Still, announced presidential candidate Herman Cain has made the FairTax idea part of his campaign platform, just as Richard Lugar did sixteen years ago. Perhaps Cain should talk to Steve Forbes, the last unelected presidential candidate to champion the Flat Tax cause, twice. However, that is another story.
10 years ago in January, 2001, the Congressional Budget Office forecast surpluses totaling $5.6 trillion by 2011. Balanced for the first time in decades at that time, the U.S. budget has since plunged from surplus to debt. A third of that $12.7 trillion plunge can be accounted for by three policies for which no one in office claims responsibility: the 2001 and 2003 Bush tax cuts, the wars in Afghanistan and Iraq funding and the 2009 Obama stimulus bill. Expressed as a percentage of the economy, except for a period after WWII, those three policies contribute to the national debt being larger than at any time in U.S. history.
So while everyone is blaming everyone else for a crisis in which they are complicit, politicians like to drag out the tax code and beat it like a populist’s piñata. It worked for President Obama.
"We've got a tax code that's making things worse,” candidate Obama said, October 22, 2007. “This isn't an accident. Special interests in Washington have carved out a trillion dollars worth of corporate tax loopholes at a time when income inequality is larger than any time since before the Great Depression." But candidate Obama was talking about a fair tax system, not the FairTax bills being put forth in Congress.
The central idea of the FairTax is that it would eliminate complexity in the tax code. The idea is long on rhetoric: what you earn is what you keep, no more withholding taxes, no more income tax. However, it is short on reality. For example, taxpayers would still pay the FICA Social Security tax, which is already a larger burden than income tax for most people. Somebody would have to enforce the new tax law, so the plan would not eliminate the IRS altogether. The FairTax would not help the poor, who pay no income taxes under current tax code. That is all before special interests hire lobbyists to propose exemptions. Tax attorneys, tax accountants and tax preparation companies be damned. Not.
Article comments
1 - Mark C
You are right Fairtax "has problems" but you seem to be blissfully unaware that it is, quite literally, a farce.
It's own leaders know it's a farce.
The goofiness of Fairtax has nothing to do with new agencies, or anything like that.
The goofiness is that a sales tax would have to be 89% -- not 23%. Fairtax math is something that the Mad Hatter wouldn't defend, it's beyond goofy.
Fairtax math is based on getting massive funds -- taxes -- from every city, every state, every county government. Three hundred billion -- IN ADVANCE.
That's right -- check out the footnotes and fine print.
By the way, this is all confirmed by Fairtax own spokesmen, David Kendall, Neal Boortz, and James Bennett. What I am saying is CONFIRMED -- not some goofy diatribe, though it must sound like that.
The 300 billion is not the total taxes that city, county, and state government would have to pay -- not even close. That is just the amount they would have to pay IN ADVANCE.
Do you really think California state government is going to pay 6-7 billion IN ADVANCE, and another 7-8 billion on top of that?? Because that is how Fairtax math "adds up". That is also what their footnotes and fineprint require.
Government is a "taxable person" per HR 25, section 2a, subsections 7, 12, 17. This "taxable person" must pay a tax on all salaries it pays, all wages, all benefits, ALL PENSIONS it pays. Yes, PENSIONS.
So city and states have to pay wages and pensions -- they ALSO have to pay a tax on these "purchases of labor".
This is PROFOUNDLY goofy. I mean it's wack wack wacko.
When I first saw this, I could not believe my eyes, so I contaced Fairtax spokesmen -- three of them. All three confirmed it, in fact, they bragged about it. David Kendall said he "sees nothing wrong with asking city and states to pay".
Asking? Since when is hiding this goofy stuff in fine print, the same as ASKING?
James Bennett, another spokesmen, defended this madness by saying that "If cities and states don't like it, fine, just don't vote for it".
Yet city and states DONT have a clue about his goofy aspect of Fairtax. When I asked Bennett how city and states are supposed to know, he said they should "read the bill".
Go to my videos, and see. Better yet, check out the fine print and goofy footnotes.
If you think Fairtax only problem is some new agencies, then you don't have a clue.
