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Boortz Unveils Fair Tax Grassroots Campaign Plans in Austin

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On Tuesday when I'd usually stay home and make dinner for the family, we all found ourselves heading down to a Barnes and Noble bookstore in Austin for a special event. Well, special for me anyway, maybe not so special for the kids. My wife was late meeting us, so I sent our 14-year-old to the kids' section with her 4-year-old sister and instructions to read her Skippyjon Jones books until further notice.

I headed for the middle of the store to hear a presentation and get a brand new copy of Somebody's Gotta Say It signed by the author, notorious libertarian, Texas Aggie, and radio talk-show host Neal Boortz.

I haven't been to a huge number of book signings, but this one was quite different from what I've encountered before. Usually – even with fairly popular authors – you get a nice little line of a few handfuls of people replenished periodically as new arrivals wander up over the course of a few hours. The biggest one I've been to was with Michael Moore, where maybe 50 people sat around and asked questions and then got their books signed and the line stayed at 20-30 people for the next couple of hours.

This was a different bag of fish. When I got to the center of the store a half-hour before the start of the event, a nice lady handed me a little slip of paper with the letter 'd' on it and a set of instructions. Printed instructions? That was a new one. They explained that we'd be lined up by letter groups with 100 people per letter and that to keep the line moving Neal would only be able to sign the books – no personal messages – and if we wanted a photo with him we had to hand our camera to designated bookstore staff who were presumably specially trained in high speed photography.

I quickly saw why all the regimentation was necessary. There were about 100 chairs set up facing the signing table and they were already filled, and the staff kept handing out lettered slips of paper to a growing throng of people who eventually lined the railing of the upper level of the store and crowded into all the areas between the stacks around the center of the store. I asked someone in management and they estimated that there were 800 attendees based on handing out slips through the letter 'h'. That's one hell of a turnout for a book signing.

After a bit of a wait, Neal Boortz arrived through a side door and took the stage. He was a bit older and a bit leaner than I expected from publicity photos, but the deep, resonant voice was familiar. Before the signing he spoke for about 20 minutes, hitting on various topics and telling some humorous stories (see video and apologies for the cell-phone camera quality), but most of the presentation focused on two topics, his new book – which is basically an amusing and insightful collection of observational essays on politics and human behavior – and the Fair Tax, which is what really got the audience excited.

In addition to co-authoring the Fair Tax Book with Rep. John Linder, Boortz has taken on the role of media point-man for the campaign to take the Fair Tax from a tax-reform pipe dream to a viable piece of national policy. In his presentation he laid out a pretty ambitious plan to use the presidential campaign to raise awareness of the Fair Tax on the national level.

He's going to be making appearances at rallies at the major early events in the primary season. This includes a big rally at the Koger center in at the University of South Carolina on May 15th, coordinated with the candidate debate that evening, and another big rally in Ames, Iowa on August 10th, the day before the Republican Straw Poll there. More events are planned for New Hampshire and other early primary states. They hope to draw thousands of rally participants from surrounding states to the rallies.

The idea is to use the media already gathered for these events to raise awareness of the Fair Tax. They'll all be wandering around looking for something to cover and a big rally will be hard to ignore. This will make sure that the Fair Tax is the first thing that comes to mind when reporters start asking candidates questions, serving the dual purpose of making both the candidates and the public more aware of the issue than ever before, maybe even making it the central issue of the campaign season. To add an interesting twist, visitors to Iowa from other states can apparently vote in the straw poll, which might add an interesting boost for any GOP candidate who endorses the Fair Tax and attracts the votes of thousands of rally participants.

Based on the number of people Neal Boortz drew to a book signing in Austin – and Fair Tax t-shirts were much in evidence – if they get all of the major Fair Tax figures including Rep. Linder, Boortz and fellow talker Herman Cain promoting the events and making appearances, the turnout could be pretty impressive and hard for the media and the candidates to ignore.

Efforts on this level to mobilize a grassroots movement in support of a single issue are almost unprecedented, especially with the level of involvement of political figures and major talk radio personalities. There's clearly some money and a lot of thought behind the campaign to catapult the Fair Tax into the national spotlight. This might be exactly what supporters of the Fairness Doctrine are afraid of.

Back to my reminiscences of the signing…

After the presentation we all lined up by letter group like good little citizens, and the line moved surprisingly fast. Within 40 minutes I was face-to-face with Neal Boortz. We exchanged a few words whose import I may explore later, and I was off to rejoin my family with a signed book in hand. Neal is still flying around the country in his personal plane, signing books and promoting the Fair Tax movement and their plans for the primary season. I'm back home trying to figure out how I can justify a trip to Iowa in the Summer.

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About Dave Nalle

  • Jim in Marietta

    A quick note. Neal’s plane is NOT a jet.

  • Clavos

    At last!!

    I’m so glad to hear that Boortz, Linder and the Americans For Fair Taxation are doing something substantive to get this idea out to the public for examination and discussion.

    It’s not yet a perfect plan, but it’s “bones” are better than anything else proposed. Perhaps, with good public exposure, a real dialogue can be started.

    I lived in Atlanta in the 70s. I’ve been a fan of Neal’s since the days of his guest appearances on another Atlanta talk show, before he had his own. He’s a very smart man, and the Fair Tax is a very smart idea.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    “and the Fair Tax is a very smart idea.”

    for those who own or sell, yachts?

    to be fair, i’ll hold off until and unless i’ve read the book…

    however, i’m always skeptical when the folks who get excited over something, are those who need something the least

    it’s like a little alarm bell, very reliable

  • Clavos

    I’m surprised at you, jaz, you don’t usually go off half-cocked like that.

    Read the book.

    Or, at least look here.

    And now I’m suspect because of what I do for a living?

    Where’s your fairness now??

    Sheesh.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    Clavos, try reading exactly what i typed…again

    which part of “to be fair, i’ll hold off until and unless i’ve read the book…”

    is unclear?

    and no, your own case is your own case…the genrality i made is about those who “own” as well as “sell”…an economic definitive based on a pair of circumstances…both of which denote a greater than average income…do they not?

    i have read much of the online source material on the topic, but not the particular book in question

    hence my disclaimer, which you appear to have missed

    so, that clear it up for you?

    the point i made, was that when those who need something the least, yell for it the most…it’s a perfect time to be careful, be skeptical, and read the fine print…look at both long and short term, and double check all the figures

    the vast majority of the time, under such circumstances…someone has “palmed an ace”

    take it for what it’s worth, and not as any kind of personal slight, if such had been my intent, there woudl be no doubt about it

  • Clavos

    I saw the “to be fair” line, but you still put a snarky attitude in the whole comment, which is what I took personally.

    the genrality i made is about those who “own” as well as “sell”…an economic definitive based on a pair of circumstances…both of which denote a greater than average income…do they not?

    OK, as you know, since you apparently read my comments pretty consistently, I also “own” as well as “sell”.

    Yes, that denotes a “greater than average” income, but I fail to see how (despite all your protestations to the contrary) that translates to promoting something purely for self interest.

    For the record, the Fair Tax focuses on taxing unecessary (as defined so far by the authors) purchases more than the food, shelter, and clothing purchases. It’s a consumption tax, which is one reason why it will be more fair than our present system.

    And as far as my own bias: A consumption tax like this one is likely to negatively impact an industry like mine severely, and yet here I am, promoting it.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    which is why i’ll read it most carefully

    do they propose to tax stock purchases as part of the “consumption”?

    other minor issues…i remain skeptical since each of the previous proposals for something like this that is read always holds flaws that break the theorem after observation and dissection

    most of them DO have some good things within them, then get royally fucked in the details, or the unintended consequences

    the bit about the “alarm” may appear snarky…but it is how i think about the issue, and will continue to do so as long as observations match thoughtful consideration

    now, show me some proposal where middle income folks get excited (middle after removing the top and bottom 5 to prevent skewing of numbers by the mega wealthy and the destitute) and i’ll not be quite as snarky

    but when things like this come out, and it’s those who really need it the least who are screaming their glee the most…perhaps you can understand why i begin as a Skeptic

    so i’ll read what comes, and think about it myself, but as i stated, a first indicator will be if stock purchases count as “consumption” or not

    the Tao of D’oh.

  • Clavos

    I just did a quick scan through my copy of the book. I can’t find a specific reference to stock transactions, but the repeated mantra throughout the book is that it will be applied to “all goods and services.”

    It’s a good question, and as I said upthread, the opportunity to get the idea out to the public so it can really be dissected and discussed is good. Your question is one reason why.

    On a first reading, the Fair Tax looks good.

    It should be discussed at a national level. If, after such discussion and debate, it’s rejected, so be it.

  • Clavos

    now, show me some proposal where middle income folks get excited (middle after removing the top and bottom 5 to prevent skewing of numbers by the mega wealthy and the destitute) and i’ll not be quite as snarky

    Within that definition, I’m “middle income,” as are most of the folks I know who are supporting the idea.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    really? 30-50K per annum?

    fair enough, more reason for me to give the book a read

    good to know you at least understand my possible objections, and why

  • http://www.diablog.us Dave Nalle

    A quick note. Neal’s plane is NOT a jet.

    Sorry about creating confusion there, I was using “jetting around” as an adjective to imply he was moving quickly, while not thinking that it implied he was in a jet. Thankfully some kind editor fixed it for me.

    Dave

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    went to the website….and found this

    “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 all with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities.”

    it appears that either SS and medicare are to be abolished, or a portion of this new revenue would be used to fund those programs from some kind of general fund, rather than specific sources

    first blush impression …will be reading more, but i have looked at all this before, just wasn’t certain if it was the same proposal

    so far it appears to be exactly what i had initially thought, and not something i can get behind due to the details

    the ONLY part i seem to Agree with so far, is that a dialogue on this Issue, real discussion and debate, should take place

    but there doesn’t appear to be a good solution here

  • http://www.diablog.us Dave Nalle

    To clarify a few more things about the Fair Tax, the ‘prebate’ system would result in the poor not only effectively paying no tax, but would end up providing a national subsidy to those under the poverty line and a smaller subsidy to those with incomes up to $20K a year.

    As radically different tax plans go it is the only one to provide real assistance to the poor rather than just being neutral towards them, which is why a lot of Democrats are getting interested in it.

    And yes, the tax does apply to purchases of stocks and other investments, but I believe that it does recognize current tax free or tax delayed investment options, so any tax consequences would be delayed in the usual way with a 401K or an IRA.

    Dave

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    the last bit about 401ks and the like is good to hear, and once i get to the list of what they will tax, precentages and the like…as well as what is supposed to be exempt…i can make a better analysis

    the website is bookmarked for study

  • http://www.diablog.us Dave Nalle

    Oh, good point. One thing Boortz mentioned in his presentation is that they’ve made some revisions to the Fair Tax plan in the last few months in response to critics. Use the website rather than the 2005 legislation or the book as your reference. It’s what will be in the next incarnation of the legislation.

    Oh, as for what’s exempted, the answer is nothing. No exemptions, no deductions. 401K and IRA contributions are essentially just not considered part of income if I recall correctly.

    Earlier you mentioned Social Security and Medicare. Those are included in the total tax rate.

    Just for the record, I think the rate on the Fair Tax is too high. IMO passage needs to be accompanied by massive spending cuts which will lower government spending enough to bring the total rate down to 25%. I believe that currently with Medicare and SS included it’s a whopping 29%, but I need to go look at the site for the latest info.

    Dave

  • http://www.diablog.us Dave Nalle

    Ok, I take it back. Don’t bother with the website. A lot of what’s on there refers to the 2005 legislation which has now been superceded. For up to date and detailed info, see instead this PDF of the 2007 legislation.

    Dave

  • Clavos

    jaz,

    really? 30-50K per annum?

    According to the 2000 Census figures from the Census Bureau, the top household income level for the bottom 5% of households was $21,600 in 1998. For the top 5%, the same figure was $145,199.

    This were roughly the parameters that I had in mind in #9.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    /sigh

    and didn’t i say after you remove the top and bottom 5% from the equation to avoid skewing figures cuz Bill Gates twists the formula in a disproportionate way than a homeless person with no income?

    but, not important…my point stands, and i’m reading the website to learn more…

    however, another alarm bell – when talking about their”projected figures” on the website we find …”This study employs a dynamic supply-side economic model to estimate the impact of the FairTax on major economic indicators: ”

    now, all predictions/extrapolations are suspect, due to being based on “supply side” assumptions from “trickle down” advocates

  • Clavos

    Dave,

    Just for the record, I think the rate on the Fair Tax is too high. IMO passage needs to be accompanied by massive spending cuts which will lower government spending enough to bring the total rate down to 25%.

    I thought the proposed Fair Tax rate is 23%?

    And that it’s based on a figure of 22% for all the current so-called “hidden” taxes?

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    the type of thing that concerns me…and i’m trying to find answers to…

    example: a corp pays $60 for a barrel of crude for refining, add 23% makes the price $73.80, price at the pump, call (for the sake of the example) $3.00 per gallon due to paying more per barrel, now add the 23% at the pump bringing it to $3.69…that’s a simplification, but you can see the concern

    still digging into it

  • Clavos

    jaz,

    Correct, you did.

    I gave the top income of the top quintile, to boot.

    My bad. (hangs head in embarrassment)

    Still, the top income of the fourth quintile, a narrower (lower) top than you specified,is $83,693.

    In fairness, the $21,600 figure is also a top income for the lowest quintile, not 5%; but my point was the upper end of the middle is higher than you mentioned, I just can’t find figures for 5%.

    Still, 80th percentile is over $80K.

  • Clavos

    jaz #20:

    Did you back out the “hidden” taxes? According to the proponents, they add up to 22% of the retail price. Gasoline pump price especially, is heavily taxed now.

  • Clavos

    jaz #20:

    Corp doesn’t pay the 23%. Tax is only levied on retail sales.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    Clavos, you keep hitting “top”, i spoke of the “average” mean (middle)

    as for the “hidden” stuff, that’s part of what i’m trying to work out here…what’s being called “hidden”, and what is being “projected”

    again, i remain skeptical in the extreme of any study or set of figures based on “supply side” assumptions due to the hideously erroneus track record of such economic philosophy…supply AND demand are required to both be inherent factors or the equations do not balance properly, much less give accurate assessments

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    “Corp doesn’t pay the 23%. Tax is only levied on retail sales.”

    another palmed ace, why would you exempt corporate and wholesale purchases except to shift the burden from businesses paying their share and placing the burden on the retail consumer

    without it being levied on ALL purchases for non-essentials at the citizen level, then it hardly seems “fair”, does it?

    more reading to do…

  • Clavos

    jaz,

    show me some proposal where middle income folks get excited (middle after removing the top and bottom 5 to prevent skewing of numbers by the mega wealthy and the destitute)

    Even though I had to use tops, because that’s what Census uses, I still showed you a range that is clearly middle income (80th percentile) and a narrower range than you specified, with a top income above $83K, and well below the 95th percentile you mentioned.

    People in that range are in fact, supporting the idea, as I said.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    ok, just to avoid any more confusion…how about i clarify and state i mean those whose single income annual gross is between $26 and $52 thousand a year?

    my study has put the “average” person in that kind of bracket (married two income earners would just double the figures, but i intentionally state single income annual gross for a reason)

    that help clarify?

    those above the figures i’m talking about have a different set of issues, as do those below…the figures themselves represent a HUGE segment of our population who actually work for a living, and represent those whose concerns i am talking about.

    hope that helps

  • Clavos

    shift the burden from businesses paying their share and placing the burden on the retail consumer

    Where the tax burden already is. If I make a widget for ten dollars in costs and pay the government another three in taxes on it before I sell it to you, will I sell it for ten or thirteen? (forget profit for the moment)

  • Clavos

    Those who make between $26K and $52K will pay less overall tax than they currently do, according to the proponents.

    So, if that’s true, and these folks are aware of and understand the tax, they will be in favor of it.

    Yet another argument for getting a public dialogue going…

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    Clavos…NEVER forget a Variable, it artificially skews the outcome.

    all for dialogue, but again…everything i’ve read so far is based on flawed “supply sider” assumptions

    so i’m still not only NOT convinced, but find serious flaws in the base line assumptions that appear “hidden” from the overview..and paint a far rosier picture than objective analysis suggests so far

  • Clavos

    jaz, you know what i meant…plug profit back in; it doesn’t change the fact that i’m going to charge the tax i pay in the price of the widget.

    to paraphrase pogo:

    we have met the taxpayer, and he is us.

    the consumer is the only real taxpayer.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    not buying it, Clavos..i do agree with some you state, but like the matching payments to SS and Medicare that corps make with their employees (and yes, i know it gets added onward as part of their costs calculations)… it appears as a way for corps to dodge paying in to the system for what they get out of it

    do you REALLY think that if this is put in place, and those expenses are removed from corps they will lower their prices to the consumer?

    or will they rather reap their sudden windfall and pocket this new non-taxed income, keeping the prices the same?

    more and more, i’m NOT convinced this proposal is worthwhile

    but i agree, the dialogue is important

  • Clavos

    do you REALLY think that if this is put in place, and those expenses are removed from corps they will lower their prices to the consumer?

    or will they rather reap their sudden windfall and pocket this new non-taxed income, keeping the prices the same?

    An important and key point. One that could be discussed and resolved, if enough people of good will are involved.

    Way back upthread somewhere, I said I thought the idea has “good bones.”

    Now it’s time to open discussion and put some flesh on those bones.

  • Lumpy

    I’m just happy that the fair tax exempts my magic the gathering cards from taxation. It’s good law for entrepreneurial nerds.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    “An important and key point. One that could be discussed and resolved, if enough people of good will are involved.”

    the problem here is that the entire proposal is based on certain assumptions, supply sider as well as the point i raised, which you acknowledge

    so far, i see this as a huge windfall to corps, those with “estates”, and capital gains

    still looking to see if the retail sales of stocks are taxed for the final nail

    but here’s a thought…

    flip the script…

    NO personal income tax or sales tax, instead use the principles of this proposal as a “seller’s tax”…

    a higher rate for imports, but every step and all middlemen along the way…you sell something in this country, you pay the tax…NOT the consumers

    would appear to work keeping prices down, helping promote American business, cut out some layers of middlemen,and places no direct burden on ANY consumer, but rather makes it a “pay to play” system for business at each point of sale

    how’s that for a better solution which addresses most major concerns?

  • Clavos

    but every step and all middlemen along the way…you sell something in this country, you pay the tax…NOT the consumers

    That part of your proposal is already substantially in place; the “hidden” taxes. Corps “pay” those taxes, but then they get built into the prices we, the consumers, pay them in the end.

    The big drawback there, as I see it; is we don’t see what we’re paying, which is a big flaw of the current system,; not only with the “hidden” taxes, but with the whole withholding system, which tends to remove taxes from our consciousness (possibly excepting geeks like me, although as self employed, I’m no longer subject to withholding).

    As I see it, corporations don’t really pay taxes; they collect them on behalf of the government. Only the people pay taxes.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    i understand, you keep saying that over and over again…i get the point you are making, it’s the basis for this entire proposal, coupled with supply sider economics

    my point is that you flip the script, make it a sellers tax, rather than the consumers…yes, the seller places that into his cost and thus the price…

    this would encourage less middlemen in the process, due to each such bumping the retail prices up, thus allowing a free market check and balance on consumer costs…if the retail price is too high, they buy something else

    self correcting supply and demand

    this would shift the entire tax burden from the Individual (directly, that is..i understand they are still paying in the end, but the mechanics now benefit the individual)to those who wish to sell anything anywhere in the Nation

    all the same reasoning applies, but my proposal appears to place market forces on aiding the Demand side, rather than Supply side…and sets the onus on Supply as a cost of doing business

    add a few percentage points extra on goods/services sold INTO the country…and you even help promote domestic businesses

    all in all, it would appear to help combat inflation as well as promoting domestic economic factors

    something the”fair tax” proposal does not appear to contemplate

    still reading, but a good rule of thumb for me when dealing with any issues involving money….flip the script, is it still a good deal? if so..fairness is achieved, if not..somebody is scamming

  • http://www.diablog.us Dave Nalle


    I thought the proposed Fair Tax rate is 23%?

