Replies

> “Economists tell us that at sales tax rates above 10%, illegal evasion as well as legal tax avoidance start to increase significantly.”

What Economists? Can you provide links? Now here are the facts. Tax enforcement under the FairTax is much easier, more efficient and more effective that under the Income tax.

Fundamentally, everyone should know that only retail level transactions on new products and services are taxed. There is no taxation on sales of used items. There are no taxes on business to business (B2B) transactions.

The Facts on enforcement:
1. Over 70% of all retail level sales are handled by a little over 3000 corporate chains. And these corporate chains are highly advanced in their electronic transaction processing. It is easy to trace any and every item sold through these chains and that makes it easy for tax enforcement to monitor, audit and test tax compliance. There’s a lot more on this but the message is clear, tax enforcement under the FairTax is clear and manageable as opposed to the enforcement nightmares under the Income tax.

2. Under the FairTax it takes *two* parties to cheat whereas under the Income tax it takes only *one* party to cheat. This is a very important distinction. Any one person can lie on their IRS tax return and no one will know unless they are audited and caught in the lie.

But under the FairTax it takes both a buyer and a seller to conspire to evade the retail sales tax. For example, if I go to an appliance store to purchase a new washer and dryer for $500 and there is a $150 National Retail Sales Tax (NRST) that is due on the final sale, I may ask the seller to look the other way but the seller has to agree to participate in the tax fraud. What’s to day the buyer is not a tax enforcement agent conducting a sting operation?

So it is not even worth debating that the FairTax code is eminently more manageable and simple to enforce than the monstrously complex Income tax code.

> “And at 30%, the Fairtax plan becomes unworkable.”

30% is the exclusive rate and 23% is the inclusive rate. The actual rate is set at 14% and then surcharge rates are added to maintain revenue neutrality. Revenue neutrality is designed in so that the FairTax does not get bogged down in spending fights on the floor of Congress. Although we as conservatives want to curb out of control spending, we want the FairTax to get passed first, why?

Because as soon as it is passed and enacted, the FairTax will make the true cost of government transparent to the retail consumer. Every time the retail consumer makes a purchase at the checkout stand, they are hit with the true cost of government by looking at all the government taxation that was formerly hidden under the Income tax. Fairtaxers are betting when Americans see how much the federal government taxation has increased prices of consumer goods and services, there will be unity among Americans to get the taxes lowered and that will entail cutting government spending unless the Fed prints easy money for the federal government. So there needs to be reform at the Federal Reserve as well.

> “No other nation has ever successfully funded their central government with such a broad based national sales tax. Six have tried, failed and switched to a VAT which has significantly less evasion at higher rates.”

You have confused the transparency of the FairTax with the obscurity of a Value Added Tax (VAT). The FairTax is not a VAT, not even close to a VAT. Under the FairTax a VAT could never exist. A VAT is levied from business to business (B2B) in the production chain. The FairTax never does this; the FairTax only applies to NEW RETAIL goods and services, never to businesses. Every business is linked in a chain to move products and services to a retail end consumer.

The FairTax only taxes the consumer and therefore is not even close to being a VAT. As consumers we want to see in all our purchases what our government is costing us. A VAT keeps everything hidden and away from public scrutiny.

Many confuse the FairTax with being a VAT. This is a result of people not taking the time to understand what the FairTax really is. So such criticism and in fact all criticism of the FairTax stems from confusion over just what is the FairTax. Again for the benefit of those learning, the FairTax is a *retail level* consumer sales tax on new goods and services.

So you have exposed yourself as the person or a person connected to Hank Van Gieson who is said to go by aliases Linda, Linda Little or can Linda and is said to be a lobbyist paid to derail the FairTax. For the readers, you can believe there are disruptors and hecklers in every thread on the FairTax.

http://christianpf.com/what-is-the-fair-tax/

So I am not surprised but will continue on to raise awareness of this issue.

> “There is no dual reporting under the Fairtax, and our 10 million retailers would be sorely tempted to “cook their books” in order to avoid remitting the tax revenue.”

As I explained at the top of this post, it is easy for a tax enforcer to visit a business and make a purchase, receive a receipt and then trace that transaction to its tax detail. Should a retail business risk prison for tax evasion because they tried to hide taxable transactions? As I pointed at the top of this post, tax compliance is much easier to enforce under the FairTax.

And again one of the key facts is that 70% of all new retail transactions are handled by only about 3000 corporate retail chains. Your figure of 10 million retailers is misrepresenting the fact that most transactions are handled by relatively few retailers.

> “In addition, HR25 proposes that the Federal government tax State and Local government purchases of all new goods and all services, including a significant portion of State and Local government employee payrolls as representative of services provided.”

Now it becoming clear that you are not only misrepresenting facts, but you are deliberately doing so. No where does the FairTax say it will tax State and Local government purchases, In fact the legislation makes it clear that State and Local governments will not be taxed. Here is a link:

http://www.gpo.gov/fdsys/pkg/BILLS-110hr25ih/pdf/BILLS-110hr25ih.pdf

and the relevant section and provisions of the above link are here:

SEC. 102. INTERMEDIATE AND EXPORT SALES.