2 - Glenn Contrarian
What did the Founding Fathers have to say about tax revenue? Well, here's what Thomas Jefferson had to say:
"Those seeking profits," Jefferson wrote, "were they given total freedom, would not be the ones to trust to keep government pure and our rights secure. Indeed, it has always been those seeking wealth who were the source of corruption in government. No other depositories of power have ever yet been found, which did not end in converting to their own profit the earnings of those committed to their charge."
"I am not among those who fear the people. They, and not the rich, are our dependence for continued freedom. ... We must make our election between economy and liberty, or profusion and servitude. ... [Otherwise], as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, ... and the sixteenth being insufficient to afford us bread, we must live, as they now do, on oatmeal and potatoes; have no time to think, no means of calling the mismanagers to account; but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow sufferers."
A totally "free" market where corporations reign supreme, just like the oppressive governments of old, Jefferson said could transform America "...until the bulk of the society is reduced to be mere automatons of misery, to have no sensibilities left but for sinning and suffering. Then begins, indeed, the bellum omnium in omnia, which some philosophers observing to be so general in this world, have mistaken it for the natural, instead of the abusive state of man."
As Jefferson realized, with no government "interference" by setting the rules of the game of business and fair taxation, there will be no middle class.
As Thomas Jefferson wrote to James Madison in 1784, "Taxes should be proportioned to what may be annually spared by the individual." And, as wealth rises, so should taxes -- "geometrically."
The only, the only thing wrong with a progressive tax system that taxes the rich more than the poor or the middle class...is that it doesn't fit with conservative dogma. The rich do NOT need to be protected. The poor who do the physical labor, the middle class who are (or should be) the backbone of the nation SHOULD be protected and given as much support to improve their lot as can be afforded...
...but the rich do NOT need to be protected, nor does the playing field need to be 'made fair' for them...for their riches alone put everything in their favor. Anyone who disagrees with that need only look so far at who can afford what kind of lawyer to see the proof.
P.S. One can only imagine the names the Tea Party and the Republicans would have for Thomas Jefferson, were he alive today and running for office....
3 - Cannonshop
Huh. While I could see the Government imposing a national sales-tax, I don't see them EVER repealing the Income Tax.
Ever.
There's an entire industry built around it, it'd be less difficult to dismantle the war on drugs, than eliminate the income tax.
EVEN assuming the "Fair Tax" math were accurate (and I can't assume that), it removes too much power from the Ruling Class in D.C. and their corporate masters on Wall Street and in Chicago.
By the way, has anyone told Herman Cain he's supposed to be a Liberal Democrat, rather than one of those Racist White Republicans?
4 - Taloran
@Glenn - Thanks for those very wise quotes from Jefferson. They will assist my arguments in another forum.
5 - Tommy Mack
Congressional committees are the lymph nodes of government. The job of congress is legislation for which the process includes writing bills and sending those bills to a committee for revenue. Some bills never make it out of committee, the most likely fate of both S.13 and HR.25. One doesn’t have to worry with the fine print of a piece of legislation that includes the repeal of a Constitutional amendment, however.
I used to find it odd that people elected to congress would hop on board one losing proposition after another until the 112th Congress came to order and read an abridged version of the Constitution into its record. The Republican majority would have a better time attempting to repeal the 17th Amendment [direct election of senators] than the 16th, both enacted in 1913.
Tommy
6 - Alex
"For example, taxpayers would still pay the FICA Social Security tax, which is already a larger burden than income tax for most people."
This is to get rid of all taxes. The social security tax would be funded under the fairtax.
"The FairTax would not help the poor, who pay no income taxes under current tax code."
You forgot about the prebate that every family gets to untax everything unto the poverty level.
"That is all before special interests hire lobbyists to propose exemptions."
There is no exemptions by design and it would take a super majority to change it once it's passed.
7 - RobertH
I'm not as sure as I used to be on the Fair Tax, but, and that's a big but, I'm also willing to try anything that does away with Payroll and Income taxes. I'd like to take home every penny I earn, without Big Brother putting his hand into my wallet, without asking me first.
I'm willing to try it. And I am slightly left of center politically.
8 - Henry
RobertH, You take home your payroll but with Fair Tax, Big Brother will be there to tax everything you buy plus any state tax added on. No winner.
