Rebuttals to Mises Institute Fair Tax Review

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.

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.

From the Fair Tax Blog Bill Rook Posts: http://www.fairtaxblog.com/20051213/liars-use-double-talk/

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.

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.

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

The person only needs to know how much his income was for the prior year and that will usually be how much he has spent (for most people).

Ah, all becomes clear now. You're still in college, and haven't had to support yourself yet. Now that that's clear, I apologize for trying to discuss this with you; it's only natural that you don't know how the world actually works.

Removing any savings (if he has them) would be a no-brainer since it would not be spent.

I can confidently subtract church tithes, and I think I can remember what my 401(k) contribution is. Of course there's the direct deposit to savings, some of which is automatically transferred to the money market account... yup, subtracting my savings is a snap. Since I use Quicken, I could of course figure it out in about 20 minutes after I get home.

But what about expenditures on used items? You're simply blathering--but as I said, it makes perfect sense given that you've never actually had to manage a real household budget.

It is impossible to link or condition the passage of the FairTax on the repeal of the 16th Amendment. The two pieces of legislation must take different paths...the FairTax only requires the stroke of the Presidential pen to become law....repeal of a Constitutional Amendment requires a vote among the states. There is simply no way to link the two. The FairTax.org folks are absolutely, unequivocally opposed to any system of taxation which uses a hybrid approach.

Fear of what MIGHT happen should not be allowed to yoke the American people with this horrendous system.

In fact, the criticism that we "might" end up with both a consumption tax and an income tax is not a valid criticism of the FairTax. In fact, a consumption based system of taxation is in complete harmony with the vision of the Founders...and could be instituted TODAY, without a Constitutional Amendment, on top of the existing income tax. We MIGHT have both today...but we don't because any politician who proposed such a thing would be run out of town on a rail.

The price of liberty is eternal vigilance....and we must be especially vigilant while the 16th amendment languishes, prior to repeal.

Since you didn't know what the word fraud meant, you shouldn't be blabbering about someone else not being educated as you'll only embarrass yourself.

I've probably been in this world a lot longer that you (and doing just fine, thank you) since you appear to be an immature 20-something (or perhaps younger). No wonder you haven't the sense to stop insulting me. Friend, I've been insulted by experts ... and you ain't even close to that category.

Now - back to what was actually said before you launched into trying to distort it ... I said:

"There is no "single way" to calculate taxes. You merely describe what you believe is the common practice and insist that it is the only way. It isn't as has been described to you. "

Note that I described the method you champion as what you believe is the common practice (note the word "believe"). That happens to be an accurate, honest statement so why do you keep trying to warp into something else??? There are also at least two ways tax is calculated and neither is better or more accurate or more difficult than the other. They both yield the same result and are as easy to figure as the other. You're welcome to believe that only the t.e. method is used but t'ain't true.

In fact in some places today, some prices are quoted as tax inclusive,and NO I'm not interesting in haggling with a hardheaded, closed minded fool about it.

Your original claims about the FairTasx 'costing" people show several things about your ignorance of the FairTax. Firstly, it won't "cost" them more than at present and may in fact cost them less ... and they needn't look at either "exclusive" or "inclusive" rates since the FairTax is revenue neutral. Secondly, he needn't - as a seller under the FairTax - have some convoluted mechanism as you suggest in #43 for determining the amount of taxes he needs to forward (his taxable sales). He needn't be concerned in the slightest with the exclusive rate - nor do the buyers need to.

You completely miss the point that the tax exclusive rate is NOT a nice, neat "30%" at all, but is (in the present tax bill) acrually "29.87%", Most of your grade school chums will probably choke on that and realize it's just as quick and accurate for assessment purposes to calculate using the inclusive method. Either will probably require a calculator or a pencil and paper, but some can do the arithmetic in their head, perhaps.

You're also making the grievous error that prices will remain unchanged with the elimination of the income tax and them, suddenly, increase by the full amount of the FairTax. You've been reading too much of the propaganda drivel from those opposed to the FairTax. Where is it, do you suppose, that the portion of costs due to the income tax will go when the income tax is eliminated? Into the government's piggy bank??? (Or perhaps you don't think any part of income tax is embedded in prices?) Those reduced prices will help us all enjoy life more under the FairTax by reducing prices prior to paying the FairTax which will then be paid by you having a huge raise in takehome pay (increased purchasing power) plus the prebate you can receive.

You're looking at the wrong end of the garden hose and are about to squirt yourself in the face. Open your mind to understand the benefits of the FairTax and stop yammering about an inconsequential t.i/t.e. back and forth that was started years ago and never goes anywhere. Look at what will be benefitted by getting rid of the present system.