Sec. 102 (a)(3)
STATE GOVERNMENT FUNCTIONS.—No tax shall be imposed under section 101 on State government functions that do not constitute the final consumption of property or services.

> “Under the long held Supreme Court doctrine of intergovernmental tax immunity, this taxation would be found to be inappropriate. Sovereign government powers can not tax each other.”

Again, you appear to be attempting to confuse the distinction between a corporate body such as a state government and a consumer.

In Collector v. Day (1871), a case holding that the federal government could not tax the salary of a state judge, the constitutional structure and the Tenth Amendment were invoked as the basis of a reciprocal state immunity from federal taxation. Because of the different sources of immunity and the structure of the federal government, however, the immunity of the federal government differs from state immunity from federal taxation. The Supremacy Clause of Article VI and the representation of the states’ interests in Congress have led the Court to conclude that the two types of intergovernmental immunities are asymmetrical.

In the example above, taxing a state judge’s consumption in his personal life is entirely legal and acceptable. Taxing his purchase of petroleum for a car from the state motor pool.

> “The 30% exclusive sales tax rate could easily rise to 43% or higher.”

This above is false. You haven’t even studied the FairTax or if you have, then you misunderstood, or you are aiming to raise uncertainty in order to attack the credibility of a person that advocates for the FairTax.

The FairTax is tied to the consumption component of GDP and is not allowed to drift upwards to 43% without a vote. The large tranparency given to Americans will be enough to stop any member of Congress from raising the NRST.

< “Although Fairtaxers claim that the Family Consumption Allowance (FCA) or “prebate” is similar to a tax refund, it is not! The FCA is an income supplement that can be spent (and taxed), or saved as financial circumstances allow. The FCA would be scored by CBO/OMB as a cash grant entitlement costing $600 billion annually at a time when entitlements are squeezing out discretionary spending in the federal budget. We do not need any more entitlements!”

The Prebate or Rebate is indeed a tax refund and the reverse of an entitlement. An entitlement is sourced from payrolls usually and from many wage earners to one beneficiary. For example the Social Security tax is a payroll tax that is transferred to benefiaries. Social security was initially seen to tax 14 wage earners for every recipient. Today it is more like a tax on every two wage earners for every beneficiary.

Further, the Rebate is quite different from an entitlement. The Rebate credits taxes intermingled with spending and is specific to an individual whereas an entitlement is drawn from the payroll taxes of many other working individuals.

The Rebate a one-to-one credit from a person’s tax spending to themselves and no one else. The Rebate effectively establishes that there is no federal taxation in the United States on spending for the essentials of living. This level is taken as the federal poverty line. The FairTax effectively says that no American is subject to federal taxation until they spend above the poverty line. The way this is implemented is via tax rebate checks, something the federal government is very capable to do.

And most importantly the Rebate is opposite in its nature to an entitlement. A Rebate represents a tax cut whereas an entitlement represents a tax increase.

Raise the Rebate and this reduces the tax burden on all Americans. Lower the Rebate and this increases the tax burden on all Americans. This action is exactly opposite to what would be expected under entitlement spending.

Many issues to discuss, but first, I am Hank Van Gieson, a retired Air Force pilot, aged 78, and I was shot at and missed in two wars defending your right to write any fool thing you wish. I am not a paid lobbyist, just a conservative citizen interested in the truth. Save your insults for another time and focus on the facts. First, let’s talk about enforcement.

My source is a very good and unbiased book named “Taxing Ourselves” by Joel Slemrod and Jon Bakija. Get a copy from your library and be prepared to learn.

As for your”facts”, 70% of retail sales of goods may be tied up in 3000 Corporate chains, but the service industry is a very different animal. There are millions of service providers, and it is the Services industry that causes sales tax schemes to fail. No nation has ever been able to tax all services successfully, and that is the Achilles heel of the Fairtax scheme. Furthermore, it is absolute nonsense to claim that it takes two to cheat under the Fairtax. Think about it! You may pay the sales tax, but unless you are willing to report every dime you spend and to which business, there is no dual reporting. The retail sales merchants can take whatever risk they feel is warranted depending on the rate, and you will never know the difference. It only takes one to cheat, and that one could be the retail merchant, or perhaps the Treasurer of any given State who might feel the revenue is better spent within his State without washing the sales tax revenue through the Federal government.

You wrote: “30% is the exclusive rate and 23% is the inclusive rate. The actual rate is set at 14% and then surcharge rates are added to maintain revenue neutrality.” Balderdash! I don’t know where you came up with your 14%, but it is nonsense.

As for the VAT, you clearly have no idea what you are talking about. Both are consumption taxes and a VAT and a national sales tax are identical other than the Vat is collected in small chunks at each level of production and the retail sales tax is collected all at once at the retail cash register. At the same rate, both collect the same amount of revenue, and both can be displayed on the retail sales tax receipt. The VAT has proven to have much lower evasion rates due to the “self policing” nature of the collection process. Read all about it in the book I recommended.

More to follow!