    And that it’s based on a figure of 22% for all the current so-called “hidden” taxes?

    The Fair Tax rate is indeed 23%, but what they really (and IMO deceptively) downplay on their website is the fact that it does NOT include SS or Medicare, which would either stay on as an income tax or be added into the Fair Tax as another 4-6% on the rate.

    Dave

  • Clavos

    Didn’t know that.

    That IS deceptive. Makes you wonder what else they’re hiding.

    All the more reason for a national, open dialogue.

  • http://www.diablog.us Dave Nalle

    They’re not really hiding anything if you consider that the legislation is a matter of public record, but they aren’t necessarily addressing all the issues as fully as they should.

    IMO having SS continue as an income tax in combination with the Fair Tax defeats the entire purpose. Abolishing or phasing out SS would be the best course, but tacking it onto the FT as a sales tax would be acceptable.

    I’ve been reading over the new FT bill and I’m going to post a summary at some point which covers all of the issues, including ones they gloss over.

    Dave

  • Clavos

    Since it it public record, technically you’re right, but it’s not straightforward.

    IMO having SS continue as an income tax in combination with the Fair Tax defeats the entire purpose.

    I agree. The FT will only work well on a strict no income based tax basis, otherwise it will probably turn into an additional tax.

  • http://www.diablog.us Dave Nalle

    I have the ‘mitigating’ circumstances on the SS confusion. Apparently they don’t know what actual rate it will take to add SS in, so they are leaving it up to the SSA and the new federal office that would oversee the FT to determine what rate would provide the equivalent of the current revenue. The intent IS to tack it on to the FT, they just don’t know yet how much that will increase the overall rate.

    Dave

  • STM

    Small question here guys, but am I missing something here? Specially for Nalle, author of the headline … so why would anyone unveil their campaign in an Austin. Wouldn’t it get a tad cozy?

  • Clavos

    Nah mate. That one didn’t cut it-strainig too hard.

    Try again.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    beyond the worries about SS, what could be another palmed ace…

    their own FAQ states – “The FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed. A rebate makes the effective rate progressive.”

    “retail sales”…does this cover the aforementioned stock purchases?…by adding the personal consumption does this mean any business can buy any real estate desired with NO payment of tax…even worse, while a residential property would pay such tax as part of “retail”?

    also, took at look at where this comes from…not encouraging at first examination, but am trying to keep an open mind

    alarms also go off when the title appears so amiable…”Fair Tax” strikes me like a marketers wet dream in the same vein as “Patriot Act” or “Enduring Freedom”

    grains of a good Idea, perhaps…but this ain’t *It*, imo

    damn shame, i’d like to be able to get behind something of this nature

    the Tao of D’oh.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    beyond the worries about SS, what could be another palmed ace…

    their own FAQ states – “The FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed. A rebate makes the effective rate progressive.”

    “retail sales”…does this cover the aforementioned stock purchases?…by adding the personal consumption does this mean any business can buy any real estate desired with NO payment of tax…even worse, while a residential property would pay such tax as part of “retail”?

    also, took at look at where this comes from…not encouraging at first examination, but am trying to keep an open mind

    alarms also go off when the title appears so amiable…”Fair Tax” strikes me like a marketers wet dream in the same vein as “Patriot Act” or “Enduring Freedom”

    grains of a good Idea, perhaps…but this ain’t *It*, imo

    damn shame, i’d like to be able to get behind something of this nature

    the Tao of D’oh.

  • http://www.diablog.us Dave Nalle

    Cozy? If it wasn’t entirely clear from the article, the Austin ‘unveiling’ was only unique to those of us actually there. He’s been doing more or less the same presentation in scores of locations on his book tour.

    Dave

  • Clavos

    Dave,

    I think Stan meant the car…

  • http://www.elitebloggers.com Dave Nalle

    By god, I think you’re right. I forget about them, no longer living in the UK. Plus they’re just Fords in drag anyway.

    Dave

  • Clavos

    does this cover the aforementioned stock purchases

    Dave said upthread he saw where it does. FWIW, stock sales on the open market to individuals are considered to be retail by the brokerages.

    a residential property would pay such tax as part of “retail”?

    Only new residential property pays, according to the web site. But you raise an interesting point in re raw land…

    Re the name:

    C’mon jaz, how much attention would they get if they named it the “Federal Sales Tax On Everything You Buy For The Rest Of Your Life”? Or, worse yet: “The Non-Discriminatory Tax.”

    It’s just a name, Dude.

    damn shame, i’d like to be able to get behind something of this nature

    Contact them. Ask your questions. Suggest your changes.

    They are asking for input.

  • Clavos

    FWIW, and for those who haven’t heard:

    Florida, which has no income tax, and raises the vast majority of its revenue through sales taxes and property tax, is considering rolling back the property tax and raising the sales tax, currently 6% statewide with a local option of 1%, to 8.5/9.5%.

    The idea is that many folks are “trapped” in their homes who would like to move, but because of a cap in taxes on owner-occupied homes, they are paying well below market if they have been in the house a few years.

    If they move, the house they buy will automatically be bumped up to market (at sale is the only time property taxes are not capped and can be raised significantly), thus costing them considerably more than the one they left, even if both are comparable in value. Hence the “trapping” effect.

    If this measure passes, Florida will have the highest sales taxes in the nation.

  • STM

    Nalle said: “By god, I think you’re right. I forget about them, no longer living in the UK. Plus they’re just Fords in drag anyway.”

    Sorry, boys, couldn’t resist when I saw the headline ” … unveiled in Austin”. Lol, nice answer first up BTW Dave.

    I had one in my late teens … it was actually rebdaged as a Morris, and was slightly larger than a Mini but felt smaller on the inside. Doing ANYTHING in it was a squash, especially certain things of a nefarious nature (although it did beat one girlfriend’s Fiat 500 hands down (or up, as the case may be).

    I bought it second hand for the bargain-basement price of $100 off a “mate” who forgot to tell me that he didn’t actually own it because he’d neglected to make the transaction official by not going through the old Department of Motor Transport and when I put the rego papers in, there was a link missing in the ownership chain going back to the previous owner. But it went great, except the knob on the gear stick fell off so I replaced it with a large ball of tightly wound sticky tape. Very good, except when you wanted to take your hand off the gearstick.

    It also had one advantage over cars I drove in America …. the steering wheel was on the proper side of the car, thus allowing the driver to drive on the proper side of the road.

  • Clavos

    Doing ANYTHING in it was a squash, especially certain things of a nefarious nature (although it did beat one girlfriend’s Fiat 500 hands down (or up, as the case may be).

    C’mon, Stan. You were young and limber and full of hormones back then. You could have done it in a biscuit tin if you had to…

  • http://www.elitebloggers.com Dave Nalle

    Man, it took some looking, Jaz. Yes, real estate is taxed when it is sold, or on rent paid. From what I can tell the purchase of stocks, bonds and other financial instruments is not taxed at all.

    The more I read the actual bill the less satisfied I am with it. The whole idea here was to eliminate complexity amd loopholes. The problem is that I’m finding loopholes and it’s not so simple overall. I do understand the loopholes – which take the form of credits for various things – and why they exist, but they desimplify the whole thing.

    Dave

  • http://www.elitebloggers.com Dave Nalle

    The Austin I had when I was living in the UK in the 80s was fairly decent size. Really too large for some of the small streets I had to drive down. I kept breaking mirrors on other cars’ mirrors.

    Dave

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    “The more I read the actual bill the less satisfied I am with it.”

    /agree

  • STM

    “C’mon, Stan. You were young and limber and full of hormones back then. You could have done it in a biscuit tin if you had to…”

    Lol. I would’ve squeezed into a matchbox if I’d had to.

  • STM

    “The Austin I had when I was living in the UK in the 80s was fairly decent size. Really too large for some of the small streets I had to drive down. I kept breaking mirrors on other cars’ mirrors.”

    That’s happened to me here in Chinatown, but I’m usually the victim, and the roads are the normal width … in the case of your UK experience, that’s probably because you were driving on the wrong side of the road, Nalle, like all bloody Yanks. I can never work out how Pommy drivers never seem to sideswipe each other when they’re driving down some of those lovely country lanes. … they never seem to, though. Now that IS a squash. You could barely manoeuvre down them on a bicycle.

  • http://www.elitebloggers.com Dave Nalle

    These roads didn’t have ‘sides’, Stan. None of your nice, wide aussie boulevards in downtown Norwich or Lynn or Yarmouth.

    Dave

  • http://www.roblogpolitics.blogspot.com RJ Elliott

    “I’m surprised at you, jaz, you don’t usually go off half-cocked like that.”

    Bwahahahahahah!

    Seriously though, when doesn’t he?

  • http://www.roblogpolitics.blogspot.com RJ Elliott

    do you REALLY think that if this is put in place, and those expenses are removed from corps they will lower their prices to the consumer?

    or will they rather reap their sudden windfall and pocket this new non-taxed income, keeping the prices the same?

    Well, there’s a little economic concept called “competition” that would come into play there, don’t you think?

  • http://www.roblogpolitics.blogspot.com RJ Elliott

    “If this measure passes, Florida will have the highest sales taxes in the nation.”

    Scary. I’m a Florida resident, and I’m not a homeowner. Therefore, this measure would not directly benefit me, but would most definitely directly harm me.

    Sounds like an effort to get a larger percentage of state government revenue from the tourists to me…

  • STM

    “Yarmouth.”

    Great?

  • http://www.roblogpolitics.blogspot.com RJ Elliott

    “That’s happened to me here in Chinatown, but I’m usually the victim, and the roads are the normal width …”

    LOL!

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    yo RJ…bite me fanboi

    try reading all of the stuff before you start yer one liner non-sequitors

    silly puppy…

    for RJ.

  • http://www.elitebloggers.com Dave Nalle

    So long as you accept ‘great’ as a relative term. The birthplace of Cromwell is not what it once was.

    Dave

  • troll

    on how to fund fascism:

    what difference does it make how the protection money is collected – ?

  • Clavos

    Sounds like an effort to get a larger percentage of state government revenue from the tourists to me…

    It definitely has that element to it.

    The tourism industry is already squawking that we’ll lose business.

    I spent thirty years in the airline industry; I don’t think a higher sales tax is gonna stop people from coming to see Mickey and SoBe.

    It will impact you negatively, RJ. On the plus side: with the rollback in property taxes, all housing will have an instant drop in prices. If you want to and can, might be a good time for you to pick up a nice condo.

  • http://doug-an-luke doug-an-luke

    Interesting reading especially clavos and jaz.

    First, stocks and IRA type purchases will not have any special tax the 23% tax is imbedded. Those who today have savings in their IRA’s will only pay taxes on these investments when they make a purchase of new goods and services. Also, no cap gains and no dividend taxes on investments. Social Security is funded from the Fair Tax and the only income reporting will be the income an individual makes to provide SS credit.

    I ran a simple 1040A form using the 2005 tax schedule for a family of 4 making $27,770 taxable income.

    First, if the Fair Tax program is truly revenue neutral then those in the lower 50% of the income earners who today pay only 3.46% (virtually no tax burden) of the total Federal income tax bill will receive additional revenues from the Feds. “Prebate” revenues starting at $2,200/year ($183/mo) for a single individual and varying as family size increases. Example: a family of four receives $5,902/year ($492/mo). The prebate insures no American pays tax on the necessities of life. This applies to all taxpayers equally, rich or poor, but obviously is of greater marginal value to the poor and lower middle class.

    The Fair Tax legislation insures the poor will benefit most. Here is an example: Using the family mentioned above. A family of four with an income of $27,770 less FICA of 7.6% equals $25,660 disposable income. Assume two children with a full tax credit of $3,500 equals ($25,666+ $3,500) $29,160. Fair Tax produces (no FICA and no Income tax deduction) an income of $27,770, no Federal deductions, plus $5,902 prebates. This results in a disposable income of $33,672 a boost of $4,512 over the current system, 15.5% increase in total income! If the Fair Tax is revenue neutral then the poor will receive the greatest boost. (Note the employers share of FICA 7.6%, part of the cost of labor, provides an option for the employer to pay an additional $2,100 to the employee, thus the employee would then have a total boost of $6,612, a disposable income of $35,762 a whopping 22.6% increase, hmmmm! An interesting rate.)

    Reference the purchase of luxury items such as airplanes or boats. The poor and lower middle class do not purchase such items, many of them do find good jobs in manufacturing such items. When a two million dollar boat is purchased some $460,000 in tax is paid. Also, Fair Tax will not apply to exports thus our national productivity will explode. The two million dollar boat listed above can be exported at a price of $1,540,000.

    I have found that those who don’t understand finances do not trust this program. for example they want a tax deduction for interest payment on a home. You can deduct all you want but $X from $0 Tax is still zero. In summary if you don’t pay income tax you don’t need a deduction.

  • tbgunn

    Guys
    I have been monitoring this conversation and I just want to clear something up. Stock purchases are not taxed. They are not considered personal consumption. They are considered personal investments, which are not taxed. Any service fees charged by the broker are considered personal consumption and only that portion will be taxed, under the Fair Tax.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    then there’s the big loophole, and explains much of why it’s a horde of business folks as backers and directors

    the devil is in the details, and the details show that while there are some good things in this proposal, it is inherently flawed in many ways…some of which are brought up in this very thread

    clue indicator – when Nalle and i actually agree on something, you can be fairly certain it’s bad/good in a non-partisan fashion

  • http://www.elitebloggers.com Dave Nalle

    Yes, thgunn, I pointed that out back in #54. The legislation as written doesn’t make it terribly clear, but that’s the conclusion I eventually reached.

    And Jaz, while I agree that this is a loophole, the devastating impact on the economy of taxing investments at the rate proposed for consumable goods has to be taken into consideration.

    At the very least 401K and IRA contributions ought to be untaxed, and other investments ought to be taxed at a lower rate, but again that adds complexity.

    So yes, the plan isn’t perfect by any means.

    Dave

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    i could go with exempting 401k and IRA accounts…

    but to try and say that the day to day trading on the various exchanges is NOT “retail” is disingenuous at best by the folks who are proposing all this

    and the same argument about overall prices at retail would apply to stocks, don’t you think?

    am still chewing on my previous idea of making it a “seller’s tax” would have the benefit of exports having NO tax burden at all…

    we will toy with it further when we are Recognized as the rightful Galactic Overlord!

  • http://www.elitebloggers.com Dave Nalle

    but to try and say that the day to day trading on the various exchanges is NOT “retail” is disingenuous at best by the folks who are proposing all this

    I agree that they ought to be taxed in principle, but for practical and economic reasons maybe they shouldn’t be.

    and the same argument about overall prices at retail would apply to stocks, don’t you think?

    Absolutely not. The tax is oriented towards retail consummables, things from which you derive an immediate benefit. You don’t get an immediate benefit from the purchase of a stock, in fact you may take a loss.

    The way it OUGHT to be done – and this just occured to me – is that any gains on stocks and bonds should be taxed at the standard rate, essentially the capital gains tax ressurected under this system.

    Taxing on the whole value of a share of stock is excessive. Taxing on any increase in value and any dividends or other gains is just right.

    And a 29% tax on capital gains is 9% higher than we have right now, so that would be bonus revenue.

    Dave

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    interesting, but they are proposing full taxation of homes/real estate as being “retail” with businesses exempt (another BIG problem for me)

    stocks should be treated the same as any other retail product…just my opinion, of course

    point is moot, this bird ain’t gonna fly anyway

  • esarlls3

    Clarification on a couple of issues from a lon time FairTax supporter:

    tbgunn is correct on investments.

    The FairTax taxes consumption. Investments are not consumption so the transaction of buying and selling stocks/bonds/etc. are not taxed. The fees for providing stock trading services would be taxed.

    Education is also not considered consumption, it is an investment in future earning potential. This exempts tuition and some fees from the FairTax.

    Only new items are taxed and taxed once to prevent the double taxation and cascading effects we have today. That means a new home is built without taxes and compliance costs embedded in the price. In any market with competition, this will lower prices. Then the FairTax is added. The tax inclusive value of retail prices will certainly fluctuate some but overall prices should stay about the same as the tax is revenue neutral.

    There is also a transition rule for inventory built with the Income Tax and sold with the FairTax. This rule provides a FairTax credit to the seller for the amount of the FairTax for materials in inventory on the transition date. Since consumers will know the seller gets a rebate of the FairTax, any seller not reducing his prices by the rebate (FairTax) amount would be avoided.

    The SS is a regressive tax that directly impacts the lower income earners the most. The FairTax spreads this tax across all consumption. With this much broader tax base for SS, it will help SS work around the problem of having too many people taking out for the number of people putting in. A portion of the FairTax rate is dedicated to maintain current SS funding levels at transition.

    An analysis in Texas (a state without an Income Tax, well we were before the new Business Tax was created anyway) revealed that if the Texas Sales Tax was broadened to include the same tax base as the FairTax, and a similar rebate was instituted to offset the regressive nature of Sales Taxes, the Texas Property Tax could be eliminated.

    The FairTax is the ONLY tax reform proposal that eliminates the IRS, untaxes the poor, untaxes exports, and brings jobs back to the United States.

    One interesting thing about the FairTax is that it was not designed by congress or lobbyists but by focus group studies with taxpayers.

    Keep asking questions and contact FairTax.org / 1-800-FairTax for answers. I was skeptical at first, too. After a few weeks of studying the FairTax, I became an avid supporter.

  • esarlls3

    Additional clarification I left out:

    Used items, including used homes, are not subject to the FairTax. They have already been taxed and their value includes the taxes paid.

    Profits from sale of appreciated assets (homes, stock, etc.) will be taxed when the profit is spent on consumption.

    Under the FairTax, a business will have lower operating costs. No Income Tax, no payroll withholding, no employer “contribution” to SS, no worrying about the tax implications of every business decision. Also, business inputs will now be tax free. Now business and consumers can purchase domestic and foreign goods with an equal embedded tax cost. So what happens now that the business is more efficient? The money has to go in three areas: lower prices, higher wages, or higher value of the business (retained earnings or business investments) which raises stock values. In all cases the money eventually gets circulated and taxed as consumption.

    More later.

  • Clavos

    An analysis in Texas (a state without an Income Tax, well we were before the new Business Tax was created anyway) revealed that if the Texas Sales Tax was broadened to include the same tax base as the FairTax, and a similar rebate was instituted to offset the regressive nature of Sales Taxes, the Texas Property Tax could be eliminated.

    Also, as I mentioned above, in Florida.

  • http://www.diablog.us Dave Nalle

    Used items, including used homes, are not subject to the FairTax. They have already been taxed and their value includes the taxes paid.

    The question here is why are the buyers of new homes penalized? Should there really be a differentiation between new and used homes, and what’s the cost to the economy of massively discouraging the building and sale of new homes?

    Profits from sale of appreciated assets (homes, stock, etc.) will be taxed when the profit is spent on consumption.

    That’s a different way at lookking at how capital gains are treated. It essentially makes IRAs and 401Ks obsolete, because if you just reinvest you get equivalent delayed tax benefits, but if you use your profits then you get taxed. Would make my life a lot simpler.

    Dave

  • Clavos

    The question here is why are the buyers of new homes penalized? Should there really be a differentiation between new and used homes, and what’s the cost to the economy of massively discouraging the building and sale of new homes?

    Good questions, Dave, but you seem to be advocating an exemption here, the absence of which you yourself said previously is one of the most positive aspects of the FT.

  • http://www.diablog.us Dave Nalle

    Yes, but there are already some other kind of haphazard exemptions, so the law as it now exists leaves the door open for them.

    Right now intangible property is exempted. All they’d have to do is include real property with that, and it would all just be one big exemption.

    Dave

  • esarlls3

    The question here is why are the buyers of new homes penalized? Should there really be a differentiation between new and used homes, and what’s the cost to the economy of massively discouraging the building and sale of new homes?

