Posted on 10/10/2006 8:59:26 AM PDT by cryptical
Advocates of replacing the income tax with the FairTax — a consumption tax in the form of a national retail sales tax (NRST) on new goods and services — regularly point to the complexity of the tax code, the millions of hours and dollars wasted on compliance costs, the evils of the withholding tax, and the abuses of the IRS to bolster their case for the FairTax.
The twin truths that taxation is theft (no matter how the money is collected) and that the US government should never be given a budget that is in the trillions (no matter how the money is collected) are concepts that FairTax proponents have never grasped.
The FairTax is intended to be revenue neutral; that is, the federal leviathan and all of its programs will receive exactly the same amount of funding as under the current tax system. Federal spending will remain at the same obscene level that it is now. This means that, although conceivably some people might pay the same amount in taxes under the FairTax plan that they do now, some will pay more and others will pay less.
Or, if we accept without reservation the claim of FairTax supporters that tax evaders, tax avoiders, workers in the underground economy, and others who don't pay their "fair" share will now be "caught," therefore increasing the tax base, we can, for the sake of argument, say that some people might pay the same amount in taxes, many will pay less, and the few that will pay more are the ones who were paying little or no taxes to begin with.
But even though the things that FairTax proponents say about the tax code, compliance costs, the withholding tax, and the IRS are certainly true, what most people care about is the bottom line. If an individual's taxes were lowered but the prices of all goods and services were at the same time raised, lower taxes might actually be a curse instead of a blessing.
The question is therefore not one of paying higher or lower taxes, but instead: Will I have more money remaining from my paycheck to save, invest, or spend on vacations and luxury items under the FairTax plan after I pay my bills and make my necessary purchases?
This is a question that FairTax activists have answered in the affirmative.
The FairTax Plan
Under the FairTax proposal, there will no longer be Social Security and Medicare taxes, withholding taxes, corporate taxes, gift taxes, estate taxes, capital gains taxes, and personal income taxes. However, these will all be replaced with a national sales tax on all new goods and services. But never fear, says the FairTax advocate, even with this sales tax, the prices of most goods and services will still be about the same.
As talk show host Neal Boortz [1]claims in The FairTax Book: "The prices of consumer goods and services remain essentially the same, with the removal of the embedded taxes compensating for the added consumption tax." The embedded costs of taxes in all consumer goods and services drive up prices because they increase the costs of doing business of manufacturers and service providers. As Boortz explains about suppliers of goods and services:
When you buy that loaf of bread, you're paying a portion of all of the bills, including tax bills, of every person or business entity that had anything to do with that bread, from before the wheat was planted up until the loaf of bread ends up in that plastic bag in the back seat of your minivan.
Have you thought about how much your doctor pays into the payroll tax system to augment his or her employees' Social Security and Medicare taxes? And what about all the embedded taxes your doctor paid when purchasing all of that sophisticated equipment, not to mention the endless monthly outlay for cotton swabs and tongue depressors?
Compliance costs are also "costs that are ultimately embedded in retail prices paid by consumers." Boortz's coauthor, Congressman John Linder (R-GA), in his November 5, 2003, testimonyin behalf of the FairTax before the Joint Economic Committee on " Rethinking the Tax Code," stated that "because of the tax component incorporated into prices under the current income tax code, we are already paying the equivalent of the FairTax!" This must include the prices of all goods and services, for Boortz maintains that "like retail goods, new homes won't be any more expensive, even with the FairTax added."
The rate of the NRST under the FairTax is supposed to be 23 percent. But as I have already shown in my first article on the FairTax (" The Fair Tax Fraud"), that is just the initial rate — it will be adjusted upward every year. And as I have already shown in my review of Boortz's book (" There Is No Such Thing as a Fair Tax"), the stated rate of 23 percent is really 30 percent — the new math used by FairTax proponents figures the rate inclusively (the tax is included in the price of the product) rather than exclusively (the tax is added to the price of the product).
To offset the full amount of this sales tax, retail prices would have to fall by a like amount if the prices of most goods and services are to "remain essentially the same." This is exactly what Boortz asserts will happen after the FairTax plan is implemented:
One of the beauties of the FairTax is that the price of consumer goods and services in our economy will go down by roughly the same amount as the proposed FairTax rate of 23 percent. This very nearly makes everything a wash.
Consumers of all incomes will be paying at least 20 percent less for virtually everything they buy, including the basics of food, clothing, shelter, and transportation.
And how does Boortz know that this will happen? Why, Dr. Dale Jorgenson said so — or at least that's what Boortz claims. Back in 1997, Jorgenson, the former chairman of the Harvard Economics Department, authored a report for Americans for Fair Taxation (AFT) entitled "The Economic Impact of the National Retail Sales Tax." [2]Before writing his 1997 report for the AFT, Jorgenson had testified before the House Committee on Ways and Means in 1995 on "The Economic Impact of Fundamental Tax Reform" and in 1996 on "The Economic Impact of Taxing Consumption." [3]
Referring to this study, Boortz says: "On average, Jorgenson concluded, 22 percent of the price paid for a consumer product represents embedded taxes. That means that for every dollar you spend on a loaf of bread, twenty-two cents ends up being passed on to the government somewhere along the line in the form of taxes." Congressman Linder also referred to this report in his 2003 testimony before the Joint Economic Committee: "The FairTax plan creates transparency within the tax code. It eliminates the hidden tax component from the prices of goods. According to a Harvard study, the current tax component in our price system averages 22 percent."
Boortz believes that prices will fall because "if these embedded taxes were to disappear — that is, if the tax burdens of all the corporations, businesses, and individuals involved in the manufacture, marketing, and sale of these items were to be removed — these businesses would experience an immediate increase in their profit margins that would roughly equal that 22 percent." Then, once profit margins increase, Boortz presumes that "competitive market pressures" would "force prices down to a level where corporate profit margins are pretty much where they were before the passage of the FairTax." Linder likewise testified that competition would "bring prices down an average of 20-30 percent."
But this isn't all that Boortz has promised, for under the FairTax system everyone will get a raise because everyone will be able to keep his whole paycheck:
Once the FairTax takes effect, you'll be receiving 100 percent of every paycheck, with no withholding of federal income taxes, Social Security taxes, or Medicare taxes.
The poor — along with everybody else — will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For most of those we categorize as poor, this would mean an immediate 25 to 30 percent increase in their take-home pay.
We start collecting 100 percent of our earnings on our paycheck.
We all get virtual raises, since payroll taxes are no longer siphoned from our checks.
But as we shall presently see, these four statements turned out to be lies and were subsequently altered or omitted in the new paperback edition of The FairTax Book.
