Posted on 12/15/2005 10:33:58 AM PST by Eaglewatcher
The author Laurence Vance gives a lengthy critic of Neal Boortz's and John Linder's book The Fair Tax Book. In Short, he misunderstands and misquotes (as many critics do) the actual workings of the Fair Tax.
Once you read his entire article you realize his real objection is not with the Fair Tax but with any Federal Taxation at all.
His Anarchist approach to no taxation in which he hates all forms of taxation is found at: http://www.mises.org/story/1975
The National Tax Payer's Union (NTU), Americans for Fair Taxation(AFFT), American Farm Bureau Federation (AFBF), and many more support the Fair Tax HR25/S25. The Fair Tax is much more than just a book by a radio talk show host.
The Fair Tax is a well thought out and extensively researched Legislative package that takes a responsible approach to replacing the current archaic income and payroll tax system with a revenue neutral National Sales Tax system.
Unlike the Laurence Vance Article, the Fair Tax gives an alternative to the Income tax, Vance arguments are against all federal taxation whether it is Income tax or the Fair Tax.
For specific rebuttals read on:
Dec 14th, 2005: 08:29:48
Jeff Horgan writes: Hello Mr. Vance,
I started to read your review of the FairTax book and had to stop. I finished by skimming it. I realized what this was, a publish or parish review. Your review of the FairTax was so superficial that your review lacks any real weight or thought. You didn't understand that the 23% tax and the 30% tax reflected the same real amount. Simpler still you didn't even grasp that prices on the shelf would be represented in a tax inclusive form so that the consumer would more easily calculate the amount they are intending to spend but that at the moment of purchase the price of the product and the tax would be separated so the consumer could see their true tax burden. You made so many lazy and misleading arguments that this review will lacks substance to your peers. You needed to get your name on a published article as prerequisite to applying for jobs at a 4 year business school. If any of those schools read this article they will not be pleased with the quality of your work. I am sorry you wasted your time to write the review and I am sorry I wasted mine to read it.
Regards,
Jeff Horgan Richmond, Va
From the Fair Tax Blog Bill Rook Posts: http://www.fairtaxblog.com/20051213/liars-use-double-talk/
Liars use Double Talk to Lie about Lies in the Fair Tax
Ludwig von Mises Institute: Laurence Vance's December 12, 2005 "There is No Such Thing as a Fair Tax" review of The FairTax Book asserts three lies found in the book and asserts 17 problems with the Fair Tax. For brevity, this article shall only address the three lies. A follow-up article will debunk the perceived problems.
Lie #1: taxes would be voluntary under the FairTax. First we must realize that all of our actions have consequences. If an individual chooses to buy a new luxury car, he/she would have to pay federal sales tax. When the individual chooses to buy the new car, he/she is also choosing to pay federal sales tax. Section 505 of H.R.25, entitled PENALTIES details the civil and criminal penalties for non-compliance.
Under the Fair Tax, the federal sales tax would be reimbursed up to poverty level spending via the Family Consumption Allowance (FCA). An individual could purchase new food and services and still survive at poverty level spending. After the FCA, the net tax payments would be $0. The individual could spend significant additional sums of money on used items tax free. The individual could work and earn as much money as he/she possibly could--untaxed. If the individual chooses to purchase a standard of living above the meek poverty level, then net sales taxes would be due.
Under the current tax system, an individual, without dependents, is taxed from the first dollar earned at the FICA/Medicare rate of 7.65%. As annual earnings increase, additional progressive income taxes are due. Under the current system, the only option to not pay any federal income tax is to not work. That is not a valid option.
Given the above two alternatives, the Fair Tax provides the only valid choice. Although the qualifying "Tax Free" situation is narrow in scope, it is possible. When an individual chooses to purchase a standard of living above the poverty level, he/she is choosing to pay the federal sales tax. Therefore, the tax is voluntary. The assertion that item #1 is a Lie is false.
Lie #2: the FairTax rate would be 23 percent. We are talking apples and oranges here. Anyone who claims that both are just fruit is attempting to mislead and misinform the public. The Fair Tax is presented to replace the income tax. The income tax is an inclusive tax. The appropriate Fair Tax percentage for an inclusive comparison is 23%. Recognizing that some comparisons could benefit from an exclusive tax analysis, the following conversion table is provided.