    Buyers of new homes are not penalized. All consumption is taxed once at the point of retail sale. All used items have the tax included in their value.

    Example: New home sold before the FairTax: Price $100,000. (Incudes hidden corporate taxes, payroll taxes & compliance costs). Cost to buyer: $100,000.

    New home sold after the FairTax: Price $77,000 (FairTax inventory credit reduces price 23%). Tax charged: $23,000 (~30%). Cost to buyer: $100,000.

    Both houses sold as used after the FairTax for zero profit by the seller. Cost to used home buyer: $100,000. No additional tax due.

    About the FairTax rate:

    • It’s revenue neutral. The FairTax is about the finding the most fair and efficient means to collect the revenue. The amount of revenue needed and what Government spends it on are separate issues.
    • The Family Consumption Allowance is based on the Federal Poverty Level for a given family size.
    • Consumption estimates are from regular economic reports.
    • Estimated compliance levels to be equivalent to compliance under the Income Tax.
    • Rate = (Revenue + Allowance) / Consumption
    • The IRS says: When you have to earn $130 to purchase a $100 item, you are paying a 23% income tax.
    • Consumers say:
      When you pay $130 in earnings to purchase a $100 item, you paid a 30% sales tax.

    This is a semantics game and a source of confusion, even among supporters. To compare rates with the income tax + social security taken out of your paycheck, you want to consider a tax incusive rate of 23%. To compare rates with what you will expect at the checkout, you want to consider a tax exclusive rate of 30%.

  • doug-an-luke

    Re: Dave Nalle

    Good Point.
    “The question here is why are the buyers of new homes penalized? Should there really be a differentiation between new and used homes, and what’s the cost to the economy of massively discouraging the building and sale of new homes?”

    Remember the Fair Tax concept; it is revenue neutral. New homes by definition are taxed because they have not ever been taxed and they are new consumption.

    “Used Homes” if produced prior to the Fair Tax already have tax included in their price (today a home has some 23% imbeded tax in the purchase price). A home purchased after implementation of the Fair Tax will cost the same amount as a pre-fair tax home but the tax paid will be clearly listed. A home purchased after fair tax and then resold will sell at a market price which will include the prior owners cost of purchase, i.e. the fair tax. Remember the tax is only paid once. In essence after Fair Tax if you buy a new or used home you pay fair tax directly to the gvt but when you buy a used home you are “refunding” the original buyers tax payment. In the end there is no discrimination between a new or used home or car or boat or plane purchase; just how the tax is identified.

    Example: You buy a home today for $100,000 imbeded in that price is some 23% federal tax. After fair tax the same home will list for $100,000 with $77,000 for the building plus a fair tax of $23,000 or $100,000. The market price whether new or used is still $100,000.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    for number 82 – you are again assuming that somehow prices will just magically drop once this proposal goes into effect

    a complete fairy tale…

    that market price will be the $123,000 and they will justify by saying “well, you are earning more cuz yer keeping all your paycheck, we raised our prices to add the tax in”

    you cannot have it both ways, as happens quite often in supply side assumptions, the logic is used that the rise in retail prices will be offset by keeping more paycheck…but here you are talking about an individuals largest purchase

    just dawned on me that you also kill the entire home improvement industry…those folks are paying retail for all their supplies…cheaper to get a contractor who will buy supplies at wholesale

    more and more holes as is looked at closer and closer….

  • doug-an-luke

    The semantics game.

    The tax rate used to describe the fair tax is just like the tax rate used on your IRS forms. Example: At the 15% IRS rate you pay $150 per $1000. The those who want to retain the IRS and not have the fair tax fully understand this “imbeded concept” but when we use the same concept under Flat Tax the 23% imbeded tax per $1000 is $230 they accept it but then take the leap by saying that the actual tax is some 29.8%, that is $230/($1000-$230). Using that “logic” the IRS 15% rate above would actually be some 17.6%. In the end the amount is exactly the same!

    Also, in business we use “Mark Up” pricing and Gross Margin (GM). A $77 item marked up some 30% is priced at $100. The GM for this item is $23/$100 or 23%. The mark-up is added to the cost of goods and the GM is “imbeded in the final price. The exact same concept.

  • Clavos

    just dawned on me that you also kill the entire home improvement industry…those folks are paying retail for all their supplies…cheaper to get a contractor who will buy supplies at wholesale

    Cheaper for the supplies, true, but you still have to pay the contractor’s labor, which is the biggest part of his charges.

    But, since HoDep’s biggest/most numerous customers are the small “handyman” contractors, it probably won’t hurt them and the other Big Box DIY stores much, if at all.

  • doug-an-luke

    Jazz

    The free market system works every time it is tried.

    Your following comment is very true: “you are again assuming that somehow prices will just magically drop once this proposal goes into effect” You appear to sound like the brilliant classical economist Adam Smith (Wealth of Nations) talking about the invisible hand that makes the economy in a free market system work. Very insightful

    Jazz, lets assume you are a contractor you build homes they sell for about $100,000 each, your gross margin is 20% thus you will receive some $20,000 (to pay tax, interest etc.) The total imbedded tax today is some $23,000, you pay some $4,600 tax out of your GM, giving you a GM of $15,400 net taxes, and the rest of the tax, $18,400, is paid by your subs. etc.

    Now it is Jan 1, the Fair Tax is passed, and an individual has the opportunity to buy one of your pre-fair tax homes at $100,000 or one of your new post-fair tax homes at $123,000.

    If you price the post fair tax home at $123K you are going to double your GM plus you will pay no tax on your GM! You will get $100K after the Fair Tax your subs using fair tax will cost only $61,000 (I assume they follow the market) rather than $80,000 thus you will receive $39,000 a whopping 39% GM with no tax on it. This will never happen because the individual will buy your pre-fair tax home for $100,000.

    Also, Your COMPETITION, who I assume understands the market, will price to meet market requirements and you will sit with a $123,000 home for sale that you think you can make a mint on but the market won’t accept. All you have to do is reduce the price to market price of $100,000 and Shazam you are back in the game making your 20% GM, $15,400, on your $77,000 price (Sell price less tax) and you don’t pay the $4,600 Income or Social Security Tax on the GM.

    When I started this I was just supporting market forces with my figures. When I finished the revenue neutral concept came through very clearly in this rather simple example. The GM net of taxes is identical for pre or post fair Tax income events!

  • esarlls3

    doug-an-luke: The GM net of taxes is identical for pre or post fair Tax income events!

    Because that is the GM that maximizes profits in a competitive market. The overhead costs of the tax system are being reduced by the same amount for all domestic sellers in the market. So the optimum GM will stay the same.

    Note that this is different for foreign competition, where US products include the embedded taxes and compliance costs but have to compete with foreign products that excude these overhead costs. The FairTax will level out this unfair advantage we currently give to foreign producers.

    Another area where some benefit more than others is where their businesses are currently at a disadvantage due to the tax code. For many small businesses, the cost of compliance, accounting, etc. is a lot more than the actual tax paid. Under the FairTax, small businesses will be more competitive.

  • http://www.diablog.us Dave Nalle

    Those of you attempting to defend the FairTax penalty on new homes are missing a key point here. The old homes which are not taxed were built under the prior system where neither the materials nor the final price of the home was ever taxed. The only thing ever taxed in their construction was the labor.

    And my concern over the tax on new homes is mainly for the impact which it might have on the economy and on the ability of people to actually purchase a home. It will be particularly devastating to people buying inexpensive first homes in new developments who may be priced out of that market automatically if they have to pay an additional 29% on their purchase.

    Dave

  • http://www.diablog.us Dave Nalle

    Oh, and both of you have missed the point about the actual rate on the FairTax. Those who are referring to it as a 29% tax are not doing so because they are taking the 23% added value and inverting it to become 29% embedded value. What was pointed out earlier is that the FairTax rate is NOT in fact 23% but more likely about 29% once you add medicare and social security to the tax. In the best case scenario Social Security would be completely privatized and removed from the tax system, but the Medicare rate will almost certainly have to be raised substantially as medicare debt balloons over the next few decades.

    In fact, we don’t know what the actual rate would be at all, because even the 23% base rate is only an estimate. The actual legislation leaves the rate open to be set by taxing agencies after the bill is implemented.

    Dave

  • esarlls3

    Dave Nalle: The old homes which are not taxed were built under the prior system where neither the materials nor the final price of the home was ever taxed. The only thing ever taxed in their construction was the labor.

    The old homes were not subject to the FairTax but they were taxed by the Corporate Income Tax. Everybody from mining ore for the nails to timber growers to oil refineries providing stock for plastics. At every stage of production another layer of Corporate Income Tax and payroll tax and compliance costs is embedded and hidden in the cost of their product to the next stage. This cascades at each level and results in about 20% of the shelf price at retail for domestic products.

  • esarlls3

    Dave Nalle: What was pointed out earlier is that the FairTax rate is NOT in fact 23% but more likely about 29% once you add medicare and social security to the tax. … In fact, we don’t know what the actual rate would be at all …

    Actually, you are mistaken. The FairTax rate (23% inclusive, 30% exclusive) does include funding Social Security and Medicare at current levels. For a very detailed and current economic analysis of the rate see this 20-page PDF from FairTax.org:
    Tax Notes article on FT rate.pdf

  • http://www.elitebloggers.com Dave Nalle

    No, you’re wrong, Esarlls3.

    Not only does the legislation itself clearly say that the rate doesn’t include social security, the PDF you link to ALSO makes it very clear that the 23% rate does not allow for Social Security or Medicare spending at the current level, much less the increased level which will be necessary to make those systems solvent. Your PDF refers to the rate two dozen times as not inclusive of social security.

    What’s more, even the 23% rate isn’t set in stone. That rate and the additional rate for Medicare and Social Security would be set after the passage of the legislation and subject to further review after that.

    Dave

  • doug-an-luke

    esarlls3

    This s a great discussion. You are correct pre-Fair Tax productivity is taxed big time. The calculated amount that includes Income Tax and social Security, Cap Gains and dividend, etc taxes comes to a 23% imbeded tax or a 29.8% added tax.

    The old addage if it sounds to good to be true, it probably is, does not appear to apply here.

    I thoght at first the concept was loonie but I got the book and have read it and discussed the concept with many. The usual reply is that it will never happen because the politicians will loose control of your money.

    One question I have is since the Social Security tax is included in the 23% (A rule of thumb is that our Federal tax is 19% of GDP if add 4% for SS you come up with the 23% total). SS payments result in a requirement to report earnings to establish your SS benefit amount. What would prevent an individual, self employed from filing a maximum income report in order to fatten his SS benefit payment.

    Some divert attention from the Fair Tax and whine about social Security funding. The SS tax collected under the imbedded Fair Tax will cover the “current program” and not some future SS structure. SS restructuring is a separate problem that the President tried to address a few years ago and the politicians were not interested. First Fair Tax and then when the wheels fall off the politicians may come up with the guts to fix SS. But the SS will get the same funding as it receives today, part of the revenue neutral concept.

  • doug-an-luke

    THIS FOLLOWING QUOTE IS FROM THE FAIR TAX BB AT FAIRTAX.ORG AND HAS BEEN A CONSTANT POSITION FOR THE PROGRAM. IF YOU DISCUSS FAIR TAX USING CHANGED CRITERIA RATHER THE CRITERIA ESTABLISHED FOR THE PROGRAM OF COURSE IT WOULD NEVER WORK. I WONDER WHY MANY ARE SO AFRAID OF THIS PROGRAM? IS THIS THE OLD STANDARD PEOPLE ARE AFRAID OF CHANGE? DO LOOK AND EVALUATE THE ISSUE BASED ON THE TERMS PROPOSED RATHER THAN A CHANGED OR ADDED “SPECIAL” CRITERIA. READ THE BOOK OR GO ON LINE, LOTS OF GOOD AND ACCURATE INFORMATION IS AVAILABLE.

    FAIRTAX.ORG:
    “The FairTax strategy is revenue neutrality:
    Neither raise nor lower taxes so consumer costs remain stable.
    The FairTax pays for all current government operations, including Social Security and Medicare. Government revenues are more stable and predictable than with the federal income tax because consumption is a more constant revenue base than is income.

    If you were in a 23-percent income tax bracket, the federal government would take $23 out of your paycheck for every $100 you made. With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality. So, instead of paycheck-earning Americans paying 7.65 percent of their paychecks in Social Security/Medicare payroll taxes, plus an average of 18 percent of their paychecks in federal income tax, for a total of about 25.65 percent, consumers in America pay only $23 out of every $100. Or about 30 percent at the cash register when they elect to spend on new goods or services for their own personal consumption. And this tax is collected only on spending above the federal poverty level, providing important progressivity.”

  • esarlls3

    An apology to those who get lost in the details of economics and mathematical equations. You may continue to the next post if you wish.

    Dave Nalle: Not only does the legislation itself clearly say that the rate doesn’t include social security, the PDF you link to ALSO makes it very clear that the 23% rate does not allow for Social Security or Medicare spending at the current level, much less the increased level which will be necessary to make those systems solvent. Your PDF refers to the rate two dozen times as not inclusive of social security.

    I’ll start with the document I linked.

    Starting on page 4 of the PDF it states:

    A. Replacing Tax Revenue
    Table 3 details the amount of revenue raised by individual and corporation income taxes, social insurance and retirement contributions, and estate and gift taxes on a calendar-year basis — taxes that would be repealed and replaced by the FairTax.

    In Table 3 on page 6 the report lists “Social insurance and retirement receipts” of $871B as a part of the revenue required.

    In the equations (from page 7):

    TR measures federal transfer payments to individuals, including most Social Security payments, Medicaid and Medicare subsidies, and social programs such as food stamps, for which the recipients are not taxed under current law; and

    GN07 represents federal spending and transfers for which the recipients would not be taxed under the FairTax, but for which they would be under current law — essentially, wage and salary costs of education, plus interest payments on the government debt held by the public plus currently taxable Social Security benefits.

    On Page 8, the authors account for changes in what is taxed and how:

    3. Treatment of taxable transfer payments and FairTax tax-favored purchases. Now let us consider transfer payments to individuals that are subject to income taxes under current law. Examples include government interest payments and Social Security benefits. Maintaining the real purchasing power of those transfer payments before and after the FairTax requires taking into account that the payments will no longer be subject to income taxation.

    The final calculated 2007 rate at the bottom or Table 5 on page 10 of the PDF indicates a rate of 23.8% exclusive, 31.3% inclusive.

    The authors then calculate the reduction in non-Social Security spending required to pull the rate back to the 23% original estimate. On page 2 the report concludes: “The most important finding of this report is that only a 2.73 percent cut in non-Social Security federal expenditures would be needed to accommodate a 23 percent rate.”

    The report often mentions “non-Social Security federal expenditures” not because Social Security is not included in the FairTax but because it is a fixed expense.

  • STM

    “With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality.”

    Sounds great in theory … but. One of the major problems is the black economy, which sees tradesmen and other service providers paid in cash at a lower rate as a means of avoiding full tax commitments, which means the government misses out on the revenue. Ultimately, that means the people who DO pay the tax are subsidising others who don’t. Taxes would almost certainly go up. And with the experience of other developed countries with similar lifestyles to that of the US showing the black economy accounts for about 5-10 per cent of all contractor/trades type services transactions and is very hard to police
    without a huge and costly bureaucracy, you are looking at substantial additional cost to taxpayers to fund government spending.

    Also, if the government isn’t taking 23 per cent of your pay packet, can you trust employers given their track record – without legal safeguards – not to drop wages?

    I live in a country that has both income tax and a Goods and Services Tax (around a 10 per cent impost on everything except basic foodstuffs – bread, milk, fruit and vegies, meat, etc), I can tell you my experience is that most governments who do this do it as an adjunct to existing taxes, but in the case of Australia the federal government dropped a number of other existing taxes, and some taxes previously imposed by the state governments were done away with and the GST revenue given back to them for spending on roads and hospitals etc, so the change hasn’t been that noticeable.

    But the truth is, income tax paid on a sliding scale depending on annual income remains the fairest, most workable and easiest tax to police of all … that’s why it’s survived for as long as it has.

  • Clavos

    STM writes:

    …income tax paid on a sliding scale depending on annual income remains the fairest, most workable and easiest tax to police of all … that’s why it’s survived for as long as it has.

    Which, in the USA, is fewer than 100 years.

    Plus, we already have seven states with no state income tax; at least two of which (Florida and Texas), are doing very well financially without one.

    Actually, I think they are all doing fine, but having lived in those two, I’m more familiar with them.

    Also, if the government isn’t taking 23 per cent of your pay packet, can you trust employers given their track record – without legal safeguards – not to drop wages?

    Easy enough to build safeguards into the legislation to prevent that.

  • STM

    Of course, Clav, as you know … one of the problems that does arise with income tax is tax avoidance schemes through trust funds and offshore investments, etc, which can on paper susbtantially reduce the income of some very wealthy people who are determined not to meet their full tax commitments.

    A case: a high-profile tax investigation combined with a divorce case, where a husband who had hidden most of his wealth – despite still ostentatiously displaying it by wearing Armani suits, $600 Italian shoes and driving a Porsche and a top-of-the-range BMW whilst maintaining a large, waterfront home for him and his new girlfriend – claimed to the courts that his taxable income, and therefore the amount that should be considered for payment of child support, was in the region of $50,000 or less a year. He was, in fact, a millionaire many times over. No one begrudges that, but it shouldn’t fall upon those on lesser incomes to meet the nation’s tax burden – and it leads to higher taxation in the long run.

    The whole thing was patently a nonsense, causing his ex-wife and his children much distress, but he’d done such a good job of hiding it that it took ages to unravel the paper chain.

  • Clavos

    Stan,

    You’re right, but what you describe is tax evasion, which is illegal.

    Tax avoidance, using the tax laws to legally lower your tax rate to the maximum degree allowable by the law, is perfectly legal and is something every sane taxpayer, me included, does every time we file.

    Interestingly, (and unfortunately, I can’t link it) I have read many times that, for being as “voluntary” as our system is, the US has one of the highest rates of compliance by citizens in paying their taxes in the world.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    the point is, the concept of “a fair go” is paramount…

  • STM

    There’s often a very fine line between tax avoidance and tax evasion. Really, they often mean one and the same thing … there are schemes that people use hoping to exploit loopholes in the law, which while represent the letter of the law, don’t represent the spirit of the legislation. Some of these have now been closed here, and they are always looking too. However, every time I file a tax return there are things I can claim (the running costs and depreciation on my car, for instance) that reduce the amount of tax I pay, which either means getting a bit back from the Government or meaning I owe them less at the end of the financial year.

    I don’t consider those things as tax avoidance – they are perfectly legit tax credits, and not in the same league as the family trust fund, for instance, which allows income accruing to a taxpayer on a high marginal rate to be treated like it had accrued to another member of the family on a low-income rate. That kind of stuff is a rort, and totally undermines the effectiveness of the tax system. Often, it means people on lower incomes paying the full whack are subsidising the avoiders and evaders.

  • Clavos

    Stan,

    Perhaps the concepts are slightly different in Oz from what they are here.

    Tax avoidance is legally reducing your taxes in accordance with what the tax code allows.

    Tax evasion is everything else, and is a violation of the law.

    You mentioned offshore accounts. A perfect example of illegal.

    Depreciating a rental property which in reality is actually appreciating: perfectly legal, and will withstand an audit.

    That’s what I meant.

    No “fine lines.” One’s legal; the other’s not.

    I get everything I can, but I also have no fear of an audit. In a nutshell, that’s the difference.

  • esarlls3

    STM: Also, if the government isn’t taking 23 per cent of your pay packet, can you trust employers given their track record – without legal safeguards – not to drop wages?

    Wages are a free market trade between the employer and the employee. Employers are free to raise and lower wages at any time. If employers feel they can lower wages without lowering productivity, they probably will.