I fully support the fair tax. But without the repeal of the 16th amendment, we will without question have both the NRST and an income tax. And anyone who thinks that politicians wouldn't reinstate the income tax in addition to the NRST is as looney as the DUmmies.

Your are contradicting yourself. In post #6 you state

"I like the fair tax, but could never support it without the repeal of the 16th amendment.

Given that the premise of your support is based on repeal of 16th Amendment and since it has not yet been repealed then the only reasonable conclusion from your statement is you do not support it currently but now in post #30 you state your currently support the Fair Tax.

If you do support it now then are you willing to participate in abolishing the 16th Amendment? They could only reinstate the income tax if they repeal the Amendment that abolishes the 16th Amendment. At the least it would be as difficult as repealing the 16th Amendment if not more difficult because once people receive 100% of their paychecks and appreciate not having to fill out tax forms they will never return to the previous tax code but it can only happen if people such as yourself participate now instead of waiting for someone else to finish the job.

Note that I described the method you champion as what you believe is the common practice (note the word "believe").

In other words, you are taking a fact I pointed out to you, and are restating it as if it were an opinion. That is, "Shalom's opinion is that sales tax is charged at the register, rather than included in the price tag." You make yourself look pretty stupid, saying things like that.

There are also at least two ways tax is calculated and neither is better or more accurate or more difficult than the other.

When you say "two ways tax is calculated," your statement is not addressing mine in the slightest: first I said sales tax, not tax; second, I specify that sales tax is calculated only one way when it is collected. I never referred to the way tax is calculated in an accounting class, in the case of excise or income taxes, or any other thing than sales tax as calculated by the people paying it.

Since my statement is manifestly true, and even you lack the cojones to say otherwise, you should realize the damage done to your credibility when you try to weasel out of the corner you're in by looking at taxes other than sales taxes, as calculated by people other than the cashier and purchaser.

In fact in some places today, some prices are quoted as tax inclusive...

I've already pointed out the case of gasoline. In addition, there are rare cases in which gift shops, for example, tag items with the tax-inclusive price. This practice is quite rare.

Your original claims about the FairTasx 'costing" people show several things about your ignorance of the FairTax. Firstly, it won't "cost" them more than at present and may in fact cost them less...

You're confused. FairTaxers claim that consumer goods will cost the same or less than before, but you're saying something different. You're saying that the tax will cost them nothing. That's asinine; if it costs nobody anything, then revenue generated is zero. Money from the consumer's pocket goes to Washington; therefore the tax costs them something. It's that to which I've referred.

I've avoided the separate question whether consumers' tax-inclusive prices will be lower than today, because although the claim is false, proving it will go way beyond your mental capacity. Elementary algebra, indeed the basics of home economics, are beyond you, so arguing an abstruse question such as the exact impact of a given tax policy with you would be beyond futile.

Open your mind to understand the benefits of the FairTax and stop yammering about an inconsequential...

I pointed out an innocuous point, and you've been spitting mad about it ever since. I haven't remotely stated any substantive objections to the "FairTax", but there are many. They have nothing to do with a quibble about the form in which the rate is expressed. A few of them are:

A "revenue neutral" tax is an abomination: out of control spending must be restrained, and keeping the money spigots open is not the way to accomplish that. The net harm to society is unchanged, even if the specific harms are shuffled around.
Passing such a tax before repealing the sixteenth amendment would be suicidally stupid. The one thing we can be sure of is that we'll end up with an income tax and a sales tax before long. The WoT, WoD, WWIII, or almost any other manufactured crisis will see to that.
Referring again to out-of-control federal spending, the "FairTax" is sure to increase in the same way as any other tax. 30% (exclusive, mein chuckleheaded freund) is just the beginning.

In short, you FairTaxers are appealing to me on the grounds that I'm sick of being raped--which is true--and suggesting that I'll feel better if the government mixes things up and starts raping me in a whole different way instead. News for you: the exact manner in which I get raped does not really concern me much. It's the fact itself that I object to.

You seem too dense to understand that a tax bill cannot also be a spending bill. As such you bitching about a tax bill not cutting spending shows your ignorance ... "checkleheaded" indeed!! They are different things and most people with a grasp of reality realize that.

Your "fact" is merely your opinion as to what you believe the common practice to be. Nor am I arguing with that - in fact if you read my initial posts on the thread, you'll see I didn't claim it was otherwise - as you continually try to pretend I had said. And, yes, that's your opinion. I said nothing about including it in the price tag or not but that is moot with the FairTax.

