Posted on 10/19/2006 5:11:50 PM PDT by pigdog
As specified in Congressional bill H.R. 25/S. 25, the FairTax is a proposal to replace the federal personal income tax, corporate income tax, payroll (FICA) tax, capital gains, alternative minimum, self-employment, and estate and gifts taxes with a single-rate federal retail sales tax. The FairTax also provides a prebate to each household based on its demographic composition. The prebate is set to ensure that households pay no taxes net on spending up to the poverty level.
Bill Gale (2005) and the President’s Advisory Panel on Federal Tax Reform (2005) suggest that the effective (tax inclusive) tax rate needed to implement H.R. 25 is far higher than the proposed 23% rate. This study, which builds on Gale’s (2005) analysis, shows that a 23% rate is eminently feasible and suggests why Gale and the Tax Panel reached the opposite conclusion.
This paper begins by projecting the FairTax’s 2007 tax base net of its rebate. Next it calculates the tax rate needed to maintain the real levels of federal and state spending under the FairTax. It then determines if an effective rate of 23% would be sufficient to fund 2007 estimated spending or if not, the amount by which non-Social Security federal expenditures would need to be reduced. Finally, it shows that the FairTax imposes no additional real fiscal burdens on state and local government, notwithstanding the requirement that such governments pay the FairTax when they purchase goods and services.
(Excerpt) Read more at people.bu.edu ...
Consumption Est. 2007
SpendingEst. 2007
FairTaxPurchase of New Homes Improvements to Single-Family Homes Brokers Commissions on Housing Taxable Home Mortgage Interest Taxable Personal Interest Final consumption expenditures (non-wage)
of non-profit institutions - Religious and welfare activitiesCapital Spending by Non-Profits (net of capital) State and Local Government Consumption Spending Federal Government Government Consumption Spending
Note the $38 billion FairTax on mortgage interest and $36 billion FairTax on brokers commissions (so much for tax-free home purchases). Also note the $36 billion total FairTax on non-profits (I guess that ends that debate - pigdog loses another one).
So am I sick of the FairTaxers both claiming that, hidden taxes embedded in every item we purchase are significant and burdensome, and that it doesn't amount to a hill of beans when ill gotten gains go shopping.
Why do you people continue to post this lie when you KNOW it's a lie?
What is the lie? The logical expectation that the black market will grow? That those in the black market pay no income tax now and will pay no income tax under the FairTax?
Is keeping the communist inspired, class warfare, social engineering enabling income tax THAT important to you?
Oh please don't tell me that you think the FairTax avoids social engineering.
I don't hate so much that I am willing to cut off my nose to spite my face.
Many of the FairTaxer's arguments come off sounding retaliatory; don't like big government spending - arrange purchases to avoid taxes (of course that nullifies the "people spend no matter what" argument). Strike out against them K Street lobbyists representing big business seeking government favors (does that sound like class warfare?), support the FairTax. Make those illegals pay (maybe they'll go home), support the FairTax.
The problem is that the FairTax does not address any of those issues.
Actually, no tax makes me feel good but the FT would hurt me. Under the present system I get an undeserved "earned income tax credit." Under the FT I would have to pay.
Our differences over methods obscures the fact that the problem with taxes and spending/entitlements is politicians. Entitlements are such only because they are declared to be, declared to be by the politicians who want them to be. The very word "entitlement" corrupts the nature of our country as founded and is a distortion of the free enterprise concept. So is the income tax.
However, our chances of reforming the tax system, as slim as they may be, pale in comparison to the chore of reforming human nature. Yet, human nature is what makes free enterprise work while socialism/communism run contrary to human nature and, as a result, end in misery. Our present tax system, the income tax, is socialist and was recommended by Karl Marx as a way to undermine free enterprise. The FT is harmonious with free enterprise as it leaves the money and choices of how to spend it up to the individual.
...nor does it touch the underground economy...
And neither does the FairTax.
No tax system will eliminate cheaters but when the non-taxpayers under the present system buy their bling, fancy cars, fur coats, houses, and many other things they pay federal taxes they ordinarily would not pay.
I believe, for many reasons hashed over and over again in this forum, that the FairTax will be an economic disaster (academic simulation notwithstanding.)
I would assume, then, that you also don't believe that tax cuts stimulate the economy by giving the individual more of his money to spend as he chooses. History shows that it does and that tax revenues to the government increase accordingly.
I believe the advertised rate is artificially low, ...
By the term artificial I guess you mean purposely understated. The only reason for that, that I can see, is to enhance its chances of passing and that you attach a negative connotation to that. It is well understood the motives of politicians in keeping the present system and the power it gives them to pick and choose winners and losers. However, what does a politician gain by scrapping that and adopting the FT? What special interest is enriched with the FT?