    If I’m currently working for $X/hr, I expect to keep working for $X/hr after the FairTax. I’ll just get my whole paycheck to take home.

    The employer will no longer have to make their “contribution” to Social Security. They will not have to process and submit withholding or W-2’s. (Since Social Security is currently based on income, there will be an income report required.)

    If employers decide to drop wages, they should be prepared to have employees look for other opportunities, too.

  • doug-an-luke

    STM and Clavos. Good Discussion!

    Under the Fair Tax, INCOME is not the focus, SPENDING FOR & CONSUMPTION OF NEW goods and services is. Those $600 Italian shoes mentioned by STM under the current system involve an imbedded Federal tax. That is included in the price because the people who brought the product to the market pay this tax, in the form of business and income tax, remember all spending in the end is income and business and income tax applies.

    Under the Fair Tax program the 23% is taken out at time of purchase only. Thus the tax evader and the tax complier both pay taxes when they buy. The Armani suit, $600 Italian shoes and Porsche owner and tax evader (cheat) is using tax free funds just for the basic $600 and the tax complier is using taxed funds some $779 net of tax of some $179 to produce $600 to spend…..plus he is also paying the current imbedded tax!. And this is just for the shoes !

    The point here is some in our economy make money under the table in the current system they evade INCOME taxes. Many get away with it. Under the proposed fair Tax they pay tax every time they buy new goods and services just like everyone else. Even money thief will pay taxes if he buys something new.

    Today you are forced to pay income tax under threat and legal penalties.

    There are actually people in America today who think the Federal Government is great because the government gives them a tax refund when the individual overpays his tax. The government has used the confiscated money from a paycheck, money free of interest charges, and these individuals think the refund is a government good deal! I kid you not! Most of these people I have talked to don’t like the Fair Tax because they want an annual refund! Insane!

    This idiocy will go away under the Fair Tax and you will receive all of your pay without federal confiscation. Now once you receive your total pay when you buy something new, you pay taxes, if you don’t buy and save your money you receive interest, dividends, and capital gains and pay no taxes! In the end you will pay tax because of YOUR DECISION to buy. And not you will not pay tax because tax is confiscated from your pay because of a GOVERNMENT DECISION to tax your work!

  • Methuselah

    This discussion is hopeless.

    You can’t discuss economic effects by pursuing anecdotal threads. Real economists deal with the distributed effects of tax policies with differential equations and eigen vectors. But that would take hard work and study, two things which are in short supply among bloggers.

    I’m against the “Fair Tax”, because it’s not fair. It shifts tax burden from corps to consumers, thus enhancing the power and freedom of those frankenstein-like monsters as super-citizens while further reducing the freedom of mere consumers.

  • STM

    Clav said: “Depreciating a rental property which in reality is actually appreciating: perfectly legal, and will withstand an audit.”

    All those things are similar here, and perfectly legal, and are tax credits – but tax avoidance has a different connotation.

    Really, here it means trying to use loopholes in the law (like family or discretionary trusts) to avoid meeting your proper tax commitments. The one thing we don’t have is the ability to claim interest on our mortgage payments as a tax credit. I wish.

    Still, having top-quality free healthcare offsets that so I guess it all comes out in the wash.

  • STM

    “If employers decide to drop wages, they should be prepared to have employees look for other opportunities, too.”

    All very well unless you in a job where there aren’t other opportunities. Rural employees of small companies would be a classic example of that. You can’t do these things without having some embedded protections for workers – otherwise, you are erring towards corporate/business anarchy. Free market forces are great, but when they threaten the wellbeing and living standards of employees, they fall down in a heap.

    Life isn’t just about free markets, money and the bottom line (although sometimes in America, you’d never guess that). It’s about community and looking after each other as well. Happy workers are better workers, and they tend to be loyal as well. A company’s greatest asset is really its human resources. Think of all the investment that goes into making a productive worker.Employees need to reap some of the benefits as they are the ones doing all the producing.

  • Clavos

    But that would take hard work and study, two things which are in short supply among bloggers.

    Says…a blogger!!

  • Clavos

    Happy workers are better workers, and they tend to be loyal as well. A company’s greatest asset is really its human resources. Think of all the investment that goes into making a productive worker.Employees need to reap some of the benefits as they are the ones doing all the producing.

    Quoted for truth. (imitation’s the sincerest form of flattery, jaz)

    And, unfortunately, too few managers realize that.

  • http://www.elitebloggers.com Dave Nalle

    I’m against the “Fair Tax”, because it’s not fair. It shifts tax burden from corps to consumers, thus enhancing the power and freedom of those frankenstein-like monsters as super-citizens while further reducing the freedom of mere consumers.

    Sorry Meth, that makes no sense at all, and shows a profound lakc of understanding of business and economics. Corporate taxes are meaningless. They’re just factored into the expenses of the corporation and passed on to consumers. So the net result of any tax placed on corporations is that it IS a tax on consumers.

    Dave

  • STM

    So the answer, Dave?

    A lowered income tax, abolition of some/most state taxes (except for those on property and motor vehicles) and fewer tax imposts on corporations, combined with a GST-style tax at the cash register of, say, 8-10 per cent? Voila.

    But I say this about all so-called fairer tax systems: meet the new tax, same as the old tax (apologies to Do’h and The Who).

  • troll

    power to the people –

    under the fair tax an effectively organized boycott of new products could bring the fed to its knees

    …gives political action a whole new door

  • doug-an-luke

    Methusala says: I’m against the “Fair Tax”, because it’s not fair. It shifts tax burden from corps to consumers”. HUH!

    A VERY IMPORTANT POINT HERE! “CORPS” DO NOT PAY TAX. IN THE END INDIVIDUALS (CONSUMERS)PAY TAXES.

    IF YOU ARE AN INDIVIDUAL BUSINESS OWNER OR PARTNER YOU PAY EMPLOYEE AND SS TAXES AND THEN THE EMPLOYEE PAYS INCOME AND SS TAX! ADDED TO THESE TAXES ARE EARNINGS TAXES AND THIS COMES FROM THE BUSINESS OWNER. IF EITHER THE OWNER (AN INDIVIDUAL) OR THE EMPLOYEE (AN INDIVIDUAL) DOES NOT HAVE TO PAY THE TAX IT BECOMES DISPOSABLE INCOME TO SPEND ON GENERAL CONSUMPTION OR INVEST BACK IN THE COMPANY.

    THE SAME HOLDS TRUE FOR THE CORPORATION EXCEPT THE BUSINESS OWNERS NOW CONSIST OF INVESTORS (STOCK HOLDERS) AND THEY PAY ADDITIONAL TAXES SUCH AS CAPITAL GAINS TAXES AND DIVIDEND TAXES.

    ALL PAYEES ARE INDIVIDUALS! BUSINESS AND CORPORATIONS DO NOT PAY TAX.

    DON’T FORGET ALL AGREGATE CONSUMPTION IS SUBJECT TO TAX (YES IN SOME AREAS THERE ARE EXEMPTIONS) AND ALL AGREGAT TAXES ARE PAID BY INDIVIDUALS

  • doug-an-luke

    REF: #108,STM, March 8, 2007, 02:03 AM

    STM says” “If employers decide to drop wages, they should be prepared to have employees look for other opportunities, too.”

    This is true. But, for example,if the market says the productivity of an employee rates $25.00/hour income ($50,000/year) and the under payer employer decides to offer $20,00/hour ($40,000/year) the employee has a choice to stay at the reduced rate or find a different job.

    If the market is calling for a $25.00 per hour payment the worker will get another job and the under payer employer will most likely have less qualified employees, if he can find them, working for him.

    What will happen here is the less qualified guy will become qualified for the $25 pay rate and seek employment elsewhere. This requires the under payer to be continually retraining new employees, employee turn over is very, very expensive and eventually, if the under payer company survives it will have to go back to the market price of $25 per hour or more (because of under payer reputation)to save money.

    The free market works every time it is tried for both the employer and employee; isn’t life great!

    I HAVE EDITED SMS’ REMARKS BELOW (SEEMS WE HAVE A BIT OF GOVERNMENT DIRECTED NON FREE MARKET BIAS HERE)

    BUSINESS IS about free markets, money and the bottom line (REAL America KNOWS that). PRODUCTIVE BUSINESS PROVIDES THE ENVIRONMENT THAT MAY ALLOW THE community TO THRIVE and IF THEY CHOOSE TO look after each other as well. Happy workers are better workers, and they tend to be loyal as well. A SUCCESSFUL company’s greatest assets ARE really its human resources WHICH CONSIST OF INVESTORS, STOCKHOLDERS, SMART MANAGEMENT AND PRODUCTIVE WORKERS. Think of all DECISIONS AND JUDGEMENTS AND RISK TAKING AND investment that goes into PROVIDING A JOB FOR productive worker.

    REMEMBER, COMPANIES ARE NOT FORMED TO CREATE JOBS. THEY ARE FORMED TO PRODUCE GOODS AND SERVICES THAT WILL PRODUCE MAXIMUM RETURN TO THE INDIVIDUAL INVESTOR AND STOCK HOLDER.

    A BENIFIT OF SUCCESSFUL FORMATION OF A COMPANY IS THE PRODUCTION OF HIGH QUALITY WELL PAYING POSITIONS OF EMPLOYMENT DEPENDING ON THE INDIVIDUAL SKILLS REQUIRED TO SUCCESSFULLY PRODUCE THE GOODS AND SERVICES FOR THE TARGET MARKET.

    THE FAIR TAX WILL INSURE ALL, INCLUDING; INVESTORS, STOCKHOLDERS, SMART MANAGEMENT AND PRODUCTIVE WORKERS ARE ABLE TO KEEP ALL OF THE INCOME THEY HAVE EARNED. A SIMPLE AND JUST TAX SYSTEM HAS BEEN EARNED BY ALL THE AMERICAN WORKERS AND THAT IS WHY THE CONCEPT OF THE FAIR TAX PROPOSAL IS SO VITAL AND IMPORTANT.

  • STM

    Can’t say I agree with pretty much any of that edited text of my statement Doug-an-luke … but then I’m not American, either, so you might be labouring under a gross misconception as to how I arrived at those conclusions.

    However, the society I live in has one of the world’s strongest-performing economies and is among the top few in overall living standards. Both the monetary success and standard of living has been built on 100 years of workers, employers and governments reaching voluntary accord or thrashing out agreements in the courts.

    In other words, the foundation for all this has been legislated, built-in rights and protections for workers that ensure such things as minimum four weeks’ a year vacation (plus public holidays. I get 7 weeks, plus holidays), vacation leave loading of 17.5 per cent on top of your normal pay, night and weekend penalty rates of up to 75 per cent extra depending on starting time and hours worked, generous compulsory company contributions to employer superannuation packages(offset against corporate taxes), universal free top-quality medical care, minimum wage of $US10.50 an hour, etc.

    While some Americans see these things as government intrusions on free-market trade and citizens’ liberties (I can’t work out how they get to that conclusion), those who’ve lived with them see them as the kinds of benefits that companies and governments should be providing to their workers. Interestingly, many corporate leaders and businesses don’t disagree.

    It’s made for a happy and productive group of people and a society where the gap between high-income earners and lower-income earners is nowhere near as drastic as that of the US. Certainly, disposable incomes tend to be a bit lower at the top end and a lot higher at the bottom. The country, probably as a result of all the protections that had been won for workers, has had a very strong work ethic. However, it also places a high value on its leisure time.

    I guess it really depends on what you think is important: looking after number one, and taking your chances, or building an inclusive community that has better quality of life for everyone as its primary goal. That is not to criticise the US, because we are very similar socities … just to point out that people have very different views depending on their backgrounds. Also here, having those views wouldn’t have me categorised as a raging “liberal’. It just makes me Mr Joe Average.

  • http://www.NoAnthraxVaccine.net Mark Anderson

    I hate to have to inform the “fair taxers,” but that “23%” tax is really 30%. You see, the plan calls for you having to pay 23 cents in a sales tax out of every $1. That means the transaction without the tax is 77 cents. An additional 23 cent sales tax on a 77 cent transaction=30% sales tax. I think people need to stop learning math from Boortz and Linder.

  • esarlls3

    Mark Anderson: I hate to have to inform the “fair taxers,” but that “23%” tax is really 30%.

    We discussed this back at posts 82, 83, & 85.

  • Clavos

    Noooo, it means you pay $1.23 for a $1 item…

  • http://www.diablog.us Dave Nalle

    Mark’s math is certainly wrong, but as I pointed out earlier, the 23.9% rate isn’t set in stone and doesn’t take SS and Medicare into account adequately, so the real rate may indeed end up being near 30%.

    Dave

  • doug-an-luke

    Thanks for the post. I understand where you are coming from. Spent some 5 years with the Brits and they are similar but the Aussies are a more independent and self sufficient lot, I sadly see that changing. Your Prime Minister, John Howard seems to be a super guy.

    You want to bring social issues into an economic discussion, yes taxes impact the society. We have a class of people today, some 50% of workers, who pay no income tax and most receive tax credits so they are living off the efforts of others; a welfare culture. Under the Fair Tax they would receive their pre-bate monthly for basic necessities and, this is missed, the massive demand for new jobs from the resulting economic boom will make it a sellers of work-capital market where the employer will pay premium pay and benefits to attract scarce workers.

    In Australia much like Canada and England the rights of the individual are determined by the Government through Parliament.

    Here in the US the individual gives government certain power, defined in our Constitution but retains the basic self evident rights of “Life Liberty and the Pursuit of Happiness”. The primary role of our government is to preserve defend and protect our inalienable rights and those clearly defined in the US Constitution. We had to amend the Constitution to add the Income tax in 1913, and life has not been the same since. Income Tax was not in the original plan!

    In the US it is the individuals choice in cities, counties and states, on how to interact and form communities. Help to other individuals is not a government function except during major disasters and reasonable welfare programs for those who can’t work and those who won’t work..

    The American public through private charities contributes more to disaster relief and the sick and poor around the world than all other nations combined!

    Plus, we have very substantial charitable programs run by private and religious organization to help our fellow US citizens (and now sadly some illegals); the government is not involved.

    US government financial contributions to world poverty, illness and disasters are unmatched in the history of mankind.

    We do all of this privately funded private charity IN SPITE OF OUR GOVERNMENT attempt to tax us to death. The benefit of the Fair Tax is that more funds would be available to the individual to make charitable contribution decisions if they wish.

    Your view is a valid Liberal Socialist view as my view is a Capitalist view.

    So far in the history of man Capitalism wins over socialism every time it is tried. Socialism must tax the people to retain control, power and create dependency of communities. Sadly, our current tax system reflects this some of this Socialist concept.

    Capitalism must produce goods and services for the individual to create a market demand that produces high wages and allow the individual to independently determine what he does with his income. The Fair Tax strongly promotes this.

  • doug-an-luke

    RE: #120 — March 9, 2007 @ 09:53AM — Dave Nalle [URL]
    Actually the 23% schedule is at the high end of the scale and the calculated rate including both Income Tax 18% and SS 4% with a total of about 22%.

    For: #118 — March 9, 2007 @ 08:37AM — esarlls3 and others:

    23% IMBEDDED TAX (GROSS MARGIN) OR 29.9% ADDED TAX(MARK UP)IT IS ALL THE SAME AMOUNT. 23% of $100= $23 and $23/$100-$23 = 29.9%.

    The dollar amounts involve are $100-$23= $77.00 cost of goods sold COGS. The “tax mark-up” of 29.9% results in a sales price of some $100. The Gross Margin on this sale (imbedded in the price) is 23% which is determined by:
    PRICE $100-cogs $77 / PRICE $100 = $23/$100=23%

    Today look at your IRS forms. When it says you pay 10% of the first $6,000 taxable income you will pay $600, however, you can say the tax “mark up” is actually $600/$6000-$600 or $600/$5400 or 11.1% the final amount is the same $600!

    NOTE MY PRIOR AUSTRAILIAN POST WAS IN RESPONSE TO:
    #116 — March 8, 2007 @ 23:36PM — STM

  • tbgunn

    To Mark in comment #117

    Tax Inclusive
    $0.23 (fairtax)/$1.00 (Total purchase) = 23%
    (Tax Inclusive is how income taxes are stated now, which is why the fairtax states it this way)

    Tax Exclusive
    $0.23 (fairtax)/$0.77 (Cost of product) = 29.8%
    and total purchase is still $1.00
    (Tax exclusive is how sales tax is currently stated)

    It is semantics. No one is trying to hide anything. In the above example, either way you state it, twenty-three cents of your one dollar is going to the feds.

  • STM

    Doug-am-luke says: “In Australia much like Canada and England the rights of the individual are determined by the Government through Parliament.”

    Sigh … a parliament elected in a transparent process that has introduced exactly the same kind of legislation that US legislators do. If I hear ill-informed Americans spouting this nonsense again about them having more liberties in the US I think I’ll vomit. If it weren’t the case, we wouldn’t all have the same rights – and we all do. Indeed, some of us actually have more, believe it or not, which often comes as a huge shock to many Americans. I know, because I’ve lived in the US and Britain so I CAN compare.

    The fact is, while Australia’s constitition is a written one, it is also open to change because it is based on Australian Common Law, which is based on English/British common law, exactly the same as the US. It is this common law that gives us our rights and freedoms, just like it does in the US (even the US constitution and the Bill of Rights are based on English Common law).

    It is the reason why, for instance, we all have a free press, why the Great Writ (and the right of Habeus Corpus, to petition for the writ) forms the cornerstone of all our criminal justice systems, it is why all our police forces inform suspects ptrior to arrest that they have the right to silence and what they say can be used in evidence and they have the right to a lawyer, and why everyone has the right to a swift trial before a jury of 12 of their peers, etc, (unless you’re a foreigner in Guantanamo).

    Parliamentary democracy, although Americans will argue the toss and split hairs about it, is in practice no different in its ultimate outcome to the US system of legislating. Arguing the differences comes down to semantics. Any elected Government under a parliamentary democracy has two safeguards: the law, and the people (in that any elected government doing anything untowards will be punted by the people). We have a third, too: the constititional monarch or his or her representative, who in times of crisis MAY be able to exercise discretionary judgement, provided it is backed by the will of the people. In fact, there are more similarities than differences. Please go back to the drawing board Doug-an-Luke if you want to argue with me about the merits of the two different systems. Honestly, I get really sick of the Amero-centric bullshit.

    The one thing I do notice about living in Australia, and to a lesser extent Britain, is that unlike people in the US, we don’t seem to live in fear all the time. There’s gotta be something in that.

  • STM

    Doug an luke says: “The American public through private charities contributes more to disaster relief and the sick and poor around the world than all other nations combined!”

    Not per capita, mate, unfortunately … it is way down the list – although still generous by first-world standards, and ranked among all the usual suspects (including those other three countries you mention – Oz, Britain and Canada – where you say government isn’t about preserving life, liberty and the puruit of happiness for its citizens. Hang on while I vomit).

    Get your hand off it old boy … you’ve already lost the sight of one eye.

  • Clavos

    Stan,

    Nice analysis and historical recapitulation of the kind of government all of us former colonies have.

    I might have missed it, but you didn’t go all the way back to 1215 and old King John, did you, old chap?

    Sort of important, that, don’t you think?

  • STM

    Thanks Clav: Ah yes, the old Magna Carta. Yes, fairly major document that one. I hope I don’t offend informed Americans by making posts such as this, but I think it’s important to change perceptions as my experience is this: many Americans don’t understand that the rights they have come from the same place as the rights I have, that Canadians have, that New Zealanders have – from English Common Law and the unwritten constitution of Britain, which is a collection of written and unwritten laws (including the right to silence) and traditions. It is the common law that gives us these rights … the only difference being, in America a bunch of good fellows wrote them down to make sure no one forgot. In my country, it is the common law and the elected parliament that exists to give me the right to life, liberty and the pursuit of happiness.

    I was often in the bizarre situation in the US of having to explain the basis of the US constitition, and to explain that our legal systems are virtually identical not because we all pinched them off you, but because we all pinched the Poms’ system.

