"The Fair Tax Fantasy"

This is a new book that I have co-authored with Hank Adler, a professor at Chapman University's business school, a post he took up after retirement from a long and successful career as a partner with Deloitte.

Hank and I undertook this project because we had --independent of each other and for different reasons-- arrived at the same conclusion: That the "Fair Tax" proposal put forward by my radio tal show host Neal Boortz and Congressman John Linder is a disastrous mirage that far too many Republicans have been drawn too, and for all the wrong reasons. "The Fair Tax" is a hopelessly flawed fantasy, but one with a surface appeal of simplicity that attracts especially politicians in need of energetic volunteers and quick headlines. But if the "Fair Tax" becomes the "Kemp-Roth" of the next few years, the GOP will be rightly punished at the polls as the details of the plan make it to the desks of serious political and economic analysts and from there to large numbers of voters who will examine the plan carefully and reject it almost immediately upon doing so. In short, not only should Republicans and conservatives not endorse the Fair Tax, they ought to affirmatively disavow the plan and press instead for serious and thoroughgoing tax reform, including lower and flatter tax rates.

Fair Tax enthusiasts often call my show and demand that I "read the book," by which they mean one or both of Neal's books. We have, and they do nothing to persuade serious readers of the plans merits, but much to camouflage the scheme's many deeply embedded flaws. Henceforth I'll be able to respond "Yes, but have you read the book that exposes the Fair tax as a destructive fantasy it is?"

It has been my understanding that all goods and services, including, food, energy, medical care, medicine, etc, will be taxed under the Fair Tax.

Your understanding is incorrect. The prebate will ensure necessities, including those you list, will not be taxed up to the poverty level.

So the "prebate", the 'refund' of the taxes to be paid on the average poverty level cost of such goods and services will come no where close to rebating the tax on cancer treatments, heat in a severe northern winter, air conditioning in a Texas heat wave, medication for a transplant patient (or the operation), emergency trauma care (and follow up treatment and therapy) for the mom who got hit by some drunk in a pickup truck...

You're not taking into account people will have more purchasing power due to the removal of all federal income taxes from people;s paychecks thereby increasing purchasing power nor are you considering the price of what those businesses charge for their services will no longer include the corporate embedded taxes and associated compliance costs we have today. They will eventually pass on at least some of the savings onto consumers by lowering their prices due to competition.

In short, instead of allowing deductions from income for these items, the tax will hit those who need them harder.

Deductions from income means the Congress confiscated more money from the people than was necessary and used it for a period of time and then out of the goodness for their cold little hearts decided to return the people's hard earned money to them. The Fair Tax will prevent politicians from making deciding when they take your money and give the taxpayer more control over when and how often they are taxed.

Your understanding is incorrect. The prebate will ensure necessities, including those you list, will not be taxed up to the poverty level

No, my understanding is perfectly correct.

What is the poverty level of Emergency care? If you get in a car wreck through no fault of your own, you are going to pick up the tax for your care, and not get prebated for anything more than the average poverty level of care.

To say they are not going to be taxed is a lie, anyway. They are, then the Goobermint will issue a check for what IT considers to be the average poverty level of whatever you need--according to them.

Bogus. Bogus, Bogus.

Just do not tax it in the first place and do away with the prebate.

Same for food, energy, and primary housing.

Deductions from income means the Congress confiscated more money from the people than was necessary and used it for a period of time and then out of the goodness for their cold little hearts decided to return the people's hard earned money to them.

No, it makes allowances for those who needed more than the average poverty level person.

If you file as self-employed, you deduct the expenses from the income before you send in the check for taxes.

Employer-provided insurance co-contributions are deducted from pay before the taxes are figured.

The Fair Tax will prevent politicians from making deciding when they take your money and give the taxpayer more control over when and how often they are taxed.

Actually, no.

Recall the prebate?

Who exactly, decides what is the "average poverty level" of need for necessities?

unelected bureaucrats

If you live in Minnesota, you just might need a little more heat to keep from freezing to death than the average Floridian. If you need more than average poverty level needs, you still need it, but there will be a bureaucrat deciding you don't?