Boortz has seriously misread and/or misrepresented Jorgenson in four key areas.
Boortz's First Misrepresentation
Boortz's first misrepresentation concerns the rate of the FairTax. He maintains that in order to be revenue neutral the tax rate would have to be 23 percent figured inclusively or 30 percent figured exclusively. But here is what Jorgenson actually said:
The imposition of the NRST would produce a sharply higher tax rate on consumer goods and services, but the tenth chart shows that the initial consumption tax rate would be twenty-three percent at both federal and state and local levels or only 18.4 percent at the federal level. This would gradually rise over time, but remain below thirty percent or 23.8 percent at the federal level.
Unlike Boortz, Jorgenson does not give us any baloney about inclusive and exclusive tax rates. But note that Jorgenson's rate of 23 percent includes federal, state, and local taxes. This is because of one of Jorgenson's assumptions:
Since state and local income taxes usually employ the same bases as the corresponding federal taxes, it is reasonable to assume that substitution of NRST for taxes at the federal level would be followed by similar substitutions at the state and local level. For simplicity I consider the economic impact of substitution at all levels simultaneously.
Boortz's rate of 23 percent (which is actually 30 percent) includes only the NRST. To this would have to be added any state or local sales tax rate. This means that in some areas of the country where the combined state and local sales taxes average 10 percent, consumers will pay a whopping 40 percent tax on all of their purchases. No wonder Jorgenson says that "as a consequence of the elimination of taxes on capital income, individuals would sharply curtail consumption of both goods and leisure."
But in Jorgenson's 1996 testimony at the "Hearings on Replacing the Federal Income Tax" held by the House Committee on Ways and Means he said that "the consumption tax rate required for replacing existing revenues from individual and corporate income taxes at both federal and state and local levels would be around fifteen percent. This would gradually rise over time reaching twenty-one."
The initial "revenue neutral" tax rate has already gone up twice and the FairTax hasn't even been implemented yet.
Other economists believe that the rate of a NRST would have to be much higher than 30 percent to be truly revenue neutral. This has been pointed out several times by Bruce Bartlett, and most recently by William Gale, an economist with the Brookings Institute, in his May 16, 2005, article " The National Retail Sales Tax: What Would the Rate Have To Be?"
Gale estimates that "a federal sales tax that maintains real federal revenues under current law and real federal noninterest spending over the 10-year period of 2006 to 2015 would require a tax-inclusive rate of 31 percent, or a tax-exclusive rate of 44 percent." This latter rate would actually climb to 49 percent by 2015. And these rates are assuming that there is no tax evasion or legislative erosion of the tax base.
Boortz's Second Misrepresentation
Boortz's second misrepresentation concerns the amount that prices could fall once the cost of embedded taxes is removed from goods. He maintains that the price of consumer goods will fall by roughly the same amount of sales tax that will be added under the FairTax plan. But again, here is Jorgenson:
Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart, would fall by an average of twenty percent.
In the long run producers' prices, shown in the eighth chart, would fall by almost thirty percent under the NRST.
He is saying that producers' prices will fall by about 20 percent in the short term and about 30 percent in the long term. Producer prices are not consumer prices. That is why the government has a Producer Price Index (PPI) and a Consumer Price Index (CPI). So, in order for a price increase from a national sales tax and a price decrease from the removal of the cost of embedded taxes to balance each other out, a much higher tax rate will be required since it is not consumer prices that will be 20 percent lower.
There are, of course, three other problems with any talk of a decrease in producer or consumer prices.
First, how does Jorgenson know for sure that producer prices "would fall by an average of twenty percent"? Why, an economic model that he created says they will, that's how.
And even if producer prices did fall by about 20 percent, we still have the same problem: How does anyone know for sure how much consumer prices will fall? There is one thing we know and one thing we don't know. We know that consumer prices will increase by 30 percent under the FairTax plan; we don't know how much they will decrease because of the elimination of "embedded costs" in the price of goods.
Second, saying that because costs will fall by x amount that prices will likewise fall by x amount is a grave economic fallacy. Not only does this ignore the basic laws of supply and demand, it is based on the fallacy that the costs of inputs in the production of a good determine the price of the output they produce. As Ludwig von Mises has said about prices:
The ultimate source of the determination of prices is the value judgments of the consumers. Each individual, in buying or not buying and in selling or not selling, contributes his share to the formation of market prices. But the larger the market is, the smaller is the weight of each individual's contribution. Thus the structure of market prices appears to the individual as a datum to which he must adjust his own conduct. What is called a price is always a relationship within an integrated system which is the composite effect of human relations.
Prices are determined between extremely narrow margins; the valuations on the one hand of the marginal buyer and those of the marginal offerer who abstains from selling, and the valuations on the other hand of the marginal seller and those of the marginal potential buyer who abstains from buying.
And third, the question of tax incidence — who actually bears the burden of a tax — is an elusive one that economists still debate. For example, many economists would argue that although a portion of the corporate income tax may be passed forward to consumers through higher prices, the majority of the tax comes out of after-tax profits and employee wages. Boortz is assuming that the full amount of all taxes paid by businesses are embedded in the costs of the goods they sell.
And what about the prices of imported goods? They would have no reason to drop at all.
Boortz's Third Misrepresentation
Boortz's third misrepresentation concerns the reason that prices could fall once the cost of embedded taxes is removed from goods. He maintains that it is the removal of the embedded taxes in the cost of goods that will account for the price reduction of those goods. Let's revisit an earlier statement of Jorgenson:
Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart, would fall by an average of twenty percent.
How would workers no longer paying taxes on wages lead to a fall in prices? Workers currently have deductions from their paychecks for federal income tax, Social Security tax, and Medicare tax. Although employers remit these taxes to the federal government, the money does not come out of their profits — it comes out of each employee's gross pay. Jorgenson is saying that prices will fall because of two factors, not one.
Producers costs would be lower because not only would they no longer have to pay taxes on their profits, they would no longer have to remit their employees' deductions to the federal government — they would pocket them.
When Jorgenson testified on the subject of "The Economic Impact of Taxing Consumption" before the House Committee on Ways and Means in 1996, he made essentially the same statement that was quoted above from his report for Americans for Fair Taxation:
Since producers would no longer pay taxes on profits or other forms of income from capital and workers would no longer pay taxes on wages, prices received by producers, shown in the fifth chart, would fall by an average of twenty percent.
After an inquiry by a citizen [4] who was concerned that the FairTax proponents were misrepresenting his conclusions, Jorgenson made his position perfectly clear:
A more reasonable interpretation of my 1996 testimony is that workers would keep that after-tax pay; producers' prices would fall, but retail prices would be increased by the national retail sales tax. Any gains by workers and investors would be the result of increased economic efficiency.
