Just how fair is the 'FairTax'?

Money.cnn ^ | 9/7/05 | Pat Regnier

[konaice]

Do you plan to take a pay cut to $7.50, that would prevent you from having the same standard of living?

Stop it with the $7.50 nonsense. Its bogus. Read #26, and visit Fairtax.org and read the faq.

[Always Right]

Actually you boss has no claim to that 20k, because you will still have to pay taxes on what you buy. He never got to keep it before, and he doesn't get to keep it under fairtax.

The point the article was making is not that the boss has claims to the $20K, it is the boss would have to keep the $20K to reduce prices like the fair taxers claim. The article points out the deception the fair taxers use in promoting their tax plan.

[Always Right]

Read #26.

Read post 42, LOL....

[xrp]

Huh?

Have you read Boortz's book or the Fair Tax Bill? (HR.25)

[Always Right]

Kinda a critical thing if you want the corresponding drop in prices.

Exactly. Fair taxers have not been able to comprehend this point, no matter how simply it is put to them. It is deny, deny, deny, twist, spin, flip. Out of the dozen plus fair tax pushers on this forum, only one of them has acknowledged this truth.

[Sonny M]

Not exactly, if taxes are levied on every step of the process, and through the transactions, then it would be, but this specifically, removes tax added on each level.

VATs scare the hell out of me, I think when this book was written and some of the folks involved with the fairtax group, probably considered that folks here don't want a VAT, so they went out of their way to make sure this would not be one (or even look remotely like one).

[xrp]

A flat tax still taxes productivity (income). Taxation is punishment. Why punish people for being productive?

A flat income tax only taxes American income earners. The Fair Tax also taxes any foreign tourists. A flat tax keeps the IRS around. The Fair Tax abolishes the IRS. The Underground Economy evades the flat income tax. The Fair Tax captures the Underground Economy. The flat income tax still forcibly takes money before it reaches the income earner. The Fair Tax gives all income earners 100% of their earned income. The government gets its cut when you voluntarily go shopping.

[konaice]

it is the boss would have to keep the $20K to reduce prices like the fair taxers claim.

Again, this is bogus. The boss does not need to get his price reduction out of the hide of the employee. He gets it out of cheaper materials, physical plant, energy, transportaion, etc.

As I pointed out, the Employer's share of fica is the only part of the payroll process that would NOT be passed on to the employee. That part (its fairly small) will go toward reduction in costs.

Add to that employers share of fica, all the other taxes corporations pay and you have (supprise!) 23% of the cost of a finished product, whether its a sewing needle or a new car.

The writer thinks hes found a flaw, but it is mostly just a flaw in his reasoning.

Go look at the list of economics professors that support Fair Tax. The least among them has better credentials than this smug writer.

[Always Right]

Major article confirms MAJOR fairtax deception. See excerpt in post #37

[Sonny M]

Getting 100% of your paycheck is too controversial? Eliminating the oppressive IRS is too controversial? If those are the criteria for being controversial then I'm the most controversial person you'll ever meet! It's only controversial if not enough people don't support the Fair Tax. Given the momentum that is becoming less likely.

The first step to pushing a fairtax, is to overcome the fact, that yes, it is very controversial, and its an idea that is very easy to be slandered and miseducated on.

One senator (Jim Demint, I think), early on in his campaign pushed it, and started dropping in the polls, he switched tracks, and started gaining.

Educate folks on the fairtax, and move incrementaly, at one time social security was the 3rd rail, now its safe to push it as more and more people learn about it.

It can't happen overnite but it can happen, but to deny its controversial is simply innaccurate, but then again, at one time Goldwaters ideas were very controversial......and we wound up with President Reagan....eventually.

[xrp]

That's a no brainer. I said bigger percentage of income. Families who make less than $75,000 a year (well above the poverty line) spend a lot greater percentage of their income on sales taxable items than families who make over. You're talking about multiplying their sales tax by at least x5 for necessities while the rich beat the tax by cutting back on frivolous items thus negatively affecting the economy in the process.

That's the gag! Everyone's paying it already. Corporate income taxes are embedded in the cost of every product that everyone buys.

[Always Right]

Again, this is bogus. The boss does not need to get his price reduction out of the hide of the employee.

Read the article and weep. The article confirms what RobFromGA found out. Dr, Jorgenson, YOUR SOURCE, says it.

[Always Right]

The writer thinks hes found a flaw, but it is mostly just a flaw in his reasoning.