    I hope it doesn’t sound like I’m telling people how to suck eggs … it’s just that it helps if we all understand this stuff. It might also explain to Americans why a lot of Aussies are pissed off about one of their citizens sitting in Guantanamo for five years without having been to trial or charged until recently. No US citizen, by the way, can be charged or tried under the Military Commissions act. My view: if it’s good enough for an American citizen, it’s good enough for an Aussie who in his own country, would likely have already served his sentence by now. Not that I agree with Hicks’ stand – I just support inalieanable rights to such things as a fair trial and proper treatment under the law.

  • STM

    Hugely unpopular King John signed that document reluctantly, BTW … he was forced to by the Barons, who were revolting – probably in more ways than one :)

  • Clavos

    Just tweaking a little, mate. i wasn’t offended; I know full well how many of my countrymen haven’t a clue as to where those Founding fathers got most of those cool ideas they set down on paper.

    Oh, and about King John: had I lived then, I probably would have been a farrier or shepherd or maybe a plowman; but philosophically, I’d have been standing on the sidelines cheering those Barons on…

  • STM

    Clav, the olde bastarde, wrote: “had I lived then, I probably would have been a farrier or shepherd or maybe a plowman … ”

    If the latter, ye doubtless would have eaten a ploughman’s lunch every day … a hunk of cheese, a hunk of bread, some pickle (onion probably) and perhaps a cut of meat on a good day. All washed down with some fine old Englishe ale.

    If anything goes better with beer than a ploughman’s lunch, I’m yet to discover it. The Green and Pleasant Land has always had a few simple things going for it. This is one of the pleasures.

  • doug-an-luke

    STM The points you make concerning the foundation and background to our Constitution are valid. No argument here.

    But our Constitution is written and clearly defines the rights of the individual. I don’t know how anyone who has read our Declaration of Independence (the founding document!) in the very first paragraph where it states ” one people (US) to dissolve the political bands which have connected them with another..” could ever deny our heritage is based on English common law as well as some of the greatest minds of Western Civilization. We told the Brits to stuff it because their common law was not being applied in a just manner in the US Colonies!

    Yes, we Americans are a bit cocky because we have as a nation done many great things. Our laws, documented, written and hard to change Constitution has assured us we have the God given freedoms as recognized as “unalienable rights” by our founding fathers. This means no body of government, political party, group or community can either alter or abolish these rights.

    A special point here is, we severed our ties with the Crown because we wanted to govern ourselves using traditional British common law as a model. We rebelled because only those in the US Colonies who were approved by the Crown had any power, we were sort of a British slave state like Australia was a British penal colony.

    SMT you seem to resent us that is too bad. Most Aussies I have met are really great people; the individuals I have met are reminiscent of the US Westerner, independent, capable, smart and outspoken.

    I am very pleased with the US. Just off the top of my head here are a few countries that owe their survival in war and their success in capital markets by having mutual close ties with the US: UK, Ireland, Italy, Greece, Israel, Canada (our Northern welfare state.), Mexico, Japan, S. Korea, New Zealand, China (emerging), India, Germany, Poland, Turkey, Greece, The emerging block of former Soviet satellites, Chili, Australia, etc., etc. Yes, I know I have missed a few.

    Here are a few who have not caught on: Cuba, Iran, and N. Korea, Venezuela, Vietnam is trying to evolve but we abandoned them some 32 years ago and they still haven’t recovered.

    I left out France in this discussion because they have both arms raised in their traditional surrender fashion. I don’t know who they are trying to surrender to yet alone whether they are willing to enter in to a free market system.

    Do you have the same freedom I have today? One example is, I can, if I wish “keep and bear arms”. You, sad to say, in Australia have recently severely limited the ability of the populace to be able to exercise such a basic right for self protection or hunting or target practice or just collecting. Now only those in Australia who wish to break the law have “no restrictions” on their gun ownership.

    I do know in the UK that there were horrendous gun law restrictions and certain limitations on public speech concerning the Crown.

    All this aside all of the former British colonies used British Common law as a pattern for their government. We took the part that seemed to work for us and solidified our demand to insure individual rights and freedoms by writing the premier document of Western Civilization; the U.S. Constitution.

    We are waaaaay off the subject of the Fair Tax except we would have to change our US Constitution, Amendment XVI in order to implement this program. I don’t mind a change to a flawed change, prohibition Amendment XVIII was an individual rights limiting failed “Law” that was repealed by Amendment XXI. Of the 27 Amendments most are rights affirming or administrative clarifications, the bad amendments include Tax (16), Senator Selection (17) (State government lost representation) and Prohibition (18).

  • http://life ape

    the services for stock brokers are taxed, not the stocks themselves. my suggestion to you jaz is to read the book and study the bill.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    studied the Bill..it’s flawed, but better than many suggestions

    as it stands at the moment, the flaws far outweigh the possible benefits, in my opinion

    that is not to say it cannot be worked on and made acceptable, just that in it’s current incarnation it is half a good idea, and half a scam

  • ape

    please inform me on how it’s a scam?

    BTW since you stated you wouldn not support itbecause of how it funds social security and medicare, well first of all the funding for those programs are narrow, fairtax broadens out tax base by taxing illegals and tourists and also makes evasion much much more difficult than what our current system allow.

    are are a few reads about insurance and social security

    what do you propose then when all of the baby boomers retire? raise taxes? how about enacting a system where the citizen and working man or woman in this country wont feel such a huge impact from that retirment which will put us trillions of dollars in the hole if we dont do something now. the fairtax is predicted to double our GDP in 10 years, our economy will be better able to handle such huge impacts like social security payments etc…

    look buddy either come with facts or dont come at all.

    here is the treatment of stock, this information is available anywhere, the fact most of you people dont know this yet manage to form opinions is really amazing.

  • ape

    oh and please explain to me how the cons outweigh the pros, please come with actual fact and not opinion. this bill has been researched for 12 years and has the support of the nations top economists and universites and a non partisan fashion.

  • ape

    crap, sorry i put up the wrong link for stocks, here it is…

  • troll

    ape – what’s your take on the prediction that the ‘fair’ tax will lead to dramatic growth of the economy…exuberant optimism or realistic reading of the tea leaves – ?

    betcha we see a ‘fair’ tax added on top of a ‘simplified’ income tax

    no need to repeal 16 for that ‘solution’

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    ape…look at who is doing the studies, and who paid for it…even on their website they clearly state that all opinions derive from “supply side” projections…

    that alone renders all conclusions suspect since it does not take into account balancing the economic equation of both supply AND demand

    i’ve stated my concerns…they are mine alone, and i suggest all concerned to look at it all, and decide for themselves…NEVER believe ANY single source…

    especially one with a vested Interest in convincing you of something..or selling you something

  • ape

    fair enough but what you’re implying is that their is a hidden agenda and they are not calculating everything, that is an opinion not fact.

    alan greenspan even endorsed the idea and said we need to switch.

    now what I ask you is this, please explain to me on why you feel that the demand will take a hit because thats the implication i’m getting from your post, do you think retail prices will skyrocket? whats your reason for being suspect on the demand side of the debate. do you honestly think demand is going to stagnate in this country?

    from what I understand the fairtax gives the citizen stronger purchasing power, with stronger purchasing power comes increased demand of new good and services OR increased investment. both are good for the country.

  • ape

    well troll that would be a disaster to have both forms of taxation imposed upon us, but personally I feel that for something like the fairtax to pass the public would have to be educated on the bill. I also believe it would be political suicide to impose both forms of taxation as it would ruin our economy.

    and yes as a middle class american i do believe the predictions of economic growth the fairtax puts out, I dont feel demand will take a hit because with stronger purchasing power comes increased demand for products and services. it’s just not AFT that supports the fairtax bill, you will find massive amounts of information that supports the bill and it’s research across all party lines.

  • ape

    sucks you cannot edit, troll we have a sales tax, embedded taxes, and income taxes etc that we pay into right now, simplifying the income tax code while imposing a 23% sales tax ocne again is political suicide and not politically viable in this country.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    ape..i appreciate the invitation to discourse, but i think i have said all i feel like saying on the topic in this Thread

    i completely understand you hold a differing opinion, and i find no need to attempt convincing you away from your own views, and assure you that you will not change my mind without changes made to the bill itself

    i also refuse to give this measure any further free advertising

  • ape

    I dont feel you’re trying to change my mind about anything jaz, however I dont quite udnerstand your logic because you’re not presenting arguments with substance. your assuming demand will take a hit, when people have more money to spend demand skyrockets and so does investment.

    thats fine if you dont want to discuss it anymore, but the math does not lie with this bill and the math is accurate.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    no..the math is flawed, as i pointed out…but those who follow supply side trickle down bullshit when it comes to economics either are willfully delusional, or deliberately deceptive

    but that’s another argument

    do enjoy your day

  • troll

    the greater purchasing power would show up only if retail prices drop as taxation is removed as a cost of production – my guess is that ‘the system’ will demand increased profits to shareholders instead

    call me jaded

  • troll

    23% might be suicide but is say a 7% fed sales tax – ?

  • ape

    first of all people are getting taxed hard in this country to begin with yet demand is still strong, we have the strongest economy in the world banking 13 trillion a year GDP. so why would people come to the conclusion business would stagnate? the fairtax outsources jobs to the US, the US becomes the tax haven of the world because of not ony our laws but also our massive consumer base and our domestic infrastructure. considering nobody knew that stocks aren’t taxed I wouldn’t expect anyone to know that princeston university did a study with overseas companies and concluded that 400 out of 500 said they would build a plant etc in the US and 100 of them stated they would relocate corporate headquarters to the US. can you say jobs?

    why shouldnt companies pay attention more to shareholders and employees? the best strategy to do this is to compete and make money, when companies compete the consumer benefits. you think this is the robber baron days or something you talk like employees and consumers will get the shaft? yeah thats a sound business decision to make in the business capital of the world, do you take me for an idiot? assumptions hold no weight, come with common sense. the majority of business decisions made in this country are based on the tax implications of those decisions, the fairtax would benefit the consumer, employee and the shareholders creating more wealth in our country.

    the fact you didn’t know that stocks are not taxed and the apparant lack of knowledge on how social security works I find it hard to believe you actually studied and read the bill. maybe cherry picked certain things you disagreed with on a personal or polticial level but have yet to provide accurate math or challenge the math provided in my links. the math in this bill does not lie, you source of hatred for this bill I’m assuming stems from the mistrust of big busniess, well guy this bill is benefits small business aswell.

    marx eh?

  • chadsrnc

    Put me down as another FairTax supporter. No tax plan is perfect, nor does it have to be. The FairTax is the only plan that uses a consumption base, and that’s the direction tax reform must take in order to be effective. Any attempt to “fix” our current income-based system will only lead us right back to where we are now.

    The FairTax is worth supporting.

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    ape…do note the times i posted on this thread…and the days…

    then look at todays date…note the progression of thinking and understanding evident in the commentary

    then look at today’s date

    try not to assume

    example – as in HST and Groucho…you know..a pun

    these are my initials

    glad to help

  • STM

    Doug-an-luke wrote: “SMT you seem to resent us that is too bad.”

    Please mate, with respect, don’t mistake a desire to engage in constructive dialogue as a resentment of America, Americans and all things America, The opposite is true. To paraphrase, I remain, sir, one of your greatest fans … but that doesn’t mean I can’t have my own opinions about some of the problems I see (and others see) besetting American society. We have ours here too, and you are welcome to comment on them if you wish without me regarding your views as resentment. It is always good to swap ideas.

    Friends should always be able to speak frankly to each other …

  • STM

    “I do know in the UK that there were horrendous gun law restrictions and certain limitations on public speech concerning the Crown.”

    You can say whatever you like about the Crown in Britain (or here), you just can’t plot against it, just as you can’t plot against the government of the United States. There is a republican movement in Britain, just as there is here, although it would be a moot point because both countries are already regraded as being among the world’s great democracies, so what would be the point. Tradition is a nice thing to hold on to. And I CAN own a gun. I just can’t own certain types of guns – the ones that seemed to make it easy for lunatics to engage in mass shootings.

  • troll

    oh…you mean the ones that would be handy were a citizen forced to stand against his government – ?

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    does that mean i get the twin .50 cal anti aircraft guns?

    sweet!

  • STM

    “oh…you mean the ones that would be handy were a citizen forced to stand against his government”

    I guess that would only happen if you had a government that wasn’t chosen by the people and it ain’t happened yet, troll, and I have no reason to believe it will ever be the case. The only time it’s happened in the US there was a civil war aimed at ending slavery once and for all and pretty much started by the people who wanted to keep it. That’s a hoary old chestnut, that one, troll me old son.

  • STM

    “does that mean i get the twin .50 cal anti aircraft guns?”

    Only if I get the bazooka

  • http://www.elitebloggers.com Dave Nalle

    Did I actually see someone earlier suggest that we should have a 7% federal sales tax IN ADDITION to the income tax? That’s like trying to cure a tape worm by feeding it to death.

    We need to starve the beast. If we go to the Fair Tax or any kind of national sales tax it should include the repeal of the 16th amendment once and for all. Then implement the tax at the proposed level and find a way to lower it by at least 20% within the next decade.

    Dave

  • STM

    “Did I actually see someone earlier suggest that we should have a 7% federal sales tax IN ADDITION to the income tax? That’s like trying to cure a tape worm by feeding it to death”

    I think that was me Dave, only I think it should be closer to 10 per cent but not a cent levied on basic foodstuffs (meat, eggs, milk, bread, fresh fruits and vegies, etc) … but there was rider – only if it is done to complement the abolition of the many ridiculous State taxes levied on the average punter. Then the feds can starve the tapeworm by sending the sales tax revenues back to the states for roads, hospitals, schools and police. That way you’re not doubling up all the time. While I DO believe this is the way to go, I also might have been mischievously looking for a reaction …

  • troll

    (not a suggestion – rather a prediction)

  • troll

    at birth along with a banjo every American child should be issues an AK47 and 500 rounds of ammo in addition to the design plans for the latest ied – citizens are members of the non-standing militia as the law stands now after all

    there is a myth of invincibility surrounding the military/government – insurrection is possible even in the US

    do we need our Jeffersonian revolution now – ?

    perhaps not but we do need to realize its possibility

  • http://blogcritics.org/writer.php?name=gonzo%20marx jaz

    “We need to starve the beast.”

    the entire philosophy behind this Bill/proposal, as well as the overall strategy of a percentage of GOP supporters as well as much of “supply side” theory

    is it a bad thing or a good thing?

    good Question, and one that needs to be examined fully

    interesting historical context, the previous Admin shrunk the Fed by about 40% with the help of a divided House and Senate…the friction in a divided government helping to accomplish that AND balance the budget

    funny how a single party government, that party which has always claimed it wanted smaller government and fiscal responsibility, has blown the budget and been responsible for an explosive expansion of the federal government

    hopefully, the now divided government will fight itself until solutions are found and implemented

    supply AND demand…only dealing with one side of the equation or the other is fallacious at best

  • http://www.elitebloggers.com Dave Nalle

    STM, what you describe is really sort of the opposite of the solution I’d favor and which I think is most constitutional.

    The 16th amendment should be repealed and all taxing authority should be left in the hands of the states.

    The federal government should operate on a fee for service basis and get some income from taxes on interstate commerce, roads and the like.

    Then, for whatever additional revenue they feel they need, they should submit a bill to the states, divided up based on population and state GDP. The states would use their own methods of taxation to raise that money and then approve it in their state legislatures and send it on to Washington.

    Each state would have different tax rates and structures, and if you didn’t like the way they handled it in your state you could move to one where taxes were lower or money was raised by different methods.

    That’s the right way to solve the tax problem.

    The Fair Tax is appealing, but I’m afraid just what you suggest would happen. They’d pass the Fair Tax and then continue to charge Social Security as an income tax, and eventually tack more onto that income tax until we ended up with both an income tax and a sales-type tax.

    Dave

  • S.T.M

    Geez mate, they are opposite aren’t they. I forgot to mention with my favoured solution that it has to be accompanied by a substantial drop in income tax … my view on the states (here and in the US) is that they should have responsibility for non-federally funded roads, public transport, schools, hospitals, police, prisons, power and water, motor vehicle registrations etc, and not much more. They will try to sting you at every turn, especially if you’re have a small business, and too often the state taxes you pay are doubled up federally in both countries. A federal government should control most of the big loot, IMO.

  • doug-an-luke

    #161 — March 16, 2007 @ 04:49AM — Dave Nalle [URL]
    What you state here is not the Fair Tax Program: “The Fair Tax is appealing, but I’m afraid just what you suggest would happen. They’d pass the Fair Tax and then continue to charge Social Security as an income tax, and eventually tack more onto that income tax until we ended up with both an income tax and a sales-type tax.”

    Of course if you change the basis of the Fair Tax program it won’t work. If you stick to the study and the plan as proposed your assumption that Social Securioty Tax would remain means you ARE NOT PROPOSING THE FAIR TAX PROGRAM. The Fair Tax requires that the 16th Amendment be eliminated and if it is not the program will never work.

    I have been looking for a reason the Fair Tax plan will not work and I have yet to find one.

    The only time I see the Fair Tax program challenged from the negative side is when someone changes the plan, just like you have in your statement.

    Or in most cases a liberal who has never read the plan and really doesn’t understand the impact taxes have on the economy comes up with wild assertions. Such as the Plan makes the poor pay more tax; wrong the plan provides more total income to all but % increase is especially good for the poor. And then we get all those who whine about interest deductions for real estate loans or that welfare will be undermined. All are absolutely wrong.

    The only flaw I see so far is what happens to a self employed worker when he files his income report to determine his level of Social Security payments. A $40,000 a year guy could report $100,000 per year and how would that be verified. Remember no one is required to file any income reports except that required for Social Security.

    DJC

  • STM

    Dave wrote: “The Fair Tax is appealing, but I’m afraid just what you suggest would happen. They’d pass the Fair Tax and then continue to charge Social Security as an income tax, and eventually tack more onto that income tax until we ended up with both an income tax and a sales-type tax”

    Yep, that’s what they’d do alright – no doubt about it. We should all know by now that government’s greatest claim to fame and its main area of expertise is the pea-and-thimble trick.

  • http://www.elitebloggers.com Dave Nalle

    Doug, I realize that what I suggested is not the Fair Tax proposal. It’s what I’m afraid the Fair Tax would turn into in the hands of greedy politicians.

    Dave

  • doug-an-luke

    #165 — March 17, 2007 @ 00:00AM — Dave Nalle [URL]

    Dave, using your logic no tax reform bill would ever pass for fear of what the “Fair Tax would turn into in the hands of greedy politicians.”

    In my opinion if the Fair Tax program were honestly sold to the American public and then passed by the legislature along with repealing the 16th Amendment the impact would be so great and positive the American people would never stand for “greedy politicians” going back to our current anti-success, redistribution of wealth, oppressive and punitive tax system.

    Today in the US the Boomers rule! Now I must admit I am from an older generation and not a Boomer. Thank God! So, asking Boomers to stand up and take responsibility for their actions and their own welfare is a stretch. The Boomer guy LIKE might smear his makeup YOU KNOW, or LIKE their half shave might need LIKE darkening DUH! And besides if a Boomer expresses his feelings he might be too judgmental and you can’t have that.
    And finally the Fair Tax requires a firm decision. Boomers never, never ever make firm decisions. Hell, they don’t even have problems today they have “Issues”! Problems you solve! Issues you discuss!

    One other impediment is happening today; the Democrat party runs the House and Senate and they believe in and bow to their “Un-Fair Tax Program”. They are the masters of promoting class envy (We see it here in this discussion.) and retain their power by promising tax credits and welfare programs to the 50% of workers who pay less than 3% of the tax (This is called buying votes.) by punishing the successful individuals who pay more than 96% of the tax. Democrats and some moderate Republicans hate the idea of a Fair Tax because it reduces their power.

    America, where the rights and responsibilities of the individual were our strength, where self initiative and success were once admired, all are now resented by a class of people developed and educated by the Liberal Democrats.