Boortz is double counting. The portion of the worker's paycheck formerly sent to the government for taxes that will be now returned to him so he can collect "100 percent of every paycheck" is the same portion that producers will now pocket to help them lower their costs. This is because Boortz originally maintained that the embedded taxes that drive up the costs of goods and services are "in addition to the money taken out of your check in income taxes and payroll taxes." He has since changed his tune.
From his Nealz Nuze, here is Boortz on what will really happen to "100% of your paycheck":
On review, and after reading the critiques of opponents to the FairTax plan, we have concluded that there is one element of the FairTax that could have been present with more clarity in the book; the concept of embedded taxes and keeping 100% of your paycheck.
We write in The FairTax Book that the competitive pressures of the marketplace will force prices down when embedded taxes disappear from the cost of retail goods and services, and we cite 22% as the average amount of those embedded taxes. Does this 22% include the income and payroll taxes that are paid by employees? Yes, it does. So … what does this mean to your paycheck after the FairTax becomes law?
When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call "take home pay" before the FairTax. The employer may also decide to do a little of both. Either way, you can see that the amount of money you actually receive as pay — the amount you can put into your bank account — will not decrease, and may actually increase.
On a larger scale real wages will rise to the extent to which the nation's employers decide to return the embedded costs of their employee's income and payroll taxes to the employee. Likewise, the cost of the products or services produced by the employer will be reduced to the extent to which that employer retains all or a portion of those income and payroll taxes together with the other taxes on capital and labor eliminated by the FairTax.
Because of Boortz's epiphany, he had to make some significant changes in his new paperback edition of The FairTax Book. Gone is the statement on page 55 that embedded taxes which drive up the cost of goods by 22 percent are "in addition to the money taken out of your check in income taxes and payroll taxes." Here are the other changes and omissions:
First edition, page 59:
Once the FairTax takes effect, you'll be receiving 100 percent of every paycheck, with no withholding of federal income taxes, Social Security taxes, or Medicare taxes — and you'll be paying just about the same price for T-shirts and other consumer goods and services that you were paying before the FairTax.
Paperback edition, page 60:
Once the FairTax takes effect, you will be in complete control of your paycheck as nothing will be withheld — and your purchasing power for t-shirts and all other goods and services will be almost exactly what it was before the FairTax.
First edition, page 120:
When we all start getting 100 percent of our earned income in our paychecks.
Paperback edition, page 120:
When we all start controlling 100 percent of our earned income in our paychecks.
Being in "complete control" of your paycheck no longer means keeping 100 percent of it.
First edition, page 83:
Remember that the poor, along with everyone else — will no longer have Social Security taxes or Medicare taxes removed from their paychecks. Whatever they earn, they get on payday. For most of those we categorize as poor, this would mean an immediate 25 to 30 percent increase in their take-home pay.
Paperback edition, page 83:
Remember that the poor, along with everyone else — will no longer have Social Security taxes or Medicare taxes removed from their paychecks. Whatever they earn, they get on payday. If employers leave this money in paychecks instead of taking it out of price, most of those we categorize as poor would see an immediate 25 to 30 percent increase in their take-home pay.
Now the increase in take-home pay is tied to the generosity of the employer. Prices cannot be reduced and take-home pay increased at the same time.
First edition, page 84:
When you factor in the lower prices caused by the disappearance of the embedded taxes, you'll see that the total price paid for consumer goods will remain very nearly the same.
Paperback edition, page 84:
When you factor in the combined lower prices/higher take-home pay caused by the disappearance of the embedded taxes, you'll see that the total price paid for consumer goods will remain very nearly the same.
This again shows that the fall in prices that may result under the FairTax is due to two factors, not just the removal of the embedded taxes.
In the "Time for a Quick Review" chart on page 111 of both editions, there are some substantial alterations:
First edition:
We start collecting 100 percent of our earnings in every paycheck.
Paperback edition:
We start controlling our earnings in every paycheck.
First edition:
We all get virtual raises, since payroll taxes are no longer siphoned from our checks.
Paperback edition: [this sentence is completely eliminated]
First edition:
The prices of consumer goods and services remain essentially the same, with the removal of the embedded taxes compensating for the added consumption tax.
Paperback edition:
Our purchasing power for buying consumer goods and services remains essentially the same, with the removal of the embedded taxes compensating for the added consumption tax.
Do these corrections mean that Boortz is no longer guilty of misrepresenting Jorgenson? Perhaps. But consider the following:
* The new edition of Boortz's book still states (on pp. 84 & 160) that people will take home 100 percent of their paycheck under the FairTax.
* The website of Boortz's coauthor, Congressman John Linder, still maintains that one of the results of the FairTax is that it "allows you to keep 100 percent of your paycheck, pension, and Social Security payments."
* The Americans for Fair Taxation website still claims that the FairTax "enables workers to keep their entire paycheck."
Boortz is very naïve to think that once the FairTax plan is implemented that employers will be able to lower employee wages just because the net amount an employee receives might be more than his current take-home pay. Not only will workers be extremely reluctant to take a pay cut, wage contracts will in many cases prevent an adjustment downward.
And consider the case of two workers who currently make the same gross pay but each with a different take-home amount because they claim a different number of exemptions. Under the FairTax plan, if wages are lowered to current take-home amounts, one employee would end up making less than the other and certainly cry foul. Can you imagine the number of workers who will, on the eve of the implementation of the FairTax, rush to change the number of their exemptions on their W-4 forms so as to increase their take-home pay before their employer has a chance to take it away?
Boortz's Fourth Misrepresentation
Boortz's fourth misrepresentation concerns Jorgenson himself. Although Boortz quotes Jorgenson to give weight to his FairTax proposal, Jorgenson is not a devotee of the FairTax — he supports an income tax plan called the Efficient Taxation of Income. That's right — an income tax. That means an IRS and a 1040 form, not a sales tax.
In his 1996 article, "The Economic Impact of Fundamental Tax Reform," [5] Jorgenson states: "Changing the federal tax base from income to consumption is an idea whose time has come. This change will create important new opportunities for growth in the standard of living of all Americans." But that was 1996, long before Boortz wrote his FairTax book. Since then Jorgenson has written quite extensively about his income tax plan. Here are just three examples.
In his 2002 article for the Financial Times, Jorgenson called his Efficient Taxation of Income plan "A Smarter Type of Tax," and explained that
Efficient Taxation of Income is a new approach to tax reform that would introduce different tax rates for property-type income and earned income from work. Earned income would be taxed at a flat rate of 10 per cent, while property-type income would be taxed at 30 per cent.