Do you realize the source for the 22% embedded taxes was the study done by Dr. Jorgenson, the very same Dr. Jorgenson the author of this article confirmed the flaw with. Fair Taxers are COMPLETELY discredited.

[xrp]

Who in their right mind would buy a new car?who would buy anything new that they could get used?

A lot of wealthy people.

Not many cars last longer than 7-10 years. Most people just don't maintain them that well. In addition, car manufacturers are pretty good at creating slick new body styles that some people "just gotta have"! So they buy it. I don't think that 25 years after the Fair Tax would be enacted that every American would be driving 26 year old cars. Do you?

[PeteB570]

That was what I tried to point out. As I'm self employed I get to pay everything.

For the hourly worker it's soooo hard to bring them from take home pay to net worth to the company for that pay period.

Start with take home, add in Federal, state and SS tax. Are we done? Not yet, still have to add in the "employer's half" of SS, medical insurance and workman's comp to the state.

If the big employers started with net worth to the company this pay period and worked through all of the above down to take home pay there would be a revolt in this country.

The little guy would be seeing just how much he was shafted each pay period.

[Always Right]

Why do fairtax supporters say it is like a sales tax while also saying it will be a 23% tax rate? It isn't computed the say way sales tax is (if it was it would be 29.xx%) so why plant the false idea in peoples head it is like a 23% sales tax?

Slick marketing, deception. Kind of like the idea that you get to keep your whole paycheck and prices come down. This article blows that myth out of the water.

[Modok]

THIS portion, and ONLY this portion, of tax that is taken from the employers pocketbook. The rest is all taken from YOU (the employee).

---

Wrong! The cost to the employer is the same under the fair tax or the current system. You need a basic math course.

[lewislynn]

Add to that employers share of fica, all the other taxes corporations pay and you have (supprise!) 23% of the cost of a finished product

Surprise! is right. "All the other taxes corporations pay" you can't seem to list but know the exact percentage of ?...LOL! Sorry, it ain't gonna happen without the employee's losing their withholding.

BTW, nothing I've seen of those 75 economists says anything about price reductions or paycheck percentages....

Saying there'd be no withholding is a no brainer like saying there'd be no income tax returns. DUH!...No withholding from what is the question?

[ancient_geezer]

OK, I spent spent some time reading the FAQ's and all I saw was kneejerk nonsense.

Yep,

There's no such thing as a "fair tax".

LOL, so call it what it is a "retail sales tax", levied on the use or consumption of taxable property.

You know, implemented the same as state retail sales taxes taxing import goods with the same burdens as are imposed on domestic manufacturing today, instead of providing a protected environment from full taxation under the income/payroll tax system.

The name by the way was suggested by a person participating in a focus group covering the design of the tax reform legislation for the "FairTax Act". To that person in comparing it to what it replaces it apparently was a "fair tax."

To others there is no such thing as a "Fair Tax" therefore they will continue to live with the Unfair Tax of a income/payroll tax system.

The politician's main goal is to successfully legislate a new tax hike without causing a riot.

And the electorate's roll is to riot at the polls if he tries. The Fair Tax Act, assures the riot at the polls as the income/payroll tax system does not. Seems to be a plus for a "Fair Tax" system to me.

Federalist #21:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

"It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.

They prescribe their own limit, which cannot be exceeded without defeating the end proposed - that is, an extension of the revenue."

The whole idea of saving on taxes by spending less is an anti-free market pipedream that would ruin the manufacturing economy.

Lets see, manufacturing no longer taxed allowing it to be more competitive in world markets = anti-free market pipe dream.

A tax free business climate creating a tax haven in the United States = an anti-free market pipe dream.

The same amount of taxes extracted from the economy under the Fair Tax retail sales tax = an anti-free market pipe dream.

The same type of tax system favored by Von Mises for Austria to recover from its socialist economy by turning to an entrepreneur driven recovery:

 

Ludwig von Mises as Policy Analyst: Monetary Reform, Fiscal Policy, and Foreign Exchange Controls by Richard M. Ebeling
Heritage Lecture #754

http://www.heritage.org/Research/PoliticalPhilosophy/hl754.cfm#pgfId-1023417

"Austria, Mises said, would be a poor country. The destruction of war, the consumption and misuse of capital, the destruction of a large portion of the Austrian entrepreneurial class due to the expelling or murder of so many Jewish businessmen and financiers, and the debilitation of the labor force from death and permanent injury in battle would require Austria to turn its back on its socialist, interventionist, and welfare-statist past. Only economic freedom and hard work could restore Austria from a condition that we might nowadays loosely refer to as "third world" status.