Apples Oranges
Tax (inclusive) (exclusive)
Fair Tax 23% 29.9%
Payroll: FICA 6.2% N/A
Payroll: Medicare 1.45% N/A
Income Tax 10%-35% N/A
Income & Payroll
10% Bracket 17.65% 21.4%
15% Bracket 22.65% 29.3%
25% Bracket 32.65% 48.5%
28% Bracket <$90K 35.65% 55.4%
28% Bracket >$90K 29.45% 41.7%
33% Bracket 34.45% 52.6%
35% Bracket 36.45% 57.4%
When making comparisons, the appropriate inclusive/exclusive percentage must be used. Either column can be used, but a comparison of taxes between columns is wrong. Only apples to apples or oranges to oranges comparisons are valid. While we are at the comparison game, the following table provides sales verses income tax percentages with the average state sales and income taxes included.
Tax Inclusive Exclusive
Fair Tax + 6.33% Ave. State Sales Tax 26.6% 36.2%
35% Bracket + Medicare + 4.44% Ave. State Income Tax 40.9% 94.3%
Any argument quoting a combined Fair Tax and state sales tax rate above 36% exclusive is only valid when it is compared to a 94% exclusive combined state and federal income tax rate. However, as a business person filling out the national sales tax form, under the line that says "Gross retail sales of new goods and services," I'm going to put down the 23% inclusive rate. The assertion that item #2 is a Lie is false.
Lie #3: the Fair Tax would abolish the IRS. Laurence Vance debunks this one himself. "The Fair Tax will abolish the IRS in the same way that it will abolish the income tax--by replacing it with something else." The assertion that item #3 is a Lie is false.
The Fair Tax Act of 2005 does not call for a total closure of the federal government--not even a modest 1% cut in spending. In fact, Boortz and Linder promote the Fair Tax as revenue neutral. What does this have to do with abolishing the IRS? Nothing! Just as Vance's accusations have nothing to do with tax reform.
When Boortz talks about abolishing the IRS, he is referring to abolishing the intrusive nature of government inquisition into our personal and business finances. He is referring to eliminating a tax system where the government gets paid as a result of our individual and business efforts before we do. Income and payroll taxes are deducted from our pay before we see the first dime. Businesses must pay matching payroll taxes while the manufactured goods sit in the warehouse.
Will there still be inquisition into our personal finances? Sure, some. Employers will still report gross earnings to the Social Security Administration for calculation of retirement benefits. If a family wants to receive the FCA, they must file with the appropriate agency. The employer will file one form, and the head of household will file the other. Compare this to the current 1040 with the associated schedules A, B, C, SE, and so on. The inquisition will hardly be intrusive.
What about businesses, will their books be scrutinized? Again, yes, of course. Under Fair Tax, the burden of the tax collection process and paperwork will be shifted to businesses. However, this new responsibility for the collection process and paperwork will be significantly less cumbersome and intrusive than the current system. Let's look at a business situation, a Motion Picture Business. A big star with a lot of clout will demand a percentage of gross sales. Gross sales are easy to calculate. Just add up all sales and calculate the split. The Fair Tax is similar to this example. Businesses must track and total gross consumer sales, an easy number. Twenty-three percent of that tally is consumption tax. Send it in.
Applying this analogy with the current tax system, the actor would demand a cut of net profits. What are net profits? Bingo. They have to be defined. What are the valid expenses? Can the "Making of Footage" for the DVD's be counted as a legitimate expense? What about product placement fees? Does that income count when calculating net profits? The actor's agent and lawyer will lobby one way on an issue and the movie company's lawyer will lobby the other way. A lot of time and effort will be spent on details as each side lobbies for a better deal. Under the current tax system, the IRS will audit a business and demand justifications for every expense. Collecting, maintaining, and defending such justifications becomes a dauntingly expensive task, just to comply with the tax code.
The market (buyers and sellers) determines the prices of goods and services. Under the Fair Tax, businesses will be taxed 23% of the gross sales--an easy calculation. Businesses must operate within the means provided by their remaining 77% share of the gross sale. Alternately, a business could determine the pretax market price for their goods and services and keep 100%. They would then add an additional 29.9% at the till for sales tax--again, easy calculations. Both methods result in the same dollar amount of taxes; it really is just a matter of semantics. If the wrong semantics (math equations) are used, however, the numbers will not work out.