Also in 2002, Jorgenson testified yet again before the House Committee on Ways and Means on the subject of taxes. But instead of advocating a consumption tax like the FairTax, he presented his Efficient Taxation of Incomeproposal. Under Jorgenson's plan: "Income would be defined in exactly the same way as in the existing tax code."
In 2003, Jorgenson wrote an article for Harvard Magazine on the subject of — you guessed it — the Efficient Taxation of Income:
Efficient Taxation of Income is a new approach to tax reform based on taxation of income rather than consumption. This would avoid a drastic shift in tax burdens by introducing different tax rates for property-type income and earned income from work. Earned income would be taxed at a flat rate of 10 percent, while property-type income would be taxed at 30 percent.
The Fraudulent Tax
Besides the misrepresentations of Professor Jorgenson, there are other reasons the FairTax should be called the Fraudulent Tax.
The FairTax does not abolish the IRS. Changing the name and some of the functions of the IRS does not mean that it will go away. The FairTax simply exchanges one federal agency for another. If there were no IRS or other enforcement bureau to enforce the collection of a national sales tax, then why would anyone bother paying or collecting the tax? Actually, the Fair Tax Act of 2005 sets up a "Sales Tax Bureau" in the Department of the Treasury. With a bureau comes an army of bureaucrats. And what Jorgenson said in his report on "The Economic Impact of the National Retail Sales Tax" shows that these bureaucrats will still have plenty of work to do:
Any definition of a consumption tax base will have to distinguish between consumption for personal and business purposes. On-going disputes over exclusion of home offices, business-provided automobiles, equipment, and clothing, and business-related lodging, entertainment and meals would continue to plague tax officials, the entertainment and hospitality industries, and holders of expense accounts. In short, substitution of the NRST for the existing tax system would not eliminate all the practical issues that arise from the necessity of distinguishing between business and personal activities in defining consumption.
The FairTax will abolish the IRS in the same way that it will abolish the income tax — by replacing it with something else.
The FairTax is not cosponsored by Congressman Ron Paul (R-TX). Every month or so since I began writing against the FairTax I have received an e-mail insisting that Congressman Paul is a cosponsor of H.R. 25, the "Fair Tax Act of 2005." Although there are fifty-eight cosponsors of this bill, Ron Paul is not one of them. Why is it that no one bothers to mention the names of the actual cosponsors of the FairTax bill?
FairTax supporters know that it is Dr. Paul who consistently votes to lower or abolish federal taxes, spending, and regulation. His support for the FairTax bill would further their cause more than any number of cosponsors or anything Boortz could ever say or write. The Americans for Fair Taxation website lists Congressman Paul as a " supporter" of the FairTax. This is strange since Dr. Paul has not taken an official position in support or opposition to the FairTax. His priority is reducing government spending and taxes, not getting sidetracked in debates about which type of tax we should have. As he has made clear: "The real issue is total spending by government, not tax reform."
So what about these cosponsors of the FairTax bill? Are they interested in reducing total spending by government? Out of the fifty-eight cosponsors, forty-four of them voted for the Medicare Prescription Drug and Modernization Act of 2003 — the largest expansion of the welfare state since the Great Society. Only six voted against it [6] (eight cosponsors were not members of Congress at the time of the vote. [7]) The sponsor of the FairTax bill, John Linder, also voted for the Medicare Act. No wonder the FairTax has to be revenue neutral now with adjustments every year! How else will the government come up with the billions of dollars it will need to pay for all these prescriptions?
The FairTax is not a voluntary tax. Calling the FairTax a voluntary tax has got to be the most ridiculous thing ever said about it. Boortz maintains in his book that "there is nothing coercive about the FairTax." In Congressman Linder's testimony before The Joint Economic Committee on "Rethinking the Tax Code," he stated: "The FairTax plan is a voluntary tax system. Every citizen becomes a voluntary taxpayer, paying as much as they choose, when they choose, by how they choose to spend."
Well, could we not also say that the current tax system is a voluntary tax system? Every citizen becomes a voluntary taxpayer, paying as much as they choose, whey they choose, by how they choose to work. Under the present system, if someone doesn't work then he doesn't pay any income tax. Sounds voluntary to me. Rather than being voluntary, the FairTax is a "permission-to-live" tax, as Murray Rothbard has described consumption taxes.
We know that retail prices will increase by 30 percent under the FairTax plan; we don't know how much prices will decrease because of the elimination of "embedded costs" in the price of goods. Because it is embedded with fraud, the FairTax plan is not the answer.
The income tax should be repealed, not replaced. The IRS should be gotten rid of, not renamed. Tax reform should reduce taxes, not be revenue neutral. Government theft of the wealth of its citizens should be abolished, not adjusted. The FairTax should be called the Fraudulent Tax.
Laurence M. Vance is a freelance writer and an adjunct instructor in accounting at Pensacola Junior College in Pensacola, FL. See his Mises.org archive. Send him mail. Comment on the blog.
Notes
[1]Congressman John Linder (R-GA) is Boortz's coauthor, but since Boortz has previous writing experience and his name appears in larger letters on the book's cover, I will refer to Boortz as the author of The FairTax Book.
[2]This report is unfortunately not available online.
[3]These reports are likewise not available online.
[4]Rob Northrup, to whom also I am indebted for bringing to my attention the new paperback edition of The FairTax Book.
[5]This appeared as chapter 11 of Frontiers of Tax Reform, edited by Michael J. Boskin (Hoover Institution Press, 1996), and was reprinted by the economics department of Harvard University as part of its Reprints in Economic Theory and Econometrics.
[6]Dan Burton (R-IN), Jeff Flake (R-AZ), Jeff Miller (R-FL), Charlie Norwood (R-GA), Mike Pence (R-IN), Thomas Tancredo (R-CO).
[7]K. Michael Conaway (R-TX), Dan Boren (D-OK), Thelma Drake (R-VA), Michael McCaul (R-TX), Ted Poe (R-TX), Michael Sodrel (R-IN), Lynn Westmoreland (R-GA), Tom Price (R-GA).
That is so ignorant. Typing a 310 instead of 319 is a meaningless typo that did not change any substance of the arguement. Saying something that blantantly untrue and then denying it, is a lie. You sound like a DUmmie who tries to confuse a mistake with a lie to cover up their lie. Bill Clinton is more trustworthy than you.
Don't limit the possibilities. There is the high possibility pigdog is both a liar and ignorant of what the Fairtax bill means.
You demonstrate your cluelessness thread after thread. Even the biggest hardcore fairtax supporters don't stand up for your ignorance and lies. They are embarrassed.
No surprise on either count.
Stick it in which ear???
You've already shown how little you understand about what was said. And your continual post in this vein merely emphasize that.