... that the incentive and opportunity for evasion are far greater than advertised, ...
Wouldn't it be easier to keep up with the sellers who are just a small fraction of the income earners than monitoring the millions of earners? Sellers are earners, too, and are already being monitored and are already collecting a remitting taxes to the government. Seems far easier to me to keep tabs on them than on each of us individually.
... that the predicted long term economic benefits will not be achieved (largely because of the short term problems the the simulations ignore)
Back to the tax cut analogy as well as noting that simulations compare a static model rather than the dynamic model of real life.
... and that the worst thing we could do for entitlement reform is bury the funding in a general tax.
It is already buried so what is the difference? Entitlements provide a slush fund for politicians to spend on pork. So, getting rid of them will be very difficult.
Entitlements are the life blood of liberal politicians. They create and support victim groups, the liberal base. They always need more funding, thus supplying the slush funds with cash and further increasing the influence of the government and the politicians.
Entitlements are an entirely different problem from the tax system even though ithey are inextricably connected. No matter the system they will have to be dealt with separately.
You will notice I have made no mention of the nuts and bolts of either system, just the philosophical differences. Those are the most important to me and to the country.
That will do for starters!
Under the FairTax NO ONE will pay any income tax because there will not BE an income tax to pay!!!
That is the point. Unless you total the tax, all year long, from every receipt, then adjust for you monthly prebate, you won't know EITHER the amount of tax you paid NOR your real (effective) tax rate.
You did not address that point.
I said nothing about knowing you're "rate" ... but that's all you focused on. What you say is actually insufficient to determine your true tax burden.
For all it's warts, at least I know how much I pay in Federal taxes: 80% to 95% of my total burden is printed, in plain sight on my paystubs and W2. 85% to 95% of it is finalized on my 1040. The other 5% to 15% is truly hidden ... but it's easy to figure out, and it's very small part of my overall burden.
How so?
don't like big government spending - arrange purchases to avoid taxes (of course that nullifies the "people spend no matter what" argument).
I does no such thing as there will be virtually none who can avoid spending altogether.
Strike out against them K Street lobbyists representing big business seeking government favors (does that sound like class warfare?)
Nope! Doesn't sound like that at all to me! Sounds like perfectly good sense in fact. Nothing like class warefare as I understand the term.
, support the FairTax. Make those illegals pay (maybe they'll go home)
Yeah! Another good idea and a VERY practical one to boot!
Nonsense. And I'm sick of this canard.
How much did you spend over the course of a year? Simple -- take your income from all sources and subtract your net savings, multiply that by the NRST (tax-inclusive) rate, and there's your total taxes paid.
For effective taxation, subtract twelve times the monthly FCA "prebate" from the total taxes you paid out.
The only way this gets anywhere even close to complicated is if a significant portion of your purchases are for used/previously-taxed goods, which would not be subject to the NRST -- the total amount spent here would need to be subtracted from the "income minus savings" total before calculating taxes. Other than that exception, however, this whole idea of having to add up each receipt is laughably pointless.
Well, mostly because it's not a lie. You may not like what we have to say on the topic, but what we say is truthful:
the FairTax will encourage a shift from legitimate economic activity to underground economic activity; no currently underground activity will be shifted to the legitimate economy.
All the FairTax does is shift the point of taxation from money entering the underground economy to money exiting the illegal economy.
All the money that enters the illegal economy is now taxed ... even if it subsequently leaves the US. Under the FairTax, all the money entering the illegal economy will be untaxed, and if it leaves the US will be NEVER taxed.
Say WHAT? The Fairtax address every one of those things!
Only if one make the FairTax leap of faith.
No it is not truthful. It is anything but. But I guess you will continue to post it nonetheless.
Why are you so wedded to the income tax? Do you enjoy economic slavery?
the FairTax does nothing to tax the underground economy;
Incorrect, as I'll show.
the FairTax will encourage a shift from legitimate economic activity to underground economic activity; no currently underground activity will be shifted to the legitimate economy.
If we have to accept the first part of this as true, then the second part is equally false. There is plenty of current underground activity that would be shifted to the legitimate economy -- specifically, cash-under-the-table payments that currently avoid income and payroll taxes will be entering both the legitimate and illegitimate economies, so you can't say that current illegal activity under the current system will not be captured under the NRST.
All the FairTax does is shift the point of taxation from money entering the underground economy to money exiting the illegal economy.