With the FairTax the tax amount as well as the price of the thing itself is stated on each printed receipt required to be given to the buyer so it hardly matters since the tax will be stated as an inclusive amount. That will mean the tax is stated as inclusive when it is collected - which is what the bill specifies.

You perhaps should look to your own name calling and insult hurling as to destroying your own credibility. It is good to see that you realize that tax inclusive is used on some occasionally today. What I'm saying about the "cost" of he tax is tat it will be no more than it "costs" them today since the bill is revenue neutral, not that it costs them nothing (as you attempt to misstate what I have said). It is not I who am "confused", but rather YOU.

You also misstate what I've said about prices dropping. (I've said that removal of the income tax will cause prices to be lowered prior to the application of the FairTax and that taxpayers will have more of their own money to buy things with (both with the removal of payroll withholding and the prebate). If you do not believe that (as you see to not believe it from your comment "... the claim is false ...") then you would have to believe that income taxes do no cause any hidden increase in prices presently. There are many economists who would disagree.

Your so-called "substantive" objections to the FairTax are not objections to the FairTax at all, but #1 and #3 are merely more of your bitching about spending levels being too high. None of the FairTax supporters I know would take exception with spending being far too high. the FairTax, howeve, is a tax bill not a spending bill as I pointed out earlier.

Your #2 "objection" is merely the old canard that the opponents of the FairTax often raise about the "repeal the 16th" first so there won't be an income tax on top of a sales tax. This sort of "French half-duck" was always intended by Status Quo defenders and those favoring the flat tax (also an income-based tax) to help perpetuate income taxation. Most recently it was highly publicized by Dick Armey in trying to promote HIS flat tax.

Had you been reading threads in the past you'd know that the FairTax eliminates not only the income tax (and several other taxes) but also the IRS (and defunds it) and requires the destruction of income tax records as well. this makes it a practical impossibility that reinstating an income tax would be quickly or easily done - if at all. Keep in mind that sufficient votes to pass the FairTax into law means that there is sufficient voting power to pass the 16th repeal bill. The intent to do so is clearly outlined in both the bill and the FairTax website.

I ignored the rest of your post. You're kind of monotonous for an idealogue; usually they're more interesting. You do fit the profile intelligence-wise. I never said anything about one bill or 100 bills. Cutting spending is what's required. Massive changes in the revenue source at the current spending level is at best wasted effort. You're laboring over whether it's better to be strangled or suffocated; I simply don't care. Stop smothering me by any method, and I'll be most appreciative.

... then you would have to believe that income taxes do no cause any hidden increase in prices presently.

No, that's stupid. Of course there are hidden costs. Some people will indeed pay less in total taxes, including all hidden taxes, than before. Others will pay more. FairTaxers pretend that the same revenue can be generated while everyone actually pays less. That's trasparent nonsense. Luckily for the fairtaxers, the world is full of fools, and many of them will believe such claims.

And your posts are not "interesting" in the slightest. Regardless of how you phrase your insuling posts they are full of misinformation and off-topic nonsense.

You continuing griping about spending is merely a prime example of that. The level of spending has nothing to do with the tax system as one would think you'd most certainly realize (but obviously, you don't). You seem to have missed my comment about cutting spending. Neither I nor any other FairTax proponents I know disagree that spending is too high. Having a tax law that helps taxpayers grasp how much their wonderful government really costs them and removing the power to alter tax laws as they now do at the urging of K-Street lobbyists to benefit selected groups is a very good start on the spending problem. With the ability to reduce government tax revenues by their spending habits, it gives the taxpayer a method of registering disapproval in addition to the voting power.

All three of those things together (visibility of tax costs, some degree of control of and influence on tax revenue, and the power to vote the big spenders out of their cushy jobs) are what is required to reduce spending. Merely attempting to reduce spending by introducing "reduced spending bills" hasn't worked in almost 100 years.

Actually you don't seem to have thought out the mechanism of the FairTax too well. The bill is revenue neutral meaning that the same amount of tax is raised as is raised by the curremnt system. The difference is that while most will pay about the same in taxes there will be far more "contributors" to tax revenues than at present since those in the illegal economy (illegal aliens, those involved in drugs, cash betting, the sex trade, etc. - and even foreign tourists) will be paying a good bit in taxes where at present they pay little or nothing.

Expanding the tax base in this fashion will actually help lower taxes (and hence the tax rates) on the rest of us. This means that, despite your stated belief to the contrary, it is possible for a revenue neutaral tax to lower taxes on most of us - as was just explained.

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