PIGDOG post 473: "I've said nothing about any Congressional action in raising the rate since that will clearly not be required."
When in previous posts you most certainly did:
post 319 by pigdog: "The infamous "unelected bureaucrats raising taxes" ploy you've continually tried (unsuccessfully) to use isn't correct and never has been. They merely determine the split of tax revenue required to fund the S/S entitlement as required by S/S law - which it should be noted isn't part of the FairTax law at all. They have no power to raise (or lower) the FairTax rate ... that's what we pay the "big bux" to Congress for."
post 328 by pigdog: "Any change in the overall FairTax rate would have to be done by Congress, not some "unelected bureaucrat".
post 351 by pigdog: " And to change the FairTax rate it would, indeed, take congressional action."
post 368 bt pigdog: "This means that the remaining portion which is the General Revenue Rate will in effect increase since the other two have decreased and the statutory rate for all three combined must be 23% (or whatever the rate ends up as in the bill) unless changed by Congress."
You have proved you can throw insults, but you have yet shown you can tell the truth. Fess up pigdog.
Grow up, child.
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What's there to understand? You clearly lied. It's all documented here. You can continue to deny, but you only look foolish.
PIGDOG post 473: "I've said nothing about any Congressional action in raising the rate since that will clearly not be required."
When in previous posts you most certainly did:
post 319 by pigdog: "The infamous "unelected bureaucrats raising taxes" ploy you've continually tried (unsuccessfully) to use isn't correct and never has been. They merely determine the split of tax revenue required to fund the S/S entitlement as required by S/S law - which it should be noted isn't part of the FairTax law at all. They have no power to raise (or lower) the FairTax rate ... that's what we pay the "big bux" to Congress for."
post 328 by pigdog: "Any change in the overall FairTax rate would have to be done by Congress, not some "unelected bureaucrat".
post 351 by pigdog: " And to change the FairTax rate it would, indeed, take congressional action."
post 368 bt pigdog: "This means that the remaining portion which is the General Revenue Rate will in effect increase since the other two have decreased and the statutory rate for all three combined must be 23% (or whatever the rate ends up as in the bill) unless changed by Congress."
You lies just keep growing with every post.
I'll not indulge in your childish games, Rumplestilskin.
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What's there to understand? Everybody understands. You clearly lied. It's all documented here.
PIGDOG post 473: "I've said nothing about any Congressional action in raising the rate since that will clearly not be required."
When in previous posts you most certainly did:
post 319 by pigdog: "The infamous "unelected bureaucrats raising taxes" ploy you've continually tried (unsuccessfully) to use isn't correct and never has been. They merely determine the split of tax revenue required to fund the S/S entitlement as required by S/S law - which it should be noted isn't part of the FairTax law at all. They have no power to raise (or lower) the FairTax rate ... that's what we pay the "big bux" to Congress for."
post 328 by pigdog: "Any change in the overall FairTax rate would have to be done by Congress, not some "unelected bureaucrat".
post 351 by pigdog: " And to change the FairTax rate it would, indeed, take congressional action."
post 368 bt pigdog: "This means that the remaining portion which is the General Revenue Rate will in effect increase since the other two have decreased and the statutory rate for all three combined must be 23% (or whatever the rate ends up as in the bill) unless changed by Congress."
Your lying butt is not getting the last word.
"....they think it looks unworkable and will or might lead to economic crisis,...."
And are they as oblivious to the economic challenges that we face under the status quo as you seem to be? (BTW that is a dead tipoff that someone has a hidden agenda - they only want to consider one side of the risk equation) You might want to at least feign interest in some of our more serious economic challenges (such as the trade deficit, federal budget deficit, the looming insolvency of Medicare and SS) that we face in order to not come across as someone who indeed does have a hidden agenda.
" or they have paid income tax all their lives and don't wish to now start paying taxes as they spend the money."
That is a legitimate concern for those who haven't studied the proposal and don't understand how the rebate protects lower and mid level consumers, or how the removal of the current system partially offsets the imposition of the sales tax, or how the expanded growth of the economy, as well as the removal of the tax burden from businesses increases the value of any equity holdings they may have.
I have met very few people who still opposed the FairTax on those two grounds once they have had a chance to understand the proposal better. I have, however, met quite a few people in the "real world" who make their living from some of the billions that we waste on compliance costs or who have some other angle going that makes them indifferent to the huge economic advantages, which even economists who don't support the FairTax acknowledge.
I have also met some who say that they believe they will be paying more taxes under the FT, but they still support it because it will be far better for the country in the long run. My view is that the only people who would pay more under the FairTax are those who enjoy extremely affluent lifestyles with high levels of consumption. Those people have the option of decreasing their lifestyle if their primary goal is tax minimization. Most of them won't do that, since they have worked hard to accumulate wealth and they feel that have the right to enjoy it. They aren't that price sensitive and they will have the means to benefit more than anyone from a greatly expanded economy.
The FairTax's critics on FR may be different; they may indeed have no vested interest in the perpetuation of the current system. However, their cowardly tactics and their continual hiding behind anonymnity makes me very skeptical.
I just love the argument that the professional economists who have studied the FairTax and produced estimates of its economic impact are either incompetent, dishonest, or both. In addition, I hear that economists can't be trusted to predict the economy, anyway. Only the anonymous bloggers on FR who have no professional reputations at stake, no verifiable economic qualifications can forecast the economic impact of the FairTax.
Right.
"So, 'dysfunctional' is a mighty hard word to use...."
You have a right to your opinion, just as I have a right to mine. (however, please check out my tagline) From my perspective, when you had an independent magazine, such as Money doing an annual test of the tax system in which they typically had almost as many answers relative to the taxes due as they have returns submitted, and these are from professional preparers, "dysfunctional" doesn't seem too harsh at all. "Disgrace" is the term used to describe the IRC in the 1976 Presidential campaign and I don't consider that excessively harsh, either. The system is far worse today than it was in 1976 from the standpoint of its complexity and the enormous burden it places on our economy. When you can call the IRS for technical assistance and have a high probability of getting a wrong answer, and when you rely on that wrong answer in preparing your return, you can be held responsible (including punitive fines, penalties and interest) while the IRS assumes no responsibility whatsoever for providing an incorrect answer, "dysfunctional" seems pretty mild to me.
"....an unproven FairTax plan that is full of obvious holes to describe a system that has allowed our economy to perform as well as it does."
Your bias is pretty blatant in this passage. The "obvious holes" are certainly no more serious than the inefficiencies and inequities of the current system. However, since the economy has managed to survive and, in some ways to thrive, under the current system, those problems are irrelevant in your view of the tax world. You continue to forecast some kind of economic calamity under the FairTax in spite of the mountain of evidence to the contrary.