9 - Amerigo M. Cimino
I don't see any problem with the Fair Tax, except politicians do not like it! Talk about taking back our country, the Fair Tax is the way to go. Just imagine; All other taxes will be eliminated! Embedded taxes amount to approx. 22% of the cost of any product, ALL of these taxes will be eliminated! The Fair Tax will add approx. 1% to the existing cost! Not only that; if you work your 40 hour week, and you get $25.00 an hour, You get your entire $1,000.00, without any deductions! We also eliminate the lobbyists! How about that for an economy booster? The Fair Tax would be the greatest transfer of power from the government to the people! Les's get it passed.
10 - MerlinYoda
@Mark I see you've found yet another article to slander the FairTax on by posting baseless claims and arguments. This really must be a full time job for you to comment so soon on this article after it was posted.
@Glenn You totally miss the mark on that Jefferson quote is in the context of *those in government* (or closely involved with government for our more modern purposes) which seek only profit ... kinda reminds me of those legislators that say we have to raise more revenue so that we can cover even greater (and unsustainable) levels of federal spending that they themselves propose. He was concerned with "profit" (which could be interpreted as either a monetary gain or political gain) becoming the only concern of those in our government and thus having our economy and government corrupted by them (the phrase "crony capitalism" ring a bell?). In short he's saying not to elect those who are solely concerned with the profit of the nation's economy but to elect those who will also balance this out by protecting the fundamental rights of the people or ad Jefferson says "We must make our election between economy and liberty, or profusion and servitude". The key word is "between" implying a *balancing* of the two. His positions are more libertarian/*classic* liberal than in line with any neo-liberal/progressive positions.
@Alex good rebuttals. Unfortunately, in the case of people like Mark they will fall on deaf ears. "Mark" in particular is well known among the comment sections of FairTax articles and blog posts. His cometary has been exposed in countless other forums either inaccurate (throwing out "scary numbers" like a 89% tax rate which is based on absurd assumptions and cited as an exclusive rate as opposed to an inclusive one) or misleading (fixating on a singular definition in a bill and not addressing the overall picture) or both by many a commenter that actually *knew* the legislative wording of the FairTax bill and could cite specific reasons as where his assertions were false. Nevertheless, you're accurate citations are to be appreciated in shedding light on the subject when many detractors just want to poison the well to stifle fair and open debate on the matter.
@Henry You are not taxed on *everything* you buy; this is no ordinary sales tax. It is a consumption tax because only *new* goods and services are taxed. If you don't want to pay so much in federal taxes, you can by used goods and they will not have tax levied against them (the key point is *federal* taxes are not levied, the federal government cannot dictate to states how or what they tax to raise revenue for their own purposes within their state). Also, the prebate offsets taxes on spending up to the level of poverty (makes the whole system progressive). Under the FairTax your take-home pay would increase by the amount of *all* of your current federal withholdings (income, FICA, and Medicare). Furthermore you don't have the social and economic engineering under the FairTax like you do under our current income tax system with loophole and and favors throughout to reward political friends and punish political enemies. Given all that (and more!) the FairTax wins against our current tax system.
I would encourage everyone, *especially* the author who has made several omitions and factual errors in this post (such as the complete omission of the "prebate" that untaxes the poor that is built into the FairTax and how the FairTax would replace *all* current federal income-based taxes which includes FICA), to go to thomas.loc.gov and look up HR 25 (or the parallel senate legislation of S 13) and go to fairtax.org to see if any questions you have about the legislation that may have already been addressed (most likely, it has).
11 - Tommy Mack
@MerlinYoda, your thoughtful comments are noted. Those blue words that you see in the text of my article are in fact links to the Library of Congress. If the links do not work for you, please let us know.
Tommy
12 - Charlie
It is too bad that blogs like this comment on the Fairtax without a grasp of the Fairtax impact on the economy. The focus of blogs like this is that the 23% sales tax is really 30%, and thats too high. Well if 30 % is too high then the problem is how much is spent....and then more is borrowed to spend. The real impact of the Fairtax is that it will bring back jobs that have gone overseas. Manufacturers prefer skilled American labor but taxes drive up the cost of the products. Taking taxes out of the production side allow manufacturing to return to American. Now, Who thinks America needs more jobs?