We must look beyond the rhetoric for or against the Fair Tax. We must develop an understanding of how Fair Tax changes will impact our individual lives. We must look through the rhetoric and determine the motives of the activists that lobby for or against the Fair Tax and then make our own decisions. Regardless of choosing 23% or 30%, the dollars involved are the same when used in the proper equations. The Fair Tax is revenue neutral. The IRS will be replaced by another agency that has a less intrusive reach into our personal and business lives. This change will save individuals time and stress. The change will save businesses time and money. The vast majority of the people will benefit, only a small number of accountants, tax lawyers, and bookkeeping professors making their livelihood off the current inefficient system will suffer.
References: http://taxes.yahoo.com/rates.html, http://thestc.com/STrates.stm, http://www.nber.org/~taxsim/state-marginal/, Fair Tax Act of 2005
And my use of the term fairytaxers is just a gerneric description. If the slippers fit....
Post #10 was directed at all people who don't worship at the fairtax alter.
And that means that your #361 was directed at any and all FairTax supporters???
Post #10 was to Eaglewatcher as I said. Try reading it again since you haven't understood what was said. When I post to you'll it has your screenname in the "To:" area but perhaps you haven't realized that.
So you were calling Eaglewatcher a Status Quo Lover and a liar? Come on Pigdog, you are a real piece of work. No spin is too much for you. You make Clinton look like an armature at telling a boldface lie and try to spin it off as something else.
Representative Linder and Neal Boortz, a popular talk radio show host promote what they call the Fair Tax. But in in simple language, H.R. 25 [the alleged FairTax] is a wealth based tax, meaning: the most productive members of society shoulder the burden of the cost of government and do so without a proportional representation, or voice, in the determination of how their money is spent!
H.R. 25, as does an income tax, as does a flat tax, allows the spending of tax revenue without regard to a proportional influence by those who filled the national treasury.
In short and simple language, H.R.25 ignores the Founding Founder’s rule of representation with proportional obligation and embraces a Marxist idea: “from each according to their ability to each according to their need”.
For a full explanation see: The Fair Tax Con Artists
Regards
JWK
ACRS
P.S.
If H.R. 25 was enacted into law tomorrow, and a future Congress followed its language to the letter, would that future Congress have authority to calculate a tax from corporate income as upheld in FLINT v. STONE TRACY CO., 220 U.S. 107 (1911)? The answer is, YES! Our socialists in Congress would still be able to lay and collect a tax calculated from income just as is now calculated under the Income Tax! This is what the FairTax Con Artists don‘t tell you.
The “family consumption allowance“, which would be created under H.R. 25, and is a monthly check to be sent out by government to all eligible households to allegedly offset taxes paid on the necessities of life, would in fact be creating a massive, never-before-heard-of entitlement program. Existing welfare recipients who now sit at home rather then work and contribute into the common treasury would be receiving a bonus of almost $400 extra per month under H.R. 25___ simply to sit at home.
This bonus is to be taxed away from hard working Americans and businesses and transferred to welfare recipients, many of whom are nothing more than a drain upon society and make babies to increase their monthly government check. The family consumption allowance turns out to be another redistribution program, it sucks and is outright socialist___ no, its another proposed government sponsored theft program!
As I have pointed out elsewhere, H.R. 25, the alleged fair tax, would create the largest entitlement program in the history of America under its family consumption allowance___ an entitlement which is estimated would cost $ 600 BILLION a year, and would make the proposed Hilary Health Care look like chicken feed!
. H.R. 25 is a plan which turns out to be a windfall to the slugs and leaches in our society who do not contribute into the common treasury, and it will also benefit Senator Ted Socialist Kennedyand his disciples in Congress who would gladly work to increase the family consumption allowance to buy votes and remain in power!
The only stinking tax reform we need is for the people to demand their employees add the following words to our Constitution, bringing us back to our Nation’s original tax plan:
The Sixteenth Amendment is hereby repealed and Congress is henceforth forbidden to lay “any” tax or burden calculated from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money
To see what freedom loving people and real Americans are supporting CLICK HERE
To study the founder’s plan CLICK HERE and scroll down to
American Constitutional Research Service Before the
Committee on Ways and Means
United States House of Representatives
June 1995
Regards,
JWK,
"... you were calling Eaglewatcher a Status Quo Lover and a liar? ...".
Not at all. You'd better learn to read - post #10 says something quite different.
Oh I can read and I know exactly who you were referring to eventhough they weren't in the "To:" box.
Really??? Who do you think matches up wih those comments since they were not directed at any specific person?
Are you now classifying yourself in those categories ... have your "little niche" carved out - and are willing to lie about it? If so, I think that's a new first for you.