    Tax is supposed to provide funding to a government to pay for the services as defined in the Constitution, nothing more nothing less.
    Tax is not to redistribute wealth (To buy votes and promote Socialism) or to promote welfare programs (To buy votes and promote Socialism) or to punish the successful (To buy votes and promote Socialism).

    Do I think the Fair Tax is a good proposal. Yes I do! I would like to see a free and open and HONEST debate over the proposed details and their effects. If you change Fair Tax Proposal details, such as todays Left who claims the poor will suffer, but can furnish not one FACTUAL detail that supports this position or as we see here you change the Social Security portion a key element in the proposal in order to dismiss it.

    Do I think the Fair Tax Proposal will ever pass? Never, not in a Boomer world. For it takes a decisive and maybe even courageous society to take such a step and the words decisive and courageous are to a Boomer like a Crucifix is to a Vampire. They just melt and cower in the corner (Which they are very good at).

    (One point, not all individuals in the Boomer generation are so passive and uncourageous. I believe about 5-10% of that generation has the right stuff. The rest get their courage from watching REALITY TV.)

  • dsmith

    in response to #37,

    jaz,

    “…if the retail price is too high, they buy something else”

    The same could be said of the Fair Tax. If businesses don’t lower prices (because their taxes would go away) then comsumers could refused to buy from all but one business until prices drop.

    “all in all, it would appear to help combat inflation as well as promoting domestic economic factors”

    The Fair Tax does promote domestic business over foreign ones. The products coming from overseas have the cost of the local (foreign) taxes including in them, whereas U.S. goods would not have a “hidden” tax in their cost.

  • dsmith

    doug-an-luke, #69

    Finally, a rational explanation of the Fair Tax. Most of these guys just don’t understand it. The Fair Tax would be a fantastic boon for this country.

  • dsmith

    “then there’s the big loophole, and explains much of why it’s a horde of business folks as backers and directors

    the devil is in the details, and the details show that while there are some good things in this proposal, it is inherently flawed in many ways…some of which are brought up in this very thread

    clue indicator – when Nalle and i actually agree on something, you can be fairly certain it’s bad/good in a non-partisan fashion”

    Until you accept the fact that no business pays taxes because that cost is recouped either by raising the price of the goods/services sold, by reducing the salary of its employees or by lowering the profit of the company which ultimately goes to the stockholders (which are individuals like you and me), you will never understand the great boon that the Fair Tax will be. Any tax, no matter where it is levied, is ultimately a tax on the end consumer

  • dsmith

    “At the very least 401K and IRA contributions ought to be untaxed, and other investments ought to be taxed at a lower rate, but again that adds complexity.”

    No complexity at all. Consumption is taxed. Investment is not.

  • dsmith

    jaz #73,

    “am still chewing on my previous idea of making it a “seller’s tax” would have the benefit of exports having NO tax burden at all…”

    It is counterproductive to tax investment. Investment makes the economy grow. Tax consumption and not investment. A “seller’s tax” would basically be a tax on investment.

  • dsmith

    Dave Nalle #74,

    “The way it OUGHT to be done – and this just occured to me – is that any gains on stocks and bonds should be taxed at the standard rate, essentially the capital gains tax ressurected under this system.”

    Gains on stocks and bonds should not be taxed at that point. When the money from the gain is used for consumption, it will be taxed.

  • dsmith

    jaz #75,

    “interesting, but they are proposing full taxation of homes/real estate as being “retail” with businesses exempt (another BIG problem for me)”

    If the real estate purchase is a part of the cost of providing the goods/services, it would do no good to tax it, as the cost would be passed on to the end consumer anyway.

    “stocks should be treated the same as any other retail product…just my opinion, of course”

    Stocks are investments not retail purchases. Investment should never be discourage by the addition of taxes.

    “point is moot, this bird ain’t gonna fly anyway”

    This grassroots movement has been around for decades. It is finally gaining some serious momentum. I predict that it will become law within 10 years.

  • dsmith

    STM #102,

    “There’s often a very fine line between tax avoidance and tax evasion. Really, they often mean one and the same thing … there are schemes that people use hoping to exploit loopholes in the law, which while represent the letter of the law, don’t represent the spirit of the legislation.”

    All the more reason to pass the Fair Tax. It is much easier to police tax compliance when you are dealing with hundreds of thousands of businesses as opposed to millions of individuals. Plus, the Fair Tax removes the burden of the individual from filing a tax return and therefore saves the over $250 billion dollars spent each year for tax compliance. Imagine all that money flowing into the economy for “real” purchases.

  • dsmith

    Methuselah #106,

    “I’m against the “Fair Tax”, because it’s not fair. It shifts tax burden from corps to consumers, thus enhancing the power and freedom of those frankenstein-like monsters as super-citizens while further reducing the freedom of mere consumers.

    You obviously don’t understand economics. Corporations NEVER pay taxes. They simply collect them from consumers (via increased prices, lowered wages, or reduced profits for its stockholders) and passes them on to the government. Under the Fair Tax, consumers will pay roughly the same amount in taxes and yet bring home their full pay.

  • dsmith

    jaz #18,

    “now, all predictions/extrapolations are suspect, due to being based on “supply side” assumptions from “trickle down” advocates”

    Supply and demand are intertwined. One cannot function properly without the other. This is why legislative measurers to control pricing generally have a negative effect on the economy. In a TRUE free market economy no artificial fixing of prices is necessary as supply and demand will dictate the FAIR price.

    When it comes to issues of taxation, supply is the only relevant side as demand never contributes a single penny to revenue. Regardless of the demand, if a product is never supplied for sell, no revenue is generated. Without demand, supply just moves on to a market were there is a demand. Taxing production and income has a negative affect on supply and should never be condoned. The only true equitable tax base is consumption.

  • http://www.elitebloggers.com Dave Nalle

    Going back to #166, I think Doug paints a very unfair portrait of Boomers. I would guess that most of the supporters of the Fair Tax are part of the baby boomer generation – hell, most of our population is. Neal Boortz and John Linder who authored the Fair Tax book are at the outside edge of the boomer generation. The Libertarian party has been driven by and is dominated by people who are part of that generation.

    And I’d hardly say that boomers lack courage. They’re the ones who fought in Vietnam AND had the courage to oppose Vietnam.

    The generation may be conflicted and troubled in some ways, but that’s a problem with America as a whole, not just with their age group.

    Dave

  • MCH

    “And I’d hardly say that boomers lack courage. They’re the ones who fought in Vietnam AND had the courage to oppose Vietnam.”
    – Dave (Vox Populi) Nalle

    And then there was Rush Limbaugh’s family physician, who was brave enough to examine the zit on Rush’s ass, before awarding his deferment.

  • dsmith

    jaz #32,

    “do you REALLY think that if this is put in place, and those expenses are removed from corps they will lower their prices to the consumer?”

    It is a guaranteed certainy. Consumers could refuse to buy from businesses that refused to lower their prices. AND, if no business lowers its prices, consumers could organize and refuse to buy from all but one business in each market until prices drop. All other businesses in each market would have to lower prices or go out of business.

  • http://www.elitebloggers.com Dave Nalle

    You’ve got some good answers here, dsmith, but that last one seems a bit unrealistic. How well do consumers organize now? Have proposed boycotts hurt WalMart in any noticable way?

    Dave

  • S.T.M

    Dsmith wrote in #174: “Imagine all that money flowing into the economy for “real” purchases.”

    I favour a reduced income tax coupled with a Goods and Services Tax-style of about 9 per cent on everything at the cash register except basic foodstuffs: ie, milk, meat, eggs, fresh fruit, vegetables, etc, plus the scrapping of many ridiculous state taxes that mean governments double dip on a whole range of stuff (they get the lost money back through a federal distribution of the VAT/GST tax moneys, according to population and infrastructure need).

    The big problem with something like your fair tax campaign, and it’s a problem that’s been discovered in other countries that have introduced VATs and GSTs, is that there is a huge black market cash economy used in many trades and services that robs the government of its due. When the government is robbed of its due, so are you as the money flowing back from the government is also reduced. Policing it in Australia, for instance, which only has a population of $20 million, has been extremely difficult. Imagine how much harder it would be, and the bureaucracy needed to do it, in the US which has 10 times the population.

    Any system that doesn’t include some form of personal income tax is fraught, IMO … and that’s also the decision of plenty of tax experts. However, I do believe that those who seek to evade tax or use loopholes to avoid their full tax commitment make more of a contribution if they also have to pay a tax at the checkout. Just not at the level of 34 per cent. It’s unworkable for the average person, unless it is coupled with very strict legislation that stops employers reducing wages to below the pre-income tax levels, and even then it remains unfair. A person on a wage of $50,000 shouldn’t be paying the same tax as a person on $5 million. On a lower income, the 34 percent on everything becomes odious, but for the very rich it really means nothing. That wage legislation would be the key, however, if it WAS introduced. Problem is, it won’t be.

    Flat taxes like this are generally regarded as the taxation equivalent of the Flat Earth Society. I respect everyone’s right to a point of view, but I can’t see ANY US government introducing such a thing – for all the reasons I’ve given.

    You might as well start a Flat Earth campaign – that’s how much chance it has of success.

  • dsmith

    S.T.M #181,

    “I favour a reduced income tax coupled with a Goods and Services Tax-style of about 9 per cent on everything at the cash register except basic foodstuffs: ie, milk, meat, eggs, fresh fruit, vegetables, etc, plus the scrapping of many ridiculous state taxes that mean governments double dip on a whole range of stuff (they get the lost money back through a federal distribution of the VAT/GST tax moneys, according to population and infrastructure need).”

    First of all, the government has no business asking an individual what his income is. That is a violation of privacy. Second, taxing income is counterproductive to the economy moreso than taxing consumption.

    Exempting foodstuffs from taxation helps the rich considerably more than the poor, as rich people spend much more for foodstuffs (with all of their parties and such) than do the poor. The FairTax has a better solution: tax foodstuffs but give back with a prebate, the amount of tax spent on the necessities of life up to the poverty level. This is much more equitable for the poor.

    “The big problem with something like your fair tax campaign, and it’s a problem that’s been discovered in other countries that have introduced VATs and GSTs, is that there is a huge black market cash economy used in many trades and services that robs the government of its due. When the government is robbed of its due, so are you as the money flowing back from the government is also reduced. Policing it in Australia, for instance, which only has a population of $20 million, has been extremely difficult. Imagine how much harder it would be, and the bureaucracy needed to do it, in the US which has 10 times the population.”

    There is already a huge black market cash economy is the US right now. It is the unreported income of criminals and illegals who are paid with cash by employers as well as unreported income from the porn industry. By reducing the tax collection points to retailers as opposed to working individuals (there was over $391 billion tax dollars that were not paid by individuals last year), it will be much easier to police a black market economy.

    “Any system that doesn’t include some form of personal income tax is fraught, IMO … and that’s also the decision of plenty of tax experts. However, I do believe that those who seek to evade tax or use loopholes to avoid their full tax commitment make more of a contribution if they also have to pay a tax at the checkout. Just not at the level of 34 per cent. It’s unworkable for the average person, unless it is coupled with very strict legislation that stops employers reducing wages to below the pre-income tax levels, and even then it remains unfair. A person on a wage of $50,000 shouldn’t be paying the same tax as a person on $5 million. On a lower income, the 34 percent on everything becomes odious, but for the very rich it really means nothing. That wage legislation would be the key, however, if it WAS introduced. Problem is, it won’t be.”

    IMO, any system that taxes income is very detrimental to the health and wealth of the economy. It is much easier to hide income than to hide consumption. The Fair Tax would be a boon for the poor as it completely untaxes them while allowing them to bring home their full pay (including what was held out through federal income taxes, FICA and medicare taxes). Under the current income tax, the poor are strapped with paying FICA and medicare. With the prebate, most poor people who never spent a dime of their income on anything other than the necessities, will now be able to purchase these necessities with the Fair Tax prebate and keep their entire income, all 100% of it (minus any state income tax). This will give them plenty of money to use for buying a home and getting out of the burden of rent as well as investing money in their futures. They would also have more flexibility when it comes to purchasing luxury items.

    In a true free market economy, competition will prevent employers from lowering wages.

    If the US implemented the Fair Tax, it would become a magnet to businesses because of the favorable tax situation for business. This would bring many new jobs to the US and increase the consumption tax base even more. And with a consumption tax, tourists, criminals and illegals would be contributing to my social security. The Fair Tax is a win-win situation since it removes the ominous hidden taxes that most consumers are unaware that they are even paying while creating an environment that is health for businesses (who provide jobs and increase the tax base in the process). It also removes the burden on individuals of having to file a tax return and for many the cost of complying with this requirement which would free up more money for consumption.

    IMO, the income tax is the greatest evil ever conceived by humanity.

  • dsmith

    S.T.M #181,

    Not only will competition prevent employers from lowering wages, but because of the removal of the burden for employers to match FICA and medicare taxes, the employers should even be able to RAISE wages.

  • dsmith

    Dave Nalle #180,

    “You’ve got some good answers here, dsmith, but that last one seems a bit unrealistic. How well do consumers organize now? Have proposed boycotts hurt WalMart in any noticable way?”

    It wouldn’t take an excessive amount of consumers to abide by the restrictions to put a burden on the other businesses. Plus, with the increased business from consumers, the “favored” business could possibly start to lower prices in an effort to draw the non-complying consumers.

  • dsmith

    To those who seem to think it is necessary to tax income in order to “stick-it-to” the rich,

    It is unncessary to tax income to accomplish this. It does someone no good to earn lots of money if he or she is not going to spend it, so a consumption tax will still get the money from the rich. But, what if the rich choose to reduce spending and, instead, invest and save? Well, investing and saving (leading to more money to be loaned for economy-boosting endeavors) would increase the economy and allow employers to RAISE wages of the average consumer. This would result in more consumption to counter the lack of spending from the rich. However, no person is going to continue to earn lots of money without spending it on lots of fun toys eventually.

  • dsmith

    Here is a good .pdf that summarizes the FairTax very succinctly.

    FairTax

    Requires Adobe Reader.

  • dsmith

    Here is a web page FAQ that doesn’t require Adobe Reader.

    FairTax FAQ

  • Doug-an -Luke

    Haven’t been following this blog for a while. Dsmith seems to be one of the few who has a solid understanding of economics. Good show!. Many of the other replies are very weak attempts trying to justify an income tax with only feelings and opinion and no facts. (These attempts remind me of the current human caused global warming dogma preached by political idiots.) Remember, our founders did not advocate an income tax and it was only added at the 2% rate for the very wealthy. The Income Tax amendment has the same merit that the prohibition amendment had. Both limited individual rights and freedoms.

    Re my “portrait of boomers”. You will note I recognized those 5-10% of the boomers who get it! But the whining posts on this board not backed up by knowledge or basic common sense makes my point.

    Some Facts: (at random).
    1. Tax reduces aggregate consumption. More tax lest consumption less tax more consumption.
    2. Only people make money and pay taxes.
    2. Businesses DO NOT PAY TAX. People do.
    3. Dividends are taxed twice once as business earnings and once as dividend income.
    4. Tax avoidance is smart; your basic deduction is a form of tax avoidance.
    5. Tax evasion is a crime.
    6. Multiplier effect: (A simple view) 100,000 taxed at 20% results in a potential aggregate income flow of $500,000 and the same $100,000 taxed at 10% produces a aggregate consumption flow of $1,000,000. A rule of thumb income/tax rate = total potential income generation. Of course other funds uses such as savings, investments, imports-exports affect the end result.
    7. Tax should be used to provide those basic services that only the government can do. Some on this board appear to want to pay income taxes as though it were a positive event. Tax is a necessary evil to finance minimum government services.
    8. Tax should fund government and not be used to “punish” the successful.
    9. Fair tax does not apply to export our exports are thus reduced some 23% in price!
    10. Supply side economics works every time it is tried: Kennedy, Reagan and G.W. Bush have proved it.
    11. Tax avoidance impacts all business decisions and is a burden on a free market capitalist economy.
    12. You will pay the same price for a car, boat, airplane, cabin after the Fair Tax as before. Note, today many in business “write off” such items as business expenses but not after the Fair Tax.
    13. My opinion is if the Fair Tax were passed our economy wouldfboom. One example: Taxable funds in IRA’s etc., and in tax shielded investments would be immediately avilable with only one tax collected at the point of purchase. Note the poor do not usually buy new cars, boats, airplanes and cabins, the advocate of class envy should love this because the so called wealthy would pay the price and the tax and create the new jobs. Ain’t this just great!
    14. Tax shielding will not be necessary under the Fair Tax because you will already be at the “0” rate!

  • http://www.elitebloggers.com Dave Nalle

    Out of curiosity, who on this thread was defending and income tax? I wrote the article and it certainly hasn’t been me.

    Some people seem to confuse having some concerns and questions about the FairTax with supporting an income tax. You can still support tax reform and not be sure that the exact implementation in the FairTax is the way to go.

    And what if we want NO direct federal taxes at all? The proper form of taxation under a true federal system is to leave all taxing power with the states, who then pass on an appropriately apportioned amount of taxes to the (much, much smaller) federal government.

    Dave

  • STM

    Income tax is made possible by a legitimate amendment to the US constitition arrived at by the democratic process set out in the constitition. Arguing for it to be punted is no different to arguing for the 2nd amendment to be given the flick.

    Interestingly, however, in the US many of those who whinge loudest about their constitutional rights under the 2nd amendment in regards to gun control (a more pressing issue, really, than tax) are the very same people vehemently calling for the scrapping of the 16th amendment, or at least its intent.

    In my view, in their case, the claim to legitimacy under constitutional rights is a total crock and might instead come under the heading: “I want, gimme, gimme, gimme”.

    Go figure … but the truth is, if you really want to genuinely take on the rights AND responsibilities of citizenship, you can’t have it both ways. The opposite-but-similar scenario also applies to those liberals loudest among the gun control-lobby who also favour high taxation. There isn’t much difference.

    And Dave, this is NOT directed at you, nor at a lot of the other commentators. Powers of reasoning being the determining factor here.

  • doug-an-luke

    RE: #190 — April 4, 2007 @ 01:08AM — STM

    STM, you really don’t understand the U.S. Republic, do you? We are a Republic not a Democracy.

    First, to amend the U.S. Constitution it takes 2/3rds of both houses or 2/3rds of states in convention JUST TO PROPOSE the amendment and then it takes 3/4ths or 75% or 38 states to ratify such a change. This is not an easy tax.

    QUESTION: What did it take the Australian government to limit the unalienable rights of man (Para 2 Declaration of Independence our basic founding document) to keep and bear arms in Australia? A simple act of Parliament? If so, that is tooo, waaay tooo much power to give any government. We prefer the individual to have rights and power rather than government to have rights and power.
    AM, look in the mirror and say to yourself “the claim to legitimacy under constitutional rights is a total crock”

    The 16th amendment (process time 1909-1913) when initially proposed only taxed the very wealthy (Those evil Capitalists who turned our nation in to the most powerful nation known to man, ever!) which in today’s world would be those who are very successful. So when it was proposed early in the 20th century the average American said let the rich pay ….but. The tax didn’t stop with the rich. Now the middle class and rich pay the rest are along for the ride When 50% of Americans only pay 3% of the income tax and the other 50% pay 97% is a gross injustice. Now I can say this without fear because my 1st amendment limits Congress from creating a law to limit my speech. The Bill of Rights were added to the U.S. Constitution to clearly define the limits on government and to protect basic individual rights.

    You mention the 2nd Amendment, it is solid here, so far, and yes there are those (Democrat Liberals/Republican Moderates) who would deny such a basic right. But the opponents of the 2nd Amendment get no real traction. So far the 2nd Amendment opponents try to avoid the U.S. Constitution and have the courts write and dictate law. This is similar to what the Income Tax advocates did prior to the 16th Amendment in order to tax income.

