Just how fair is the 'FairTax'?

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

[Man50D]

NEW YORK (Money magazine) - If you don't care much for talk radio, or you don't live in the South, the name Neal Boortz might not ring a bell.

But pay attention: Around 4 million people nationwide catch his radio show. It's No. 1 in Boortz's home market of Atlanta and ranks first or second in numerous smaller cities in red states.

His 180-page polemic for radical tax reform, The FairTax Book, made its debut at No. 1 on the New York Times' bestseller list in August.

When Boortz came to Jacksonville for a book signing at a downtown hotel on a sticky, sweltering Thursday night last month, close to 1,000 people turned out for a chance to meet him -- and to bask in his rage at the Internal Revenue Service.

"How many of you want the federal government out of your paycheck?" asks Boortz from the hotel's ballroom stage. Wooo-hooo! roars the crowd. Boortz's wife Donna, standing at the back of the room, looks on in amazement.

"This is for taxes," she says. "This is not sex and violence we're talking about."

No kidding. Everybody likes a tax cut, but fundamental tax reform is one of those issues that's generally as boring as it is important. Who wants to waste an evening thinking about marginal rates? But the plan Boortz is selling is disarmingly simple: Just eliminate most federal taxes -- income tax, Social Security tax, corporate tax, what's left of the estate tax -- and replace them with a big, fat national sales tax.

[pigdog]

It seems that the poster Always Right is stuck on quoting a liberal reporter's article without even understanding that it says only that the reporter CLAIMS that Jorgensos said so and so. Nowhere in Jorgenson's work does he make such a statement but he DOES say that:

"... because the taxes paid by everyone in the chain of production are embedded in the cost of goods, prices could decline an average of 20 percent if all those taxes were scrapped ... "

That actually says nothing about wages being part of that or not. It probably even excludes individual income taxes since it is the employee who bears these tax costs rather than the business. But the poster is fixated on the claim the reporter had that Jorgenson told him (the reporter) that prices can only fall this sharply if wages are cut. I doubt Jorgenson said that since he knows better and certainly realizes that most embedded taxes that could be removed from costs are in he business income tax part of the business rather than in employees gross wages which remain untouched.

Jorgenson, if anything, was probably telling the reporter (as he was telling Robbie earlier) that IN HIS MODEL wages declined by the amount of the income tax. That was true for the puropse of his simulation but means nothing "on the ground" in real life. Since a number of economists have made (and are no doubt still making) studies, it does not follow that any single one was relied upon for the assessment of the amount of embedded taxes to be removed. This is especially true since it is the reporter making the claim and not Jorgenson. Jorgenson, in fact, is very much in favor otf the benefits brought about by the FairTax.

It makes a convenient claim of opponents to misstate that, however and offer as "proof" an obviously biased reporter's article which is fairly hazy in precise meaning in several areas.

[Nuc1]

The sixteenth has got to go. Otherwise you are absolutely correct. It sure is funny when the congress critters make sacred promises except that we always get it in the end.

[Nuc1]

Good points. So the question still remains is it worth it to eliminate the income tax? I think so provided the sixteenth amendment goes also.

[Man50D]

I oppose a National Sales Tax because it would be just as Un-Constitutional as the National Income Tax is now.

You make a statement as if it is fact but you give no detailed explanation for your conclusion nor do you propose any solution!

[Always Right]

Good points. So the question still remains is it worth it to eliminate the income tax? I think so provided the sixteenth amendment goes also.

It could be worth it, but first I want to get to the point of an honest debate. I don't want some fairytale spin. If we are going to have incomes go up 20% and prices go 20%, we need to know. Maybe there is a way to deal with that, but the fed will have to increase money supply and not over-react the large one-time spike in inflation.

[JOE43270]

It may sound to good to be true though it is a lot fairer than what we have now. That is because everyone will pay.

[ovrtaxt]

I think his solution would be the tariffs legally imposed by the Constitution and nothing more. A brilliant idea that I'm very sympathetic to.

But we would have to fight a revolution and start over, creating a government that doesn't spend money like a sub crew on shore leave in Bangkok.

So unless we're willing to fight the US military, it would be pretty much impractical.

