At an appearance in Austin radio talker Neal Boortz revealed audacious plans for the Fair Tax movement in the 2008 primary season.
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.…
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226 - 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
227 - dsmith
Chile already has something similiar to the FairTax and its economy is booming!
228 - 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.
229 - 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.
230 - 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
231 - 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.
232 - 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.
233 - 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.
234 - dsmith
The FairTax has two more co-sponsors.
Darrell Issa, California on 5-7-2007
John Boozman, Arkansas on 5-9-2007
235 - Phillip Winn
Corporations paying corporate income taxes may disagree, Clavos. While *most* taxes a business collects are not "paid" by the business, some are.
236 - 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
237 - 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.
238 - 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?
239 - dsmith
... employees are now unemployed ...
I hate that you can't edit your own posts.
240 - Clavos
dsmith,
I hate that you can't edit your own posts.
But you can. That's what the "preview" button is for.
241 - 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.
242 - 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.
243 - 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!
244 - 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.
245 - 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.
246 - dsmith
Strictly speaking, I need to do a better job of previewing my posts.
247 - 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.
248 - 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!
249 - 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.
250 - 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
251 - 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.
252 - dsmith
Up to 63 co-sponsors in the House.
253 - 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?