    The requirement to ratify the Fair (Just) Tax does require that the 16th amendment be repealed which would increase individual freedom (conscription of income reduces individual freedom). This is no easy task but looking at the successful repeal of the 18th Amendment I can drink to the repeal of the 16th Amendment! If the 16th is not repealed the Fair Tax will not work; repeal is a mandatory requirement. I would like to see the following amendment:

    “The President, The Congress and the Supreme Court and other inferior courts do not have the power to lay and collect taxes on incomes, from whatever source derived.” P.S. this will never happen but I can hope.

    (Please note: We are not without problems though the Constitution requires laws to be written by the Legislative branch (House and Senate) and signed in to law by the Executive Branch. We see some laws “written” by our judiciary. Examples range from killing the unborn (Which should be the responsibility of State Legislatures) to permitting private conscription of property without due process in direct violation of Amendment V.

    Hopes this helps.

  • doug-an-luke

    RE: #189 — April 4, 2007 @ 00:42AM — Dave Nalle [URL]
    “Out of curiosity, who on this thread was defending and income tax? I wrote the article and it certainly hasn’t been me.”

    Reply:
    It is not you. You try to keep the conversation going and on track, that is good. Like all of us the intelligent discussion of this proposal requires review of the details! Back to the books, to support one’s views. All good. Some people just learned that business and corporations do not pay taxes; individuals do. Getting that point across is of great value. I don’t know if the math between “mark up” and “margin” will ever get across. We tried! The attempt to include exceptions like Social Security, Housing, Job Growth, etc., all have merit because we are able to discuss how the Fair Tax program addresses such issues; it expands the Fair Tax discussion.

    IMO The three posts listed below show support of the status quo on Income Tax.

    #106 — March 8, 2007 @ 01:42AM — Methuselah
    I’m against the “Fair Tax”, because it’s not fair. It shifts tax burden from corps to consumers, thus enhancing the power and freedom of those frankenstein-like monsters as super-citizens while further reducing the freedom of mere consumers.
    -Doesn’t have a clue. Does not understand basic economics.

    #181 — March 29, 2007 @ 18:25PM — S.T.M
    “I favour a reduced income tax coupled with a Goods and Services Tax-style of about 9 per cent on everything at the cash register except basic foodstuffs:”

    -### STM tends to bring emotion and attempts to divert the conversation but all in all his points are clear. He believe the individual has an obligation to respond to the governments requirement for taxes rather than have the government justify it’s conscription of income. Simple view: I believe in individual rights and obligations and STM supports government rights and individual obligations.

    JAZ – Many, many posts, no detal. In general is against the Fair Tax. I am not certain why. He has either not read the book or the legislation and if he has then he has made up his mind or he doesn’t have the basic ability to comprehend the program. I am not saying this to insult. I say this because I read all (gasp!) of his posts on the program and he is against it because it represents a “supply side” view. If today, after all of the emperical data is in, someone cannot accept the reality of free market capitalism and the absolutely positive affect it has on income and consumption then they will never be convinced. Even China and many of the former soviet Block countries belive in the good old supply side and are moving in the right direction. Fair Tax fits into the supply side proven concept like a glove.

  • dsmith

    The FairTax just picked up 6 more co-sponsors in the last month! There are now a total of 64 co-sponsors (over 10% of Congress!). Get 4 Congressmen to join each co-sponsor and the bill passes! This thing is starting to gain some serious momentum!

  • http://usafoundingfathers.blogspot.com/2006/03/founding-fathers-original-tax-plan.html john w k

    Since Neal Boortz is a primary advocate of H.R. 25, the alleged fair tax, I thought it would be interesting to post some of my disagreements with his proposal.

    BOORTZ agrees with a proposal, the alleged fair tax, which proposes to expand Congress’s taxing powers to reach property, real and personal, with a 23 percent tax, while keeping alive Congress’s powers to calculate taxes from profits, gains, salaries and other “incomes”.

    johnwk disagrees with such an expansion of government’s taxing powers and proposes to limit Congress’s taxing powers as follows:

    “The Sixteenth Amendment is hereby repealed and Congress is henceforth forbidden to lay ‘any’ tax or burden calculated from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money”

    BOORTZ agrees with a proposal, the alleged fair tax, which would create a family consumption allowance.

    The allowance would create a massive and dangerous voting block which would dwarf our existing social security voting block and would likewise be dependent upon a monthly government check for its subsistence. The allowance would open the door for our socialists in Congress like Senator Ted socialist Kennedy, to bribe voters during election time with a promise to increase the allowance to keep themselves in power!

    The family consumption entitlement is also projected to cost approximately $600 BILLION a year, making Hillary Health Care look like chicken feed and would be the largest redistribution program ever created by our government.

    Finally, the family consumption entitlement would be available to people who do not work for a living and are already on the public dole and would be paid for by hard working Americans who are having a hard time meeting their own economic needs.

    johnwk disagrees with the proposed family consumption allowance which is nothing more than a massive and blatant socialistic concept.

    BOORTZ agrees with a proposal, the alleged fair tax, which is unconstitutional on its face and would subjugate the intentions for which the rule of apportionment was made part of our Constitution.

    The intentions for which the rule of apportionment was made part of our Constitution are that if imposts, duties [external taxes] and miscellaneous internal excise taxes including those laid upon specifically chosen articles of consumption, which Congress was authorized to lay, were found insufficient to fill the national treasury, and a general tax among the states was found necessary to meet Congress’s exigencies, and especially in a wealth based tax being used as a primary source to fill the national treasury, those states carrying the lion’s share of such a tax would be compensated by a vote in Congress Assembled proportionately equal to their financial contribution___ a vote to be exercised in determining how their money would be spent by Congress ___ representation with proportional obligation, a concept which socialists and our Washington Establishment’s political plum job empire dreads with a passion!

    johnwk disagrees with a proposal, proposing to subjugate the rule of apportionment and further undermine federalism and state’s rights with regard to taxation.

    BOORTZ agrees with a proposal, the alleged fair tax, which is intended to raise existing levels of revenue without any provision to extinguish deficits created by borrowing and make every member of Congress immediately accountable for deficits when they are created. The alleged fair tax, which CIGuy agrees with, is intentionally designed with its revenue neutral feature to protect the existing Washington Establishment’s political plum job empire which is there to redistribute tax revenue taken from tax payers, redistributing that money to tax getters [Congress‘s numerous dependent voting blocks], and in the process those holding these political plum jobs live quite well with their six figure salaries, extravagant heath care benefits and outrageous retirement pensions ___ all paid for by the tax payers __ many of whom can only dream of such benefits and have become the tax slaves for the Washington Establishment and tax getters!

    johnwk disagrees with a proposal which is specifically intended to perpetuate the American Taxpayer being kept as a tax slave for a Washington Establishment political plum job empire.

    JWK

    “To lay with one hand the power of the government on the property of the citizen [the H.R. 25 tax] and with the other to bestow upon favored individuals, to aid private enterprises and build up private fortunes is none the less a robbery because it is done under forms of law and called taxation.” ____ Savings and Loan Assc. v. Topeka,(1875).

  • http://www.elitebloggers.com Dave Nalle

    John, referring to yourself in the third person is always a bad sign. Tends to suggest you’re a bit unhinged.

    I also have to suggest that you really don’t understand the Fair Tax or how it is implemented. I’m not even a rabid supporter of the plan, but it’s quite clear that you don’t quite get how it works. It is not a tax on real or personal property as you suggest, and obviously the negative tax aspect for those at the bottom of the income scale is necessary if such a radical change were ever to pass the Congress. And as for the rule of apportionment, it’s lovely, but it’s already been eliminated under the current system.

    I’m also not clear on what you’d suggest as an alternative. Certainly not the current system? You seem to be against direct taxation, yet you also object to the repeal of the 16th amendment?

    Perhaps you could tell us what you think would be better than the FairTax, short of more or less eliminating the federal government altogether, of course.

    Dave

  • STM

    Doug-an-luke wrote: “STM, you really don’t understand the U.S. Republic, do you? We are a Republic not a Democracy.”

    Don’t be condescending, now – I do know that it’s a representative republic. It’s also not that different to the system of government here in terms of how it’s elected. Both also happen to be democracies, in the case of the US you could argue that it’s a democracy in its purest form. Your argument on this particular thing is semantics, and is a view that tends to be touted most ardently by a certain element in US politics to justify a point of view that advocates “smaller” government. Plenty of US presidents, however, have used the D-word to describe the US, including Franklin D. Roosevelt.

    And yes, a simple Act of Parliament was all that was required to change the gun laws here, because they weren’t protected by the constitution. Anything protected under the Constiution requires a much more far-reaching and complicated process.

    Here’s the truth, though: Most of us aren’t agitating to have the gun laws changed back, either, and the mood of the country was what got them changed in the first place.

    We vote, we get to influence what goes on. In this country, which doesn’t have the gun culture of the US so in reality it can’t be compared, we have voiced our opinion on this issue and made our feelings known to the government by returning them to government at the ballot box.

    And it might be the only decision of this government about which I’ve agreed.

  • http://usafoundingfathers.blogspot.com/2006/03/founding-fathers-original-tax-plan.html john w k

    Dave,
    I suggest you study THE TEXT OF THE ALLEGED FAIR TAX, it is far different than the fairy tale version put into book form by Boortz and Linder!

    The very language of the alleged fair tax states in clear language “property“ is the subject of taxation:

    SEC. 101. IMPOSITION OF SALES TAX.

    `(a) IN GENERAL- There is hereby imposed a tax on the use or consumption in the United States of taxable propertyor services.

    b.

    Rate-
    `(1) FOR 2005- In the calendar year 2005, the rate of tax is 23 percent of the gross payments for the taxable propertyor service.

    `SEC. 103. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX.

    `(a) LIABILITY FOR COLLECTION AND REMITTANCE OF THE TAX- Except as provided otherwise by this section, any tax imposed by this subtitle shall be collected and remitted by the seller of taxable propertyor services (including financial intermediation services).

    `(f) BARTER TRANSACTIONS- If gross payment for taxable property or services is made in other than money, then the person responsible for collecting and remitting the tax shall remit the tax to the sales tax administering authority in money as if gross payment had been made in money at the tax inclusive fair market value of the taxable property or services purchased.

    Heck, under the Boortz promoted Marxist tax even the property which a teenage girl has in her labor when she baby sits is taxed as “taxable property“!

    Keep in mind, Dave, our socialist friends in American worked very hard to have a constitutional amendment adopted to remove the requirement of apportioning a specific wealth based tax among the states involving “taxes on incomes“ [see the 16th Amendment]..

    They now appear to be back and want to tax property, real and personal [which H.R. 25 would tax] also without apportionment among the states and without regard to any census or enumeration thereby closing the circle of a socialist taxing structure which reaches property, real and personal, in addition to calculating taxes from “incomes” which H.R. 25 does not remove from Congress‘s taxing power.

    As to your suggestion that the socialist redistribution idea of a family consumption allowance being necessary, tells me you are not familiar with the manner in which our founding fathers taxed consumption, which did not contain a “family consumption allowance”.

    Finally, your pompous remark that the rule of apportionment being “lovely” and has been eliminated under the current system is irrelevant when talking about the alleged fair tax which does not tax “incomes”, but proposes to tax the sale of property, real and personal___ the very objects which our founding fathers intended to protect by the rule of apportionment..

    The architects of H.R. 25, the alleged fair tax, and the socialists who worked very hard to adopt the 16th Amendment, both have something very much in common ___ the subjugation of the rule of apportionment by which the people of the various states agreed they would contribute into the common treasury if imposts, duties [external taxes] and miscellaneous excise taxes [inland taxes on consumption] were found insufficient to meet Congress’s expenditures.

    But the difference between the socialists who promoted the 16th Amendment and those who now promote the alleged fair tax is this.

    The socialists who promoted the 16th Amendment were up front and promoted exactly what they wanted:

    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

    But the weasels behind H.R. 25, who are obviously the friends of big government, are not being up front in saying exactly what they want, which is:

    The Congress shall have power to lay and collect taxes within the various states on the sale of property, real and personal, without apportionment among the several states, and without regard to any census or enumeration.

    Instead of saying exactly what they want, direct access to the people’s property, real and personal, they hide their evil by calling it the “fairtax“! But when all is said and done, H.R. 25 is the same socialist type taxing pig we now have but in a different dress!

    BTW, you also wrote:

    “I’m also not clear on what you’d suggest as an alternative. Certainly not the current system? You seem to be against direct taxation, yet you also object to the repeal of the 16th amendment?”

    I suggest you go back and read what I wrote. Unlike the primary architects of H.R. 25 which do not propose to end Congress’s power to calculate taxes from profits, gains, salaries and other “incomes”, I propose the following words to be added to our Constitution, bringing us back to our FOUNDING FATHER’S ORIGINAL TAX PLAN which was created by tax rebels and designed to control the actions of Congress, rather than having Congress control the people:

    The Sixteenth Amendment is hereby repealed and Congress is henceforth forbidden to lay “any“ tax or burden calculated from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money

  • troll

    Dave – while JWK can respond for himself I have a few questions about your #195:

    1 – under the Fair Tax when you buy something new (making it your property) you pay the Feds a tax…how is this not a tax on ‘real and personal property’ – ?

    2 – why is the Fair Tax’s bureaucratic redistribution of funds to those at the bottom necessary rather than some system of exemption – ?

    aside – you seem to have misread JWK concerning the 16th – he calls for its repeal

    3 – as for an alternative system of supporting the Fed – how about the States tax their residents and the Fed gets its funding from the States consistent with the rule of apportionment – ?

    finally 4 – what’s the problem with limiting the functions and power of the Fed – ?

  • http://www.elitebloggers.com Dave Nalle

    JWK, I’m already on record in this thread as agreeing with you on what would be the best plan – to just repeal the 16th Amendment. But that’s never, ever going to happen by itself and that makes the Fair Tax a practical alternative.

    That said, you’re misreading and misunderstanding the text of the act. A tax on the sale or exchange of goods or services is NOT unconstitutional. The SCOTUS has already ruled to that effect. It’s also not the same as a direct tax on real property, which has also been ruled constitutional (incorrectly IMO), which you seem to be confusing it with.

    As to your suggestion that the socialist redistribution idea of a family consumption allowance being necessary, tells me you are not familiar with the manner in which our founding fathers taxed consumption, which did not contain a “family consumption allowance”.

    Last I checked it wasn’t 1795, JWK. The founding fathers operated under an entirely different system of taxation which certainly could have included a ‘family consumption allowance’. If we did as you suggest and went back to the original apportionment system there would be NOTHING to stop individual states from taxing income, real property, sales of goods, or from just taking all income and redistributing it any way they wanted to.

    Your desire to go back to the original indirect tax by apportionment system is laudable on the surface, but all it does is transfer responsibility to the state governments where even greater abuse could and likely would go on.

    Dave

  • http://www.elitebloggers.com Dave Nalle

    1 – under the Fair Tax when you buy something new (making it your property) you pay the Feds a tax…how is this not a tax on ‘real and personal property’ – ?

    It’s a tax on the exchange of goods. You only pay it once when the item is sold, and it’s already been ruled constitutional on the state level. It won’t apply to stuff you already own and the state won’t come back every couple of years and try to tax you on the stuff you own again whenever it needs money.

    2 – why is the Fair Tax’s bureaucratic redistribution of funds to those at the bottom necessary rather than some system of exemption – ?

    A system of exemption would be fine with me, but the Fair Tax folks determined that the ‘prebate’ system was better for a couple of reasons. The first is that it makes the FairTax much more attractive to Democrats and putting it in there has actually won them some democrat support in congress. The other is that it’s more equitable and easier to administer than a exemption system. It puts less of a burden on businesses who have to keep track of what goods are exempted, and it doesn’t penalize people for being frugal. Under an exemption system the family which scrimps and spends less money on essential goods receives less of a benefit than one which eats like pigs and buys more expensive essential goods.

    aside – you seem to have misread JWK concerning the 16th – he calls for its repeal

    My point was that the FairTax ALSO calls for its repeal.

    3 – as for an alternative system of supporting the Fed – how about the States tax their residents and the Fed gets its funding from the States consistent with the rule of apportionment – ?

    That’s what we had before the passage of the 16th Amendment. IMO this is the right thing to do, but under our current government it would be a disaster. The amount apportioned to the states would be so enormous that the states would either refuse to pay, or implement a hodgepodge of unfair and abusive systems to raise the money. It would result in chaos and likely shut down the federal government. Might not be such a bad thing, but the transition would be hell, and it would likely end up in taxpayers paying a lot more, especially in certain states.

    finally 4 – what’s the problem with limiting the functions and power of the Fed – ?

    Not a problem for me at all. But it takes more than just repealing the 16th Amendment, because the state governments are just as likely to be abusive.

    Dave

  • http://usafoundingfathers.blogspot.com/2006/03/founding-fathers-original-tax-plan.html john w k

    That said, you’re misreading and misunderstanding the text of the act. A tax on the sale or exchange of goods or services is NOT unconstitutional. The SCOTUS has already ruled to that effect. It’s also not the same as a direct tax on real property, which has also been ruled constitutional (incorrectly IMO), which you seem to be confusing it with.

    No misreading on my part Dave. The very reason for which the rule of apportionment was adopted would be subjugated by the alleged fair tax, just as income taxation now subjugates the rule of apportionment, but does so via the 16th Amendment!

    During the framing of our Constitution, states with superior wealth objected to allowing a power of taxation being granted which was based upon wealth and would leave them carrying more of the federal tax burden than poorer states. The wealthier Southern States felt that some compensation in their voting strength was necessary if they were to contribute a larger share of the federal tax burden.

    Eventually, a compromise was reached [Article 1, Section 2, Clause 3] “Representatives and direct taxes shall be apportioned among the several States…” The intention being, which is contrary to the popular myth that it made Blacks 3/5 of a person, was an agreed upon rule determining each states’ voting strength in Congress Assembled, and also determined each states’ share of a tax, if imposts, duties [external taxes], and miscellaneous internal excise taxes were found insufficient to meet Congress`s expenses.

    Our Constitution’s fair share formula for a general tax among the states is as follows:

    State’s population

    ————————-X SUM TO BE RAISED = STATE`S SHARE

    Total U.S. Population

    Keep in mind there is a vast difference in laying miscellaneous excise taxes on specifically chosen articles of consumption from a general tax among the states which is specifically intended to be Congress’s primary source to fill the national treasury___ the latter type of tax being the very type of tax for which the rule of apportionment was adopted ___ a general type of tax among the states as a primary means to fill the national treasury which would make the most productive states in the union carry the largest share of the federal tax burden! And so, a compromise was reach tying such a tax and representation by the same standard…each state‘s population‘s size

    Of course this has already been established by the SCOTUS in POLLOCK V. FARMERS’ LOAN & TRUST CO., 157 U.S. 429; (1895) which struck down a tax because it would have subjugated the intentions for which the rule of apportionment was adopted! The Court carefully documents the intentions for which the rule of apportionment was adopted___ two illuminating references being:

    Mr. George Nicholas said: “the proportion of taxes is fixed by the number of inhabitants, and not regulated by the extent of territory, or fertility of soil… Each State [*568] will know, from its population, its proportion of any general tax. As it was justly observed by the gentleman over the way, (Mr. Randolph), they cannot possibly exceed that proportion; they are limited and restrained expressly to it. The state legislatures have no check of this kind. Their power is uncontrolled.” 3 Elliot, 243, 244.

    Mr. Madison remarked that “they will be limited to fix the proportion of each State, and they must raise it in the most convenient and satisfactory manner to the public.” 3 Elliot, 255.

    After determining the total sum needed, and each state’s apportioned share was calculated, each state’s Congressional Delegation was to then return to their own state with a bill to extinguish their state’s share of the tax. Each state’s share was based upon its number of votes in Congress and the various state legislatures and Governors were intended to retain the responsibility of having to meet that financial responsibility in their own chosen way, which would prevent Congress from entering the states and taxing the people directly.