[Nuc1]

I still don't get it. Perhaps I am dense (people have said so before) however I current make say 50/hr gross. Say I pay 40% in taxes now. So if my math is correct I take home 30/hr. If the fair tax passes then I would get all monies covered by the fair tax added to my take home. Why would my gross salary, which was negotiated when I took employment, change? Should my employer attempt to implement this differently they could find another employee.

[Man50D]

These are the people that have saved their money, bought stocks,mutual funds,Roth IRA's, have paid taxes on that money and appreciation all along and then will have to pay 23+% on anything they buy with that money. Double taxation. And that is a large percentage of the population.

The income tax imposed on investment income and pension benefits or IRA withdrawals would be repealed. Pension funds, IRAs, and 401(k) plans had assets of $6.5 trillion in 1994. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal but will not be required to do so under the FairTax. All capital gains taxes would be repealed http://www.fairtaxvolunteer.org/smart/faq-main.html#16

Another point, I think a 23+% tax on a car or home will present a 'sticker shock' that will kill retail sales, esp. in the short run. It would certainly drive up the price of used items since they would be tax free. ( supply and demand)

You forget all goods and services already contain the embedded costs of the current tax system in their prices. When these embedded taxes are removed, prices come down by as much as 22%.Also with no IRS compliance costs are greatly reduced driving down prices even further(http://www.fairtaxvolunteer.org/smart/faq-main.html#17). Also mortgage rates will drop by about 25 percent (about 1.75 points) as bank overhead falls also due to much less compliance costs(http://www.fairtaxvolunteer.org/smart/faq-main.html#21). I suggest you read more about the Fair Tax(http://www.fairtax.org) before you make anymore statements.

[Man50D]

Your employer would be forgetting one very important factor and it's called competition. All companies in your line of work or any given industry will not pay the same wages. Those who pay more will get the more experienced people. Your employer could lose an experienced worker if it chooses to pay you less than a competitor.

[pigdog]

Actually, you'd get your full wages untaxed when you receive them; the tax is paid under your control as you purchases taxable things (not all things are taxed).

The trash about wages going down is just spin from the Status Quo Lovers who hype a liberal reporter's incorrect claims about what one economist said (the economist never said what was presented).

You and everyone else who works for wages seem to know this, but the Status Quo Lovers believe they can fool you all by promoting what isn't true. I believe they're wrong.

[Taxman]

Just so, pigdog.

The point is that the "tax cost of government" (which includes far, far more costs than just the taxes withheld FRom wages), when squeezed out of retail prices on domestic goods and services is likely to be offset exactly by the Fair Tax.

I still maintain that a $100 retail item in the progressive income tax environment will be a $100 retail item (tax inclusive) in the Fair Tax environment.

[voteconstitutionparty]

"I think his solution would be the tariffs legally imposed by the Constitution and nothing more. A brilliant idea that I'm very sympathetic to."

Yes,that's right.

[pigdog]

Sounds very likely I think.

Good to see you back on the threads!

[Always Right]

I still maintain that a $100 retail item in the progressive income tax environment will be a $100 retail item (tax inclusive) in the Fair Tax environment.

Based on what? Because you feel that way. Now that the source for that claim has completely discredited it, what are you basing it on?

[Always Right]

You and everyone else who works for wages seem to know this, but the Status Quo Lovers believe they can fool you all by promoting what isn't true. I believe they're wrong.

Why doesn't fairtax.org just ask Dr. Jorganson to clarify????????????????????? They don't because they are lying. Dr. Jorgenson has already clarified that they lied and you still continue to maintain that lie. Unbelievable. How long are you going to keep your little fariyhead buried in the sand?

[Vinnie]

An income tax deduction was taken for contributions to most of these plans

True, but what about Roth IRAs, any stocks, mutual funds , savings accounts that you have been taxed on already?

As for your other point about the embedded taxes on manufacturing and that savings being passed on to the consumer, I don't believe it.
How are we, the consumer, to know whether we are benefiting from those 'savings'? We have no way of tracking as to whether we are getting gouged.
How is the consumer to possibly know how much the tax is on the amount of steel, plastic, leather used in the manufacture of a car for instance? We have to take the word of the manufacturer

IMHO any 'savings' would be minimal.

Don't get me wrong, there are points I like about the Fair Tax, esp. many folks that get around paying income tax would now be contributing( love that pc word).