One other thing exposes your bias. I have read your profile and I respect the compassion that you exhibit toward those who suffer from addiction to alcohol. On the other hand, you have been surprisingly (and inconsistently) indifferent to those whose lives have been turned upside down by an out of control government agency called the IRS. You have casually dismissed the opinions of those posting to the President's Tax Commission, referring to them as "IRS haters". Well, I am an IRS hater also, and a proud one at that. They are the most un-American federal agency in existence today and the closest thing that we have in this country to state sponsored terrorism. The fact that the terrorism is done financially, rather than with bombs, is not IMHO a hugely significant distinguishing feature.
I have known several people who have been put through the ringer for years. Some of these people were ultimately exonerated of any wrongdoing and all back taxes, penalties and interest were erased. However, I am not aware of a single case in which the IRS agreed to reimburse them for substantial amounts of money spent defending themselves, or to issue a public apology as a good faith attempt to help them restore their reputations in their communities. Just try suing the IRS because they shut down your business without substantial proof of any wrongdoing. The fact that you haven't been subjected to that doesn't mean it does not happen, and the fact that you are indifferent to it suggests that either you don't have a soul or you do have a hidden agenda. Given the compassion and empathy that you have displayed in other circumstances, I believe I know which is the case.
Or there could be a third option:
I have looked at the plan and I think it is fatally flawed.
That is the true option.
If I believed any of the FairTax propoganda rather than analyzing it myself, I am one of the people who would pay less in tax under the FairTax. I just don't believe the rate is accurate, and I don't believe that people will cough up $2.5 trillion without a negative effect on consumption, which will cripple our economy as well as tax revenue.
I think I and most productive people would end up with both. And vast segments of our economy wrecked, hurting my business and others. And that is my entire agenda.
Budget deficit- As long as the percent of debt-to-GDP is shrinking as it is now, and we are investing in important things like defense, then we are moving in the right direction.
Regarding the Medicare/SS deficits, you are grossly mistaken, I am outspoken on this subject and I have written at least a dozen letters to politicians on this subject, and I think it is the #1 fiscal issue we face, and I have stated so repeatedly. So come off your high horse.
Regarding the trade deficit, there is more to that than meets the eye, and this is primarily an issue made up to look scary by protectionists and others who are against Free Trade. I think this is a relarively minor issue compared with the entitlements.
There will have to be an equally ugly tax collection arm under the FairTax, ya'll just won't acknowledge it.
"Budget deficit- As long as the percent of debt-to-GDP is shrinking as it is now, and we are investing in important things like defense, then we are moving in the right direction."
Ok, so it is ok that the economy is booming (your description, not mine) and we still have a deficit. So tell me, if we can't pay down some of the debt we have run up when the economy is booming, when can we pay it down?
"Regarding the Medicare/SS deficits, you are grossly mistaken, I am outspoken on this subject and I have written at least a dozen letters to politicians on this subject, and I think it is the #1 fiscal issue we face, and I have stated so repeatedly. So come off your high horse."
So just what is the solution that you have proposed in those dozen of letters? Private accounts?
"Regarding the trade deficit, there is more to that than meets the eye, and this is primarily an issue made up to look scary by protectionists and others who are against Free Trade. I think this is a relarively minor issue compared with the entitlements."
We are on a path which will take us to a $1 trillion trade deficit by the end of this decade. No country on earth has ever run these size trade deficits and economists almost universally warn that this is not a sustainable trend. Our manufacturing base is being destroyed and we are becoming primarily a service economy. That is one of the reasons that, even though unemployment is low, the middle class is under great pressure. So this is a "relatively minor issue"?
BTW, I am most certainly NOT a protectionist, but I believe that "free trade" should be on a level playing field. Ignoring the disadvantage that our tax system places our producers in in the global marketplace and pretending that an exploding trade deficit is insignificant is very shortsighted IMHO. I am reminded to those who ignored the hugely expanding P/E ratios during the technology bubble. The more experienced market watchers warned that these were unprecedented and that "trees don't grow to the sky". The younger tech investors countered that this was the "new economy" and these companies were growing so fast that they would "grow into" those P/Es. With the benefit of hindsight, we can now see where that thinking led.
Do you follow the same kind of thinking in your personal finances? IOW do you just watch your debts mount up month after month and year after year and convince yourself that there won't ever be a day of reckoning?
"There will have to be an equally ugly tax collection arm under the FairTax, ya'll just won't acknowledge it."
Another unsupported assertion. You have a right to your opinion, but check out my tagline.
I couldn't care less whether you agree with me or not; if fact I doubt you will since you've locked yourself into a certain position from which you quite possibly will not retreat. Despite that I think it may help to actually understand what I've said whether you agree or not.
The two portions dealing with the subject of FICA payments and the funding of the two entitlements (S/S & M/C) by means of the FairTax are Section 101 (a) through 101 (b) (4) and entitled "IMPOSITION OF SALES TAX" and the second part is Sec. 904 (a) through (f) entitled "TRUST FUND REVENUE".
The wording in Sec. 101 is the controlling text in determining the FairTax rate while the text in Sec. 904 deals solely with the administering the entitlements and the funding thereof as already determined by statutes already passed and in effect from congregational action. The actions controlled by Sec. 904 are no different in principle that existing actions government is authorized to take (without voting) by the existing entitlement laws.
The reason for this wording (Sec. 904) being part of the FairTax legislation is so that there can be no claim that the FairTax is failing to fund the existing entitlements (basically S/S & M/C) at (at least) the existing levels - which are called out in Sec. 904. Here, the SSA bureaucrats have nothing at all to do with altering the tax rate in the bill; they are just administering the statutes passed by Congress in the past and allocating the money as determined by existing law. This is really no different than when unemployment taxes or the wage base (the amount of wages taxed) for payroll taxes change or the level of child credits, the personal and dependent exemptions, or even the actual tax brackets used each year under the income tax. All affect the amount of tax you pay, all are handled by "unelected bureaucrats" and none need be voted on yet there seems to be no discomfit on the part of any of you about that.
What I have repeatedly said to you throughout this thread is that these SSA guys do not get to change the tax rate. There is no provision for them to do so in the bill. That's the function of Sec. 101 in which they play no part. All they do is determine the apportionment of funds raised by the FairTax into the different "buckets" so that the entitlements are funded as required by law. I have NEVER said that the allocations determined under Sec. 904 might not cause the total tax rate to be larger than the original 23%. What I HAVE said is that such a circumstance is not going to happen - and I'll show this to you later using actual government numbers. As I've tried to get across to you the allocation proportions will actually decline rather than increase even as wages increase over time and the wage base grows due to the increased economic activity brought about by the FairTax.