You've never admitted to EVER being wrong or lying about anything that I can recall (quite the contrary). Have I missed an admission of that? If so, where might I see it?
Oh puh_leeeeez. I make corrections all the time. On this thread alone, you made a valid point about the census including some non-qualifying people. I admitted it and recalculated the number taking out all non-citizens that the census says exists in their count. In fact I over-corrected because only illegal aliens don't qualify, so I over-corrected by a factor of two.
YOU on the otherhand, when faced with OVERWHELMING evidence that you are wrong, still sticks to that $368 Billion number. You can't offer any support for the number and won't even tell us where you got it from. The number is probably 5 years old and has nothing to do with the current prebate allowance and uses old population numbers. Instead of correcting yourself and admitting what is plain as day that you are wrong, you call us liars and phonies. And when your own supported Ancient Geezer corrected you about non-qualifying people, you still go on talking about all these other non-qualifying people, when a fellow fairtax supporter said only illegal aliens don't qualify. Sorry, but it no ME who can not admit a mistake, but you.
A typical and specific example is when I pointed out to Piggy that H.R. 25 would create the largest entitlement program in the history of America under its family consumption allowance___ an entitlement which is estimated would cost $ 600 BILLION a year, and the cost of this entitlement to the American Taxpayers would make the projected cost of Hilary Health Care look like chicken feed, Piggy responds BY SAYING:
“More of your misinformation since an entitlement program is NOT giving back to someone their own money. And that's what the prebate is - a refund of their own money paid as taxes. That's no entitlement but you seem not to know that.
Of course, Piggy ignores the fact that those who do not contribute into the common treasury may receive the entitlement upon registering with government. For example, un-wed moms, who now sit at home and make babies to increase their monthly government check, would be receiving a bonus of about $ 400 per month, just to sit at home and make babies which hard working Americans are then forced to support!
In this respect, Piggy is unwilling to admit H.R. 25 is a windfall to the slugs and leaches in our society, and Senator Ted Socialist Kennedy and his disciples in Congress would gladly increase the family consumption allowance to buy votes and remain in power!
Piggy is one piece of work, but quite amusing!
Regards,
JWK
The only stinking tax reform we need is for the people to demand their employees add the following words to our Constitution, bringing us back to our Nation’s original tax plan:
The Sixteenth Amendment is hereby repealed and Congress is henceforth forbidden to lay “any” tax or burden calculated from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money
I've pointed out to you that the recent Census counted all persons in the US whether citizens or not and whether legally here or not. The count makes no distinctions between the people whose heads it counts nor does it tally categories such as "non-citizen" or "illegal -alien". That's not the purpose of the census.
So taking numbers that you claim came from the census that show the number of our south of the border friends OR any other sort on non-legal person is subject to a good deal of error on both your part and the part of the census. More definitive studies of the numbers of illegal aliens such as the Bear Stearns study state:
"Though we cannot conduct an independent census of the United States population, as investors, we need not accept the accuracy of the official census immigration statistics, which are widely recognized as incomplete. There are many ancillary sources of data that provide evidence that the rate of growth in the immigrant population is much greater than the Census Bureau statistics."
This clearly says you're using flawed data whether you think the Census Bureau is infallible or not. Even the numbers you use as a base to start your "calculations" are probably no more accurate, either, since they also came from the Census Bureau. You guys can't seem to understand that even the best of government statistics can have huge errors in them.
What I'm saying is that you are attempting to push off numbers as being accurate that are not such and that - in any event - the numbers are meaningless since the prebate is not an entitlement but a tax refund. The "cost" of the prebate is also a chimera since it is provided for in the revenue neutral 23% tax inclusive rate. It would be equally as meaningless to speak of the cost of the income tax refunds on April 15 as a "cost". No appropriations bill funds the prebate (or the income tax refunds) as is required for any entitlement program such as Social Security or Medicare - THOSE ARE entitlements, the prebate is not.
That is the purpose, but the census also uses a long-form on about 1/6th of the population. That data is used to caculate things like how many non-citizens, legal and illegal. Beside, the 2000 census undercounted the population by about 5%. The US census is the best available data and I calculated accordingly. You can make arguements that it undercounted illegals, but the overall undercount more than makes up for that.