    This is what federalism is all about, leaving the state’s at liberty to raise their share in their own chosen way, if and when Congress finds it necessary to lay a general tax among the states as a primary means to fill the national treasury.

    JWK

  • troll

    *It’s a tax on the exchange of goods.*

    isn’t this a sleigh of hands since it is the nature of the goods that determines the tax status of the exchange – ?

    the Fair Tax folk assume that a system of exemptions would have to be based on excluding certain goods from taxation…how about a system of exemptions in which the consumer after establishing that his income is below a certain level is issued a tax free card by a new income certifying agency (which would be required under the prebate system anyway) – ?

    while a bureaucratic solution itself wouldn’t this be simpler than checks every month – ?

  • http://www.elitebloggers.com Dave Nalle

    You might have something there, troll. But the problem with that system is that you’d have to know what peoples income is before they’ve actually earned it, and you might expempt them from taxes and then have them suddenly increase in income and not be taxed on it.

    Dave

  • troll

    good point Dave…a couple of responses come to mind –

    assume that income certification would be a periodic task

    first: would the exceptional cases seriously impact revenue in any way that couldn’t be anticipated – ?

    second: couldn’t an ‘undeserved’ tax free period function as an added incentive to move out of the tax exempt ‘class’ and be viewed as fair and positive – ?

  • http://blogcritics.org/writer/clavos Clavos

    troll/Dave:

    Good idea starting here.

    But, to carry Dave’s concern a little further:

    I don’t have a salary or “draw;” I work strictly on commission. An individual commission for a given sale can be quite large, often most (or all) of a year’s total income, but the flip side is that such commissions can often be far apart.

    Example: in 2006 I had NO commission income, but had savings from from previous years, and so lived a middle class lifestyle during the year. In such a scenario, I would have received, but shouldn’t have been entitled to, an exemption under the Fair Tax.

    Using troll’s idea, how would we able to account for such sporadic income and keep equitable? I would have paid consumption tax, sure, but also would have been eligible for an exemption.

    An “averaging” of say, five years income could solve this problem, perhaps.

    I know I’m not unique in this, since there are millions of commission salespeople in the economy.

  • dsmith

    troll/Clavos,

    You seem to have a misconception about the FairTax “prebate”. It doesn’t go just to households at or below the poverty level. It goes to every household of legal residents that applies for it. It eliminates any attempt at currying favor with added exemptions because there is no exemption. Everybody gets it.

    An added benefit of the FairTax is that it taxes illegal aliens who currently pay no taxes AND it prevents them from getting the “prebate” further burdening them. The FairTax could actually entice illegals to make the effort to become legal.

  • dsmith

    JWK,

    I’ll concede the point that the FairTax should probably have been called the FairerTax. It isn’t as fair as the rule of apportionment, but it’s fairer than any other proposed tax system since. And, it’s much more likely to become law than our returning to the rule of apportionment.

  • dsmith

    The FairTax has the potential to eliminate poverty as we know it because it completely untaxes individuals, who live at or below the poverty level, for expenditures on necessities. It will provide more disposable income for the impoverished allowing them to own property. This would make them contributing members of society instead of a drain on it thereby reducing the need for redistribution of funds (welfare).

  • http://blogcritics.org/writer/clavos Clavos

    dsmith,

    You’re right in that i didn’t realize the prebate applied to all households.

    I disagree with you when you say that illegals don’t pay taxes, however. They provide phony SS numbers in order to get jobs and are paying withholding which they have no prayer of ever seeing again.

    The exceptions are the ones working as nannies, gardeners, etc. The illegals who are working in construction or a factory or meatpacking plant, can’t get those jobs without an SS number.

    According to a series of articles in the Miami Herald this past tax season, more than a few even have REAL SS numbers and file tax returns.

    Since the IRS is prohibited from sharing their info with la migra or other government agencies, those who know this are actually obtaining SS accounts and paying. The Herald actually interviewed quite a few individuals for their series.

  • dsmith

    Clavos,

    I agree that there are SOME illegals who pay income taxes because they have obtained an SSN. But, there are numerous employers who are willing to pay illegals under the table (even some in construction). So there are many more illegals who pay NO taxes compared to the ones that do.

    I disagree with you when you say that the illegals who pay SS taxes will never see them again. Most of those illegals get FREE medical care at emergency rooms around the country. The illegals are virtually put ERs out of business.

    Illegals are also sending their children to public schools without having paid a single penny of taxes. What really irks me about the illegal alien situation is that some of those illegals are so very ungrateful for being able to live here tax free. They are now DEMANDING rights. Give me a break!

  • dsmith

    A case in point about illegals:

    The government was partially funding a construction project at Dulles Airport located just west of the DC area. It was discovered several months into the project that about 25% of the construction workers were illegals! How ironic! The government was paying the salaries of illegals who were contributing nothing in the way of taxes!

  • dsmith

    troll says in reference to tax on exchange of goods:

    isn’t this a sleigh of hands since it is the nature of the goods that determines the tax status of the exchange – ?

    Transactions involving all new goods and services (excepting the purchase of education) is taxed. All transactions involving used goods are untaxed (since the tax has already been collected during the transaction of the goods or services when they were new).

    Education is exempted to encourage people to get an education. As anyone should know, education is the key to everything. Education solves most problems or lessens the negative impact.

    Under the FairTax, investing and saving are not considered consumption. This also encourages investing and saving which can only improve the economy.

  • http://www.elitebloggers.com Dave Nalle

    The government was paying the salaries of illegals who were contributing nothing in the way of taxes!

    Good lord! They should arrest those government employers for not taking withholding out of those workers salaries!

    I’m being facetious, of course. In fact, they almost certainly paid the appropriate taxes for those illegals who would then be legally unable to file for a tax refund, with the result that the full taxes withheld would stay in the IRS’s coffers.

    So much for your theory that illegals don’t pay taxes.

    Dave

  • dsmith

    troll,

    In reference to the prebate:

    It has been suggested, that instead of issuing monthly checks to each household, each head of household would receive a card that would function like a Visa debit card. Each month the government would add the prebate to the account. The consumer could use the prebate debit card for purchases until its monthly balance is exhausted. This would cut costs as the government wouldn’t need to issue checks (everything could be done electronically) AND it wouldn’t require the consumer to give his bank account information to the government in order to do it electronically.

  • http://blogcritics.org/writer/clavos Clavos

    AND it wouldn’t require the consumer to give his bank account information to the government in order to do it electronically.

    You do know that if the government wants your bank account # NOW, they can get it on demand, and your bank won’t even tell you they asked for it?

  • http://www.elitebloggers.com Dave Nalle

    I think the bank account info is a lost cause, but the idea of doing the prebate with a debit card is still very appealing for the efficiency and cost reduction.

    Dave

  • dsmith

    Dave Nalle says

    I’m being facetious, of course. In fact, they almost certainly paid the appropriate taxes for those illegals who would then be legally unable to file for a tax refund, with the result that the full taxes withheld would stay in the IRS’s coffers.

    So much for your theory that illegals don’t pay taxes.

    Actually, Dave, the reason the illegals were discovered is because the contractor was not sending in the taxes for the illegals. Remember, the project was only partially funded by the government. The contractor thought he was smart about hiding the fact that he was paying illegals under the table.

  • dsmith

    Clavos says

    You do know that if the government wants your bank account # NOW, they can get it on demand, and your bank won’t even tell you they asked for it?

    Not without probably cause. The government must have a legitimate reason to obtain your account information (suspected tax evasion, criminal activity, etc.).

  • dsmith

    No. I’m not naive. I’m sure that the government does illegally obtain people’s account information. Hopefully, it’s not rampant.

    It is still illegal to do so without probable cause. If one learns that one’s information has been illegally obtained by the government, one should sue for remuneration and the government officials responsible for the illegal activity should be prosecuted to the full extent of the law.

  • http://blogcritics.org/writer/clavos Clavos

    No. I’m not naive. I’m sure that the government does illegally obtain people’s account information. Hopefully, it’s not rampant.

    Deposit $10K or more at one time and your account info is electronically (and legally) transferred to the feds tout de suite.

  • dsmith

    And the reason for that is called the federal income tax. The government decided that deposits of $10K or more warranted monitoring so these deposits become probable cause. All one has to do to avoid that is make numerous deposits below the $10K limit instead of one deposit.

    Enact the FairTax and this becomes unnecessary. When income is taxed it requires stronger tracking of income to monitor compliance. Change the tax base to consumption and the government’s interest in your deposits will be reduced.

  • http://blogcritics.org/writer/clavos Clavos

    And the reason for that is called the federal income tax.

    Maybe.

    But, the stated reason at the time of implementation was the illegal drug business.

  • dsmith

    But, the stated reason at the time of implementation was the illegal drug business.

    The passage of the FairTax would tax this income AT CONSUMPTION. Another reason to replace the income tax with a consumption tax.

  • http://www.elitebloggers.com Dave Nalle

    Hell, if the FairTax makes the war on drugs more difficult that’s just another thing in its favor.

    Dave

  • dsmith

    The FairTax has many upsides. One of the most important is that it gives the individual more control over the amount of tax paid. An individual is required to earn income in order to pay for the necessities of life. But, if consumption is taxed instead of income, an individual can have greater control over his tax burden. Since the FairTax does not tax an individual for consumption up to the poverty level, an individual can reduce his tax burden to virtually zero by eliminating any expenditures above the poverty level. So, in times of need (e.g, unemployment), one could put a hold on unnecessary consumption until the rough times pass (a new job is obtained).

  • http://www.elitebloggers.com Dave Nalle

    It would be cool if it made unemployment insurance obsolete.

    Anyway, I heard Boortz on the Radio today and he made a comment which suggested that other countries might be looking at the FairTax, particularly Brazil. That might be a shocker – wake some people in Washington up.

    Dave

  • dsmith

    Chile already has something similiar to the FairTax and its economy is booming!

  • http://blogcritics.org/writer/clavos Clavos

    Chile already has something similiar to the FairTax and its economy is booming!

    The implication being that Chile’s booming economy is thanks to the fair tax.

    Didn’t Milton Friedman have something to do with Chile’s booming economy?

    Seems like I read that somewhere…

    The fair tax looks like a good idea; I support it, but don’t overdo it, dsmith.

  • dsmith

    I didn’t say that Chile had the FairTax. Just something similar (a consumption tax instead of an income tax).

    Consumption taxes have been very successful wherever implemented throughout history. Income taxes, not so much.

  • dsmith

    Global corporations consider local tax structures when making planning and capital investment decisions. Lower corporate tax rates and favorable transfer pricing regulations can induce higher corporate investment in a given locality. The United States currently has the highest combined statutory corporate income tax rate among OECD countries1. Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the impact on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States.2 In addition, the U.S. is currently the only one of the 30 OECD countries with no border adjustment element in its tax system.3 Proponents state that because the FairTax is automatically border adjustable, the 17% competitive advantage, on average, of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home.

    1Hodge, Scott; Atkins, Chris (2005-11-15). The U.S. Corporate Income Tax System: Once a World Leader, Now A Millstone Around the Neck of American Business. The Tax Foundation

    2Wagner, Scott (2005-11-08). Abolish the IRS. The Observer Online. Free Republic

    3Linbeck, Leo (2006-06-22). Testimony Before the Subcommittee on Select Revenue Measures. House Committee on Ways and Means

  • Lumpy

    Right ye are dsmith. The reason business is booming in ireland is their 12 percent corporate tax rate when everyonw else is over 30 percent.

    And before u start bitchin that businesses aren’t paying their ‘fair share’, in ireland lowering the corporate rate ultimately resulted in enough additional revenue from attracying new businesses that they could lower income tax a bit too.

  • http://blogcritics.org/writer/clavos Clavos

    Businesses don’t pay taxes; they merely collect them for their respective governments.

    Any taxes they disburse to government are included in the price of their goods or services; or, as in the case of some airline taxes, are a surcharge on the product.

    The only taxpayers in commerce are the consumers.

  • dsmith

    Lumpy,

    Clavos is correct. Businesses do NOT pay taxes. They recoup their tax costs by passing them on to individuals. They do this by raising prices, lowering wages, or reducing dividends to stockholders. Or a combination of the three.

    Businesses can not be tax payers because businesses can not own wealth. They are merely the tools by which individuals earn wealth.

  • dsmith
    Congress Sponsors Co-sponsors For Undecided Against
    House 1 60 72 297 70
    Senate 1 4 9 72 19

    The FairTax has two more co-sponsors.

    Darrell Issa, California on 5-7-2007
    John Boozman, Arkansas on 5-9-2007

  • http://blogcritics.org/ Phillip Winn

    Corporations paying corporate income taxes may disagree, Clavos. While *most* taxes a business collects are not “paid” by the business, some are.

  • http://www.elitebloggers.com Dave Nalle

    Corporate taxes DO matter. Even if they are passed on to consumers 100%, that still impacts the final price of the product being sold. That reduces the competitiveness of the product in the marketplace.

    Dell builds computers in Ireland because it means that when they sell them they can cut the price by 20% because the corporate tax they pay there is 12% instead of the 35% they pay here in America. That means they can undercut Gateway (who I believe they already forced out of business) and other competitors.

    Dave

  • http://blogcritics.org/writer/clavos Clavos

    Yes, Phillip, but income taxes ARE part of their costs of doing business, and a business that doesn’t make more than it spends in overhead eventually fails.

    Thus, the ultimate payer is the end user, and the ultimate end user is the retail customer.

    Businesses are certainly not absorbing their taxes. As dsmith points out, they come out of either sales revenue, wages, or dividends. In every instance that means we, the individual taxpayers.

  • dsmith

    “Corporations paying corporate income taxes may disagree, Clavos. While *most* taxes a business collects are not “paid” by the business, some are.”

    Phillip, a company will attempt to recoup 100% of its tax burden as mentioned above. If it is unable to do this because of market forces, its profit will be reduced. If its profit is reduced enough, it will not be able to continue operations. It is silly for a government to place an extra burden on any company struggling to survive. The very revenue generated by the tax can and often does eliminate a source of revenue by putting the company out of business (this also cuts consumption to a degree because its employees are not unemployed). This is the very reason why income tax cuts ALWAYS stimulate the economy. Rather than indirectly tax the consumer through hidden taxes, why not just directly tax them? Doesn’t it make much more sense to tax consumption?

  • dsmith

    … employees are now unemployed …

    I hate that you can’t edit your own posts.

  • http://blogcritics.org/writer/clavos Clavos

    dsmith,

    I hate that you can’t edit your own posts.

    But you can. That’s what the “preview” button is for.

  • STM

    Yes, that’s a really fair tax, that flat consumption tax. Doesn’t discriminate one little bit against low- or middle-income earners. Let the poor pay, I say! Yes, I do love a good flat tax, and it just dovetails nicely with my membership of the flat-Earth society.

  • http://blogcritics.org/writer/clavos Clavos

    Stan,

    Did you check out the FairTax website?

    There IS a provision for providing relief to lower middle and poor families (and individuals), such that once the current hidden taxes are backed out of the system (also part of the plan), they will be paying less, not more, than they pay now.

  • doug-an-luke

    I haven’t been on line for a while with this discussion group.

    Some very interesting points are made. But there always appears to be an attempt to drift away from the details of the Fair Tax in order to discredit it.

    1. A key point is Business, Corporations, Enterprises, etc. do not and never have paid tax. Not one cent not a half cent. Individuals pay the tax. The consumer has a tax included in the purchase. In addition all expense of an organization or individual, every penny is someone elses income be it a supplier of goods and services or even the government (buys goods and services) all the money belongs to someone. Even money stuffed in a mattress belongs to someone. One man’s expense is another man’s income!

    2. Fair Tax addresses CONSUMPTION of new goods and services produced and sold in the U.S. In national income accounting (Ca) Aggregate Consumption is a key part of National Income, just as Savings, Investment, Taxes and Exports less Imports are all part of National Income. The Fair Tax is a consumption tax on (Ca) Aggregate Consumption.

    3. The prebate is payment to a U.S. citizen to insure “…no one should ever have to pay the tax on the basic necessities of life.” (TFTB pg 95). The requirement to have business or individuals track spending would be a nightmare. The prebate is a just solution as well as a political solution; can you imagine the screaming if the poor were not considered as benefiting from this program. The simple and fair thing to do is provide a universal rebate, “prebate”, schedule for all individuals based on family size and Poverty Level spending all U.S. citizens are thus treated the same. The criteria is simple and just!

  • dsmith

    Clavos,

    Previewing before you post is a form of editing. But, it’s not that difficult to overlook something. Being able to edit after posting would be much better.

  • dsmith

    “Yes, that’s a really fair tax, that flat consumption tax. Doesn’t discriminate one little bit against low- or middle-income earners. Let the poor pay, I say! Yes, I do love a good flat tax, and it just dovetails nicely with my membership of the flat-Earth society.”

    If it were strickly a flat consumption tax, you’d be right. The FairTax is much more than just a flat consumption tax. It contains provisions that benefit the poor and lower middle-class. Actually, the FairTax benefits all current tax payers. It just benefits the ones on the lower end more.

  • dsmith

    Strictly speaking, I need to do a better job of previewing my posts.

  • dsmith

    Yes, that’s a really fair tax, that flat consumption tax. Doesn’t discriminate one little bit against low- or middle-income earners. Let the poor pay, I say! Yes, I do love a good flat tax, and it just dovetails nicely with my membership of the flat-Earth society.

    With the FairTax, the Family Consumption Allowance (prebate) will offset taxes up to the poverty level.

    Our current tax systems has a VERY, VERY regressive tax, the payroll tax. Because payroll taxes are paid only on the first $90,000 of income, the poor pay a significantly higher effective rate than the wealthy. Someone earning $20,000 pays $3,060 in payroll taxes (15.3% [I include the employer matching part because if the employer didn’t have to pay it, he could pass it on to the employee in higher wages] of income) while someone earning $3,000,000 pays $13,770 (0.459% of income). 15.3% for the poor and 0.459% for the wealthy! The FairTax will do away with this most regressive tax.

  • dsmith

    Another co-sponsor in the House. Wayne Gilchrest of Maryland became the 61st co-sponsor. There are 4 co-sponsors in the Senate. Including the two sponsors that makes 67 Congressman who have put their name on the bill!

  • dsmith

    Yet another co-sponsor in the House! Zach Wamp of Tennessee just became the 62nd House co-sponsor of the FairTax bill. Let’s keep the pressure on the ones who have yet to sign on to the bill.

  • http://tinyurl.com/7lssy Ian

    Here is why the FairTax will make a good U.S. tax system REPLACEMENT. The FairTax is:

    • 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”
    • Pre-bate equals payback for taxes on spending to poverty level
    • FairTax’s pre-bate 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

  • doug-an-luke

    Ian great list.

    A few comments:

    Ref:

    FOR INDIVIDUALS:
    • Savings is bolstered with reduction of interest rates.

    I believe this should say savings and investment are bolstered with the elimination of taxes. (Lower interest rates would result in reduced savings.)

    FOR BUSINESS:
    • Business decisions would be made based on the goals and objective of the organization rather than tax implications. Also, as you note. The Business decisions of “off-shore” organizations would cause many to move their operations to the US in order to avoid taxes.

  • dsmith

    Up to 63 co-sponsors in the House.

  • psu77

    I am a novice at this Fair Tax proposal, and certainly far from an economic expert. To be fair I am very skeptical, mainly for two reasons.

    First, regardless how you word a tax as being “inclusive”, I do not care for the tax being cited as 23% when it is 30%. Sorry, but if something costs $.77 and I pay $1.00, that’s a 30% tax.

    Second, I have a hard time figuring out how they can possibly assume 100% compliance on a program like this. And their numbers only work if they get 100% compliance.

    But I have a question.

    How can you assume that the price of new houses will be reduced by the % of the fair tax? I understand the “embedded tax” thing, but are you saying that is the same % as the fair tax?

    How does that work without including the amount of money that workers currently pay in payroll taxes? And if it does include them, then the workers will see a reduction in their take home pay, right?