The truth of this can easily be seen by reviewing the latest dynamic analysis paper (by Laffer et al) on the FairTax website. In this paper it is shown that over about the next 10 years that consumption (the FairTax base) will grow considerably starting from a baseline over a 10 year period by using the 2004 GDP set to 1.0 and assumes the economy will grow at its usual 3.0% per year which closely approximates the actual economy according to the BEA. This 3.0% rate is, if anything, conservative as the paper points out, meaning that the results in the paper and as I present below are probably on the low side and will actually be bettered by the FairTax performance.
Taking the consumption growth (basically a DPI growth assessment) over a 10 year period, the study shows that consumption will grow a good bit faster than the baseline number so that in the first year the increase will be not 3% but 5.4% and so on until in year 10 the increase is a full 11.7% over the 3% year-to-year baseline.
I've taken this assessment and incorporated it into a spreadsheet listing (NOT a table) starting from the projected 2007 FairTax base of $11,244 B$ derived by the Kotlikoff paper and expanding the figure by 3% per year then making the further expansion of consumption beyond this baseline each year determined by the Laffer et al paper. The actual FICA numbers (the OASDI and HI referred to in the bill's language) are taken from the NIPA Tables for the most recent year available (762.9 B$) and projected upward using the same expansion techniques as for the balance of the listing except that the FICA numbers are expanded at a faster rate than the GDP rate since the improvements caused by the FairTax should result in increased employment/wages and therefore a 3.5% per year expansion is used so that workers are earning proportionately more each year. The FICA numbers used include the requisite amounts from SE wages also.
The key things to notice (intermediate years are not shown but are taken from the Laffer et al consumption calculations) is that the resulting entitlement rates DECREASE each year despite the increased wage base used and that the resulting percentage of the two of the total FairTax rate of 23% (which has 8.09% for the two entitlements and 14.91% - the GRR - as the balance of the rate) eventually goes from the 8.09% presently (the OASDI & HI together) down to a bit under 6.80% from the present 8.09%. This has the corollary effect of reducing the term (defined in Sec. 101 of the bill) "Combined Federal Tax Rate Percentage" from the initial 23% down to 21.71% in year 10. It also means as shown in the spreadsheet listing that the two entitlement percentages determined by the SSA employees (your "unelected bureaucrats") as required in Sec. 904 drop from the 6.31% and 1.78% now for OASDI and HI respectively in the 10th year to 5.30% and 1.5% which (if the GRR remained unchanged and no action were taken by Congress) would reduce the total tax rate from 23% to 21.71% or other corresponding values in a given year. This in spite of workers earning more and the wage base increasing and the effect shows up each year.
Keep in mind too, that the Laffer et al paper is a dynamic analysis that purposely UNDERSTATES the beneficial effects of the FairTax as it shows within the paper. For example, the assessment of whether the 23% rate is revenue neutral (it is) in Table 3 does not even take into account the additional tax revenue that will result from taxing the illegal economy by the FairTax rate on purchases (rather than the relatively minor amount raised by the income tax from retail purchases by those funds). It also does not account similarly for the tax revenue derived from the foreign visitors/tourists to this country which number about 50 million people per year. If each of these 50 million spend $2,500 each (and 1/2 their airfare must be counted in this figure) then the FairTax revenue generated from this 125 B$ in consumption would be $28.75 B$ - a sizable amount indeed (and none would get the prebate). None of these increases are considered by the Laffer et al paper nor, indeed, by most economic studies.
Here is the spreadsheet listing (with the intervening years not shown to simplify the presentation):
Initial: FairTax base = $11,244.00; FICA = 762.90; yr+1 yr+2 ... yr+10 FICA $$$ $817.24 $845.84 ... $1,113.81 FairTax base $11,513.86 $12,073.53 ... $16,387.36 Adj over GDP 2.40% 4.25% ... 11.70% Sec. 904 rate 7.098% 7.006% ... 6.797% "new" FairTax 22.01% 21.92% ... 21.71% GRR/total FT 67.75% 68.03% ... 68.69% OASDI/total FT 5.54% 5.46% ... 5.30% HI/total FT 1.56% 1.54% ... 1.50%
The term "new" FairTax in the listing is what the resulting rate would be if there were no action by Congress. This seems hardly likely since the voters/taxpayers (which now would include ALL of us) will be quite aware (due to the 6 months lead time in the rate determination by the SSA) of the fact that the result could cause the total rate to decrease each year (even though the government would have an even larger amount of tax money) and should Congress decide to "correct" the GRR upward (or even to leave it where it is) to give themselves more money to spend from the increased funds available (a distinct possibility considering their normal proclivities), any such attempted "grab" of the additional tax money would be rightly seen by voters as a failure of Congress to reduce the overall tax rate and there would certainly be pressure upon Congress to reduce the FairTax rate by reducing the GRR from its 14.91% (from the 23% rate - or 64.84% of the overall tax revenue). It's hard to believe that voters would be that foolish when the information will be widely spread about and publicly available in sufficient time to make any such FairTax rate reduction. I think that most voters would insist on such a reduction.
At any rate, any change in the FairTax rate (which would really basically be a change in the one fixed rate - the GRR) would require Congressional action which is what I've been pointing out in this thread. Failure to change the FairTax rate downward would be, in effect, handing Congress mucho bux on a platter while maintaining the tax rate (the GRR) on the taxpayers. Some "official" reduction of the rate from 23% to, say, 22.01% would be required for publication in the Federal Register to advise everyone involved that the rate had changed to the lower number so that their cash registers, computer programs, and any forms involved could be altered to accommodate the lower rate. Keep in mind that if the GRR were left at 14.91% the indicated FairTax rate would be 22.01% but the government would have more tax revenue - and we certainly don't want that as they spend far too much already. Even so, an "official" rate announcement would surely be needed so the alterations mentioned could be made. More likely, though, would be huge political pressure to reduce the FairTax rate by GRR reduction which would require Congressional action. Since these sorts of changes affect all taxpayers I certainly believe that Congress would choose to be involved (so they can take political credit for "helping" the taxpayer).
Keep in mind Looey's #302 which said "... the law gives taxing power to SS bureaucrats ...". That is simply not true - they have no ability to change the FairTax rate at all (specified in Sec. 101) as I've shown here. Or his #233 which said "... after the first year the unelected bureaucrats at Social Security could implement their new congressional taxing power and raise the rate to 25 or even 30% without a vote from congress ..." which, again, is simply not the case as I've shown here. I believed you've stated this effect also (though I could be wrong), but your colleague certainly has - on many posts - and it is clearly wrong. If you choose to continue your assault against me as a "liar" I see no reason to continually point out that I have not "lied" despite your claims, but you'll have to do as you think best. You chose to ignore my #334 and #500 but in #334 I misstated that the GRR would rise when the analysis shows correctly that the GRR rate would not rise (being fixed in the bill) but that more tax funds would be available due to the decrease in the FICA proportionate funding. The statement should have been that in effect the GRR would be raised since more tax money would be available even under the reduced FICA proportions as the same GRR represents an increased percentage of the total tax revenue.