More telling and more accurate is the statement made by the Acting Director of the Census Bureau:
"It appears that both the population counts and the methodology used to calculate them are seriously flawed. "
The "undercount" methodology is taken up only when the Census Bureau gets sufficient heat from Congress that they must respond with a "show of force" to do a CYA for future funding. It has nothing to do woth whether or not they believe the census count was incorrrect or not. In fact prior to the Congressional hearings used to squeeze the CB so they'd put up "better" numbers in areas of interest where funding is/was at stake - it's all about money-grabbing and has nothing to do with any counting errors.
Before the squeeze play on the CB, the Director of the CB had released the statement:
"“Former Census Bureau Director Kenneth Prewitt has called the 2000 census ‘the most accurate headcount in the nation’s history.’ The numbers released this morning confirm he is exactly right.”"
In other words, you're fiddling with numbers that you have no understanding of and claiming/thinking they are somehow precise merely indicates your ignorance of how they come about and their intended purpose. They are a political funding football and many, many entitlement programs suck tax blood off of them.
Undercount my fanny. Don't even talk to us about how ultra-accurate your nujbers are --- they are not. They are just as likely to be overcounted as undercounted but NO ONE (especially you) will even know the difference. Don't even try your nonsense that the political pressure of "undercount" does anything to make your numbers more accurate. As I said, they are JUST estimates.
The family consumption allowance provides the tools to Ted Socialist Kennedy, and his disciples in Congress, to remain in power by promising to increase it during election time to buy millions of votes to remain in power, just as these socialists now do with the minimum wage, social security payments, aid to families with dependant children, Pell Grants, and you name it from the shopping list of government socialist programs created by Congress . . . the only difference with the Boortz Plan is, its family consumption allowance promises to extend the tentacles of socialism to every American household with a monthly government subsistence check, making the majority of American households dependent upon a monthly government check, while the 23 % consumption tax would bleed the productive members of society and give a $ 400 per month bonus to un-wed moms who stay at home, do not contribute into the common treasury and make babies to increase their government check size.
I asked: Why does Boortz promote a plan which paves the way to create the largest entitlement program in the history of America under its family consumption allowance . . . an entitlement which is estimated would cost $ 600 BILLION a year . . . the cost of which would make the projected price tag of Hilary Health Care look like chicken feed?
Regards
JWK
a)When the government starts cutting monthly pre-bate checks to Bill Gates or Phil Knight (and why shouldn't they apply?) et alia, you will see the maggots swarm from the woodwork demanding some kind of means testing (Form 1040 much?)
b) The numbers don't add up. The Fair Tax plan would leave government revenues about $400 B short (Go to the BLS web site and check on total consumer spending and take 23% - assume that Americans will spend all of the $900M that the IRS currently takes from individuals and that businesses pass along the $200B that the IRS collects from them - add the $600B cost of the pre-bates (which doesn't include the actual cost of administrating the printing and sending of 300 million checks per month) and you come up short by several hundreds of billions of dollars.
c)Five minutes and a calculator will show that the Fair Tax would shift the tax burden from the upper quintile to the second, third and fourth quintiles. Any politician who seriously proposed it would be dead in the water.
d) Anyone who has ever spent a day in Portland, OR understands what happens when you don't have a sales tax and your neighbor does. (That enormous sucking sound you hear is consumer products being purchased from Canada and Mexico...)
e) At least the European VAT system has the advantage of being somewhat self-policing. Businesses pay VAT to their suppliers and collect it from their clients (consumer or not) and remit the difference on a monthly or quarterly basis (depending on amount). This means that if ANY company in the supply chain charges VAT, ALL the businesses downstream must charge it or face the loss of the tax.
f) And most importantly, it matters very little HOW the government collects its taxes. What matters is how MUCH they collect (relative to other goverments), what they spend it on, and whether or not the citizen is getting value for his money.
H.R. 25, the alleged FairTax, would create the largest entitlement program in the history of America under its family consumption allowance___ an entitlement which is estimated would cost $ 600 BILLION a year! The cost of this entitlement to the American Taxpayers would make the projected cost of Hilary Health Care look like chicken feed.
Each of your points have serious flaws which have been pointed out a number of times on the tax reform threads. Perhaps you're too much of a newcomer to be aware of that.
the arguments against the FairTax come almost entirely from those having vested interests in the present income tax system rather than taxpayers in general.
I also suggest you study the bill itself and spend some quality time on the FairTax website - or perhaps buy/borrow a copy of The FairTax Book.
For starters on just a single one of your points, find out how the 23% rate was determined to be revenue neutral (and you'll find out the numbers DO add up - and quite nicely).
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