Karl Marx was a smart fellow. He was wrong on rights and liberties, but smart. He said the best way to get from a democracy to a socialist state was with an "Income Tax". It was all the rage in Europe and in the early 1900's smart fellows in America wanted to do things like Europe(sound familiar?) So, they got the income tax. Small at first, it got a little bigger and a little bigger each Congressional session(sound familiar?) A little like the frog in a pot on the stove. Next thing you know, the economy is restrained by the income tax and government has to come in and fix everything. probably by raising taxes(sound familiar).
People want business to pay taxes. Unless a business has a printing press,the only place they can get money is from their customers. If McDonalds doesnt have to pay taxes on its workers, it doesnt have to collect it and can cut the price of hamburgers. And they better do it quick because Wendy's and Burger King are right behind them.
Blogs like this leave out the prebate feature that essentially untaxes basic necessities. Each household recieves the equivalent to the taxes on the poverty threshold of the number of people in the household that have Social Security cards. The Fairtax removes taxes from manufactured goods and refunds taxes on basic necessities. THE FAIRTAX UNTAXES THE POOR. We should pass the Fairtax but for no other reason but this.
When you watch one of those award shows, that is a tax write-off. The gowns, jewelry, limos, even the dinner and drinks are written off as an expense. If the Fairtax were enacted, it would be a taxable event. After all, what is wealth? Having money in the bank or being able to live extravagantly?
To dodge the income tax, all you have to do is falsify your return and take the chance you wont get caught. Many do it and dont get caught. With the Fairtax, the SELLER is responsible to collect and report the tax AND the SELLER is the one that is at risk for not reporting the taxes. Are they going to risk there livelihood to avoid YOU paying taxes. With 90% fewer accounts to watch, the Revenue Service will be adequately staffed. Oh Yea, and 80% of american business is done by 15% of the businesses. Big companies will certainly prefer compliance to investigations.
I am glad I dont have to defend the current tax revenue collection system that everyone thinks we have to have. We dont. There is a better way to get it done.
It wont come from Washington, we have to send it there. The "co-sponsors" are offering lip service right now because the is no broad call for passage. Just regular foks are going to have to demand it. If you will go to:
www.Fairtax.org
and read about it, you will get on board. My kids are approaching adulthood and things really look bleak. The Fairtax will give them and America a fighting chance.
13 - Charlie
Oh yea...I almost forgot.... There is a big industry that makes 250 BILLION dollars a year in "tax compliance". Its the CPA/Tax Attorney industry. If you think they are going to concede without a fight....well, just read the comments...you can figure out who's who.
14 - Tommy Mack
Thanks for your comments, Charlie #13. That is why I wrote, "Tax attorneys, tax accountants and tax preparation companies be damned. Not."
Tommy
15 - Dutchman3
Any of you that believe that retail prices will rise only a percent or two need to think again. The only study on prices was done in 1997 by Dale Jorgenson. He concluded that tax costs averaged 22% across most industry segments. But what most Fairtaxers don't grasp is that he included employee taxes in that 22%. If we are all going to get 100% of our pay/pensions, then the most business tax costs can be reduced is around 9%. Remove 9% in tax related business tax costs and add the 30% sales tax and retail prices will rise by 18% on average. Check it out! There is no free lunch!
16 - Dutchman3
To All,
You masy not like Marc Curran's numbers, but he is dead right about the total idiocy, (and unconstitutionality), of having the federal government tax all State and Local government consumption. Hire a cop, pay the tax on his salary each year, buy a fire engine, pay the tax, etc. etc. There is no precedent for such a tax scheme, and it seems clear that the Fairtax originators simply wanted to expand the tax base by $2 billion or so in order to keep the tax rate low. Never happen, my friends. The Supreme Court would toss this one in a heart beat.
17 - Cannonshop
It's too complicated, which is the same exact problem we have with the current income tax system, and like the current system, the 'fair tax' system makes assumptions not in evidence in order to make its plunder palatable.
If you tax localities and municipalities, it's the same as taxing business-they're going to raise THEIR tax rates to compensate, or cut services, (or, likely, both). This could be catastrophic to small businesses and home-owners, esp. in states without state level income tax structures, where state revenues are reliant on sales and property taxation and business taxation.