Fiscal policy, therefore, would have to be designed to do everything possible to unleash private sector incentives and opportunities for investment, capital formation, and entrepreneurship. Virtually all taxes, Mises suggested, should be skewed toward consumption and away from production. What type of broadly based consumption taxes? He proposed:

• (1) excise taxes on alcoholic beverages, tobacco, and related tobacco products;
• (2) a sales tax exclusively on the sale of goods and services to the final consumer; there should be no explicit or hidden value added taxes;
• (3) a progressive consumption tax based on housing expenditures, but with an exemption for housing expenditures for those in the lower income brackets;
• (4) a tax on luxury automobiles for private or personal use;
• (5) a tax on lottery winnings;
• (6) a stamp tax on playing cards;
• (7) administrative fees for certain government services, such as issuing patent rights, brand name registrations, determination of weights and measures, and "official stamps" to cover the cost of providing various types of documentation;
• (8) a wage tax paid by employers that was not deducted from the employee's salary to fund existing social insurance programs; and
• (9) a moderate net profits tax on shareholders and limited liability partnerships when annual disbursements exceeded 6 percent of the enterprise's capital assets; retained earnings by the enterprise would be exempt from taxes so as not to discourage capital formation.

Except for the net profits tax and the wage tax for social insurance costs, all income and business earnings would be completely tax-exempt. And a perusal of Mises' proposed list of taxes clearly shows that he thought that, besides the general sales tax, the fiscal burden should primarily be in the form of what nowadays would be classified as "sin taxes" and a narrow selection of "luxury" expenditures. Mises' long recognized advocacy of "laissez-faire" did not mean a hands-off indifference to the path taken by the market economy. What would be produced, where and how goods would be produced, and for which segments of the consuming public would be determined by the pattern of market demand and the profit-driven entrepreneurs. As Mises expressed it in the early 1940s, "If there is any hope for an new [economic] upswing [at the end of the war] it rests with the initiative of individuals. The entrepreneurs will have to rebuild what the governments and politicians have destroyed."

***

It should be mentioned that Mises' apparent concession to the welfare state in his listing among his fiscal suggestions of an employer's tax for social insurance expenditures did not mean his belief in their desirability or necessity. This was clearly an admission that, given the political currents, not everything could be reformed at once. For example, in 1942 Mises was invited to lecture in Mexico for six weeks during which he had the opportunity to studying the economic conditions in the country. The following year, in 1943, he prepared a lengthy monograph for an association of Mexican businessmen on "Mexico's Economic Problems." His recommendation was to not establish social insurance programs in the first place. If part of the cost of such social insurance schemes falls on the shoulders of the employers, it would only succeed in raising the cost of employing workers, with the negative effect of pricing some members of the work force out of the job market. At the same time, such government-mandated insurance policies restricted the freedom of the employee to weigh the opportunity costs of allocating his income in various ways more reflective of his own preferences and that of his family.

 

I could go on but the whole idea is such a joke that it's not worth my time.

Indeed the idea that you even wasted a visit to the FairTax website and spent all that useless time researching the value of going to a flat consumption tax system over a graduated income and payroll tax system that hinders free market growth markedly is the real joke:

Economic Burden of Taxation
William A. Niskanen
Presented October 2003
Friedman Conference
Federal Reserve Bank Dallas page 6.
www.dallasfed.org/news/research/2003/03ftc_niskanen.pdf

"Given that the elasticity c implicit in recent U.S. fiscal conditions is about 0.8 and the average tax rate is about 0.3, the marginal cost of government spending and taxes in the United States may be about $2.75 per additional dollar of tax revenue. One wonders whether there are any government programs for which the marginal value is that high. Given the estimate of the long-term elasticity c from the U.S. time-series data, the marginal cost of government spending and taxes may be as high as $4.50 at the current average tax rate. "

 

Yep a tax free system on American manufacturing and entreprenuers is going to kill American GDP growth and drive American businesses away.</not>

The advantage for growth of industry in an international tax haven for industry.

Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996

• "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."

[Nuc1]

Sorry, I don't agree with you, provided the constitutional amendment allowing income tax is repealed. Assuming revenue neutrality, monies that are not currently taxed, such as the underground economy, will be taxed thus lowering the tax required on a per capita basis. I also don't buy the class war fair arguments either, and no I am not rich. There will probably be upsets when enacted however I believe the overall result will be well worth it.