At any rate the FairTax rate is determined by Sec. 101 which requires the GRR of 14.91 plus the proportionate determination required by existing entitlement laws and changing the entitlement funding. If those funding requirements change the tax revenue rate required (and as shown in the spreadsheet listing, it will be decreased) then for the law to function as a practical matter all involved in collecting and remitting the tax will need to be advised of the correct FairTax rate to be used. The analysis shows that when the rates decrease for the entitlements, the FairTax rate - to retain the same tax revenue - would need to have the GRR altered downward to prevent an "excess" of tax funds (ain't that a kick?). Such an action would, indeed, require Congressional action. Not doing so would mean that Congress is knowingly sticking it to taxpayers with the full knowledge that taxpayers will be VERY aware of this action ... and that the congressmen will very likely suffer retaliation at the polls. Congressmen may not be too smart, but most certainly are not that dumb.
You're welcome to have our own opinion but neither you nor anyone else has ever offered any valid detailed analysis that shows anything different from the action shown by my analysis here. In this analysis, congregational action IS required to change the FairTax rate (by means of the GRR) due to the action of the reduced entitlement funding. Even if the GRR remains the same action will need to be taken to advise tax collectors of the new rate - and for the GRR to remain the same Congress would be "in your face" with every taxpayer since they would be receiving more tax funds (at the new lower rate) than were originally called for by the 23% rate. Perhaps you wouldn't be all over your congressmen in that event for a rate reduction, but I certainly would and I think most taxpayers would also.
Keep in mind Looey's #302 which said "... the law gives taxing power to SS bureaucrats ...". That is simply not trueIt's absoluteley true and the rest of your essay is also a lie....
You went a long way to avoid quoting any text from the bill.
....The old-age, survivors and disability insurance rate shall be determined by the Social Security Administration. The old-age, survivors and disability insurance rate shall be that sales tax rate...."Shall be determined by the Social Security Administration" can't mean anything other than "shall be determined by the Social Security Administrationthan" and "shall be that sales tax rate" can't mean anyting other than "shall be that sales tax rate" no matter how many ways or pages it takes for you to lie about it.
BTW, in your twisted interpretation, what exactly would the bureaucrtats at SS be required (by law) to announce if not a sales tax rate?...
The rate shall be determined using actuarially sound methodology and announced at least 6 months prior to the beginning of the Calendar year for which it applies.
The Fairtax and your entire essay are a pathetic sick joke!
Oh but there is a difference. Under the current law the SS tax rate is fixed. Under the fairtax it changes.
This is really no different than when unemployment taxes or the wage base (the amount of wages taxed) for payroll taxes change or the level of child credits, the personal and dependent exemptions, or even the actual tax brackets used each year under the income tax.
Unemployment taxes is a state thing, but it is a bad situation just like the fair tax. You have bureaucrats effecting your tax rate by calculations. The other things are all fixed by law and don't change based on some government statistics. The current SS/medicare is 7.65%, it is fixed. Without an act of Congress it stays 7.65%. The fairtax rate will go up or down based on government numbers, mainly wages. If reported wages go up relative to gross sales, the fairtax rate goes up.
I have NEVER said that the allocations determined under Sec. 904 might not cause the total tax rate to be larger than the original 23%. What I HAVE said is that such a circumstance is not going to happen.
OK, now your out of spin mode and in full LIAR mode once again. You have said more than (you think) its not going to happen, you have said it takes an act of congress for it to happen. Let's review:
post 319 by pigdog: "The infamous "unelected bureaucrats raising taxes" ploy you've continually tried (unsuccessfully) to use isn't correct and never has been. They merely determine the split of tax revenue required to fund the S/S entitlement as required by S/S law - which it should be noted isn't part of the FairTax law at all. They have no power to raise (or lower) the FairTax rate ... that's what we pay the "big bux" to Congress for."
post 328 by pigdog: "Any change in the overall FairTax rate would have to be done by Congress, not some "unelected bureaucrat".
post 351 by pigdog: " And to change the FairTax rate it would, indeed, take congressional action."
post 368 bt pigdog: "This means that the remaining portion which is the General Revenue Rate will in effect increase since the other two have decreased and the statutory rate for all three combined must be 23% (or whatever the rate ends up as in the bill) unless changed by Congress."
Why Pigdog can you still fail to admit a mistake???? You always must spin your way out of a mistake. Instead of saying you were wrong in those 4 posts, you must LIE. You are a LIAR and continue to LIE. Why???? Why not just say you were WRONG???? It blows my mind.
The two portions dealing with the subject of FICA payments and the funding of the two entitlements (S/S & M/C) by means of the FairTax are Section 101 (a) through 101 (b) (4) and entitled "IMPOSITION OF SALES TAX" and the second part is Sec. 904 (a) through (f) entitled "TRUST FUND REVENUE".Here's a question. If the the old-age, survivors and disability insurance rate and the hospital insurance rate don't change every year, why do they even exist in the bill? You could achieve what you are claiming by just having the 23% rate and then use the percentages in Sec. 904 (c) to divide it up. Furthermore, why are Sec 904 (d) and (e) even in the bill? What you claim is achieved in Sec. 904 (c).
The wording in Sec. 101 is the controlling text in determining the FairTax rate while the text in Sec. 904 deals solely with the administering the entitlements and the funding thereof as already determined by statutes already passed and in effect from congregational action. The actions controlled by Sec. 904 are no different in principle that existing actions government is authorized to take (without voting) by the existing entitlement laws.
The reason for this wording (Sec. 904) being part of the FairTax legislation is so that there can be no claim that the FairTax is failing to fund the existing entitlements (basically S/S & M/C) at (at least) the existing levels - which are called out in Sec. 904. Here, the SSA bureaucrats have nothing at all to do with altering the tax rate in the bill; they are just administering the statutes passed by Congress in the past and allocating the money as determined by existing law. This is really no different than when unemployment taxes or the wage base (the amount of wages taxed) for payroll taxes change or the level of child credits, the personal and dependent exemptions, or even the actual tax brackets used each year under the income tax. All affect the amount of tax you pay, all are handled by "unelected bureaucrats" and none need be voted on yet there seems to be no discomfit on the part of any of you about that.
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