What I'm saying is, it's a nice fantasy, but it's not workable-there's a whole lot of rather predictable rule-of-unintended-consequences involved in the "Fair Tax" consumption tax design.
And that's from a "Flat Tax" view.
18 - Tommy Mack
Cannon’s right on. Steve Forbes got a lot of attention on the Flat Tax platform as a two time Republican primary candidate. He had the money to promote it, too. The Fair Tax legislation languishing in committees, however, still requires amending the Constitution to repeal the 16th Amendment and that is just not going to fly. It’s a museum piece.
Tommy
19 - John Craine
The true farce is the current tax code. We can argue till we're all blue in the face over details of the execution of the fair tax. The larger reality is that any tax collection scheme needs to cover the costs of running government -- which is a separate argument about spending policy. The Fair Tax concept is all about how the money is collected, what are the embedded incentives inherent in the collection scheme, and who ultimately has control over changes to the system.
I think we can all agree that the current system of tax collection is a hodgepodge of ideas and carve outs driven by special interests with the occasional bone thrown to the public at large. It's not cohesive or coherent and it certainly does not reflect any national "mission" or overarching national goals or strategies for growth or sustainability. It is this chaotic and unfocused nature of our current tax system that is a primary barrier to economic growth in this nation.
The fair tax concept is elegantly simple. It's a green tax because it promotes efficiency and savings. It reduces the paperwork and record keeping burden on everyone. And most importantly, it puts control of paying taxes back into the hands of the consumer. Because it's easy to understand, it becomes very difficult for lawmakers to tinker with it beyond public scrutiny. Every year Congress makes hundreds of changes to the tax code, yet most of us are completely oblivious to these changes because we believe they don't affect us directly. Obviously they do because they affect the distribution of total tax burden.
I don't disagree that moving to a new system of tax collection will result in winners and losers. It's unavoidable because of our current mess of a system. But the impact can be reduced through thoughtful implementation.
Since most Americans already pay a sales tax to their state, ask yourself this simple question: Which tax system do I spend more time agonizing over, my state sales tax or my income tax?
I agree that it's going to take a tidal wave of pressure to change the tax system and it won't be easy. But I see a growing pressure wave building. We just need smart lawmakers willing to rise to the challenge.
20 - Cannonshop
I'd argue that the underlying dissatisfaction with the current system has a LOT to do with HOW that money's mishandled-the amount of KNOWN waste, fraud and abuse can only be efficiently handled using scientific notation-the number of zeroes makes the amounts too staggering for the average citizen to even properly IMAGINE, while the visible 'quality' of the work done is low enough that "Good enough for government work" is faint praise indeed-(it's a common expression meaning "mediocre at best").
Just consider how OFTEN the "Lowest bidder" goes over-budget yet can't deliver the promised product on time (JSF, various other projects, dams, bridges and roads), how often 'service end' personnel are cut when the budget goes down (yet supervisory and management positions linger on) and how,as Reagan put it, "A Government Agency is the closest thing to Immortality known to man", well...(and the redundancy-don't forget, the NSA was originally formed to perform the functions that Dept. of Homeland SEcurity was formed to perform some over forty years later!)
the GOVERNMENT is a hodge-podge, thus it is reasonable to assume that a tax code from that government will be a hodge-podge...and it is. Eighteen THOUSAND pages of tax-code, with contradictory passages and sections, riddled with exceptions, if/and statements...if it were a computer programme, it would kill your system without being able to perform the most basic functions due to the sheer amount of junk coding involved.
It's a law that even the people tasked to enforce it, do not know nor understand in any sort of functional way...which probably hamstrings the hell out of any real effort to use it to...y'know, collect REVENUES and shit.
and I'd give a "Fair Tax" amendment about an hour in a congressional committee to become just as hamstrung in its primary tasking, along with becoming just as, if not more, of an impediment to economic growth.
The system that needs to be changed isn't (entirely) the Tax Code, it's the whole Regulatory ball of wax- Congress needs to clear the debris and straighten things out-and they aren't going to do that, in part because doing so would certainly crush many of their members' re-election campaigns-big donors don't like losing their special tax exceptions.