Nonsense, see above. You're using a very artifically narrow view of "illegal economy" in order to ignore the facts that destroy your argument.
All the money that enters the illegal economy is now taxed ... even if it subsequently leaves the US. Under the FairTax, all the money entering the illegal economy will be untaxed, and if it leaves the US will be NEVER taxed.
Again, a fair amount of the money currently entering the illegal economy is currently untaxed. And while its true that money earned in the US under the NRST would not be subject to the NRST if it leaves the country, likewise, money entering the country to be spent here that wasn't earned in the US would be subject to the NRST.
All that aside, we also get the case of the illegally-paid worker, who, in many cases, is not a legal resident anyway. Anything they spend for food, housing, etc., will be subject to the NRST, but these illegals do not get the FCA, and so have an effective rate equal to the marginal rate. Works for me.
Unlikely. if you are in the income strata that qualifies for the IETC, then it is highly likely that your effective tax rate will decline under the FairTax. The FairTax out-Marxes the current combined Federal Tax burden when it comes to progressivity.
I would assume, then, that you also don't believe that tax cuts stimulate the economy by giving the individual more of his money to spend as he chooses.
No, your premise is false: there no tax cut. I DO believe in tax cuts. The problem is that the FairTax is not a tax cut: the same amount of money is extracted from the private sector under either scheme. There is no tax cut.
Back to the tax cut analogy as well as noting that simulations compare a static model rather than the dynamic model of real life.
I'm not talking about static model, I'm talking about Jorgenson, Kotlikoff and other who have simulated DYNAMIC economic effects. ALL those models ignore capital mobility issues; all those models expect perfect foresight; all those models ignore behavioral based changes due to likely monetary accommodation (inflation) etc.
It (entitlement funding) is already buried so what is the difference?
It's currently NOT buried ... that is unless you consider printing the amount of the tax on the "receipt" (your paystub) buried. In fact, it is PREICISELY because Payroll taxes are separate and limited that SS/MC is in funding trouble.
Philosophical issues are nice, but ours are not that far apart; in fact, I dare say that, philosophically speaking, you and I are probably a LOT closer than you might think. It is PRECISELY the nuts and bolts over which I have issues with the FairTax.
In short, the FairTax cannot realize your philosophical desires; don't be fooled!
No "leap of faith" is required as the Fairtax bill is, without question, the most throughly researched bill EVER introduced in congress.
Except under the FairTax I have no W-2s or 1099s to get my totals from (I have to do that myself.)
If you are capable of performing the accounting gymnastics you outline, then the income tax well within your grasp, and the FairTax will be just as much accounting work (probably more, since there is no summary accounting.
Try some Pepto Bismol ... that might help the sickness ;-)
I offered you sever specific aspects about the FairTax that I believe are being misrepresented here and you responed to NONE of them directly.
Whether you choose to believe these aspects neither makes them true or false.
Your hyperbole about economic slavery or you beliefs about my support for any particular tax system have no bearing on whether these aspects are true or false.
Meanwhile, you just described having to go with a handful of forms on top of end-of-year summary statements to even remotely figure out what your taxable income is, let alone how much you actually wind up paying in net taxes.
The Fairtax way is simpler and far more intuitive.
But in the long run that may very well be a problem. Under the fair tax everyone can claim a bigger income every year that will entitle them to get a bigger social security check. Right now I only claim a marginal income and get most of my earners through my S-crop to avoid paying too much in social security taxes. Under the fairtax, I will max out my stated wages to qualify for more Social Security benefits without having to pay out additional money. There is no downside to claiming larger incomes and greatly enlarging the debt to the social security program.
When the Executive pays the illegal gardener under the table, he pays him from fully taxed income.
Under the FairTax, the executive's UNTAXED income will pay the illegal gardener (and no, he won't pay any FairTax on that transaction.) If the gardner then sends 20% of his income to Mexico, that 20% forever escapes taxation. Of the rest, the illegal is UNLIKELY to spend all of it on taxable items ... there is a thriving underground already for all sorts of goods and that won't change.
To the extent that the illegal's costs are increased by price increases from the FairTax, he will be incentivized to go underground for what used to be mainstream purchases.
All of the illegal's mainstream purchases are ALREADY in the legitimate economy today, and as such are already included in the FairTax tax base; all of his underground purchases are STILL NOT in the FairTax tax base ... they're still underground. So, no previously illegal activity is captured under the FairTax. All that happens is that the point of taxation shifts.
If ANY of the currently mainstream consumption activity goes underground, the FairTax is in revenue trouble. The likelihood of that happening rises dramatically as the tax rate increases ... a fact which FairTax supports ignore.
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