Will this tax be on top of the 'cap and trade' taxes as well?

Does the average person need a parka rated for -30 weather? A snow shovel?

Averages always screw someone over.

Tell that to DHS, the EPA, your HOA, the state highway patrol, etc. There is always someone in Government somewhere who can make a living at your expense.

Surfer was obviously referring to the title of thread. Your examples have nothing to do with The Fair Tax or taxes in general.

Waste is waste. There is no guarantee it would not continue, no matter how the money is collected.

Waste would be reduced as Congress could not spend beyond a certain point. Doing so would require an increase in the tax rate. An increase would result in people reducing their purchases and in turn would lessen the amount of consumption tax collected. Less tax collected would mean less money Congress will have to spend.

Except that spent on the 'black market', which is where the illegal money is, anyway.

The black market would be a fraction of its current size considering people will have more money in their paychecks and therefore more purchasing power.

Maybe not so many, once they got bit by the tax.

They're "bit" by a nearly 23% embedded tax in every item they purchase today! The overall cost will be almost the same under The Fair Tax as the 23% will be removed from the price and added as a separate entry on a receipt.

Not sure how you figure this. Businesses require supplies, which would be taxes at 30% plus state tax...

I'm not sure where you read this misinformation but it certainly wasn't at the www.fairtax.org website. There will not be any business tax under The Fair Tax Fair Tax FAQ #2.

That does not begin to address the plethora of regulatory hoops one must jump through which make doing business, especially manufacturing, more difficult.

Please cite where in The Fair Tax Act bill the so called regulatory hoops businesses will have to jump through are located!

Unless you required lifesaving surgery or medical care, unless you had to replace catastrophic losses (home vehicle, etc), unless the weather got worse and you required more heat to stay alive. You are never in complete control of anything.

The costs of those services will be more affordable due to increased purchasing power since federal income taxes will no longer be deducted from paychecks. The prebate will remove any taxes on necessities up to the poverty level including those you cite thereby lowering the overall tax burden. Businesses will also pass on some of the cost savings for no longer having to include their corporate income taxes and associated costs in the price.

There are no provisions to eliminate the death tax, property taxes, state sales taxes, or a host of other taxes, just the stated intent to eliminate the income tax. Federal and state excise taxes may apply.

The death/estate tax is considered income and will no longer be taxed under The Fair Tax. You're stating the obvious with property taxes, state taxes and federal excise taxes as they are beyond the scope of The Fair Tax Act since it is only a federal bill.

Who said the capital gains tax was going away?

The Fair Tax Act! It's in the bill! Capital gains is considered income by the federal government!

I am sure the socialists will find a way to keep it.

It won't be done through The Fair Tax Act.

The only way to reduce the tax burden on the taxpayer is to reduce the funding requirements of the Government.

This can be done by eliminating the departments and programs which the Federal Government spends money on which are outside the scope of its Constitutional authority. Until then, there will be no fairness, no matter how the money is collected, just taxes.

Nobody said just revamping the tax code will resolve the spending problem although The Fair Tax does address it to some extent. No tax system is designed to exclusively reduce spending. There is no roadblock to addressing both issues simultaneously. Our government, meaning the people, have always considered multiple issues at the same time since the founding of the country.

Take another look, please.

I suggest you heed your own advice.

Waste would be reduced as Congress could not spend beyond a certain point. Doing so would require an increase in the tax rate.

Yeah, that is working out great. They have already spent trillions they don;t even know where it went!!

Sheesh!

The black market would be a fraction of its current size considering people will have more money in their paychecks and therefore more purchasing power.

LOL! You really don't understand underground markets, do you?

Throughout my youth, people risked getting busted with semi-loads of cigarettes going north to New York to beat a 30 cent per pack tax difference.

Businesses who really want to sell things will be marketing 'demos' at 'used item' prices (no tax!). And that will just be what is out in the open.

You think people are going to willingly give the government a chunk of 'enhanced' paycheck to whiz away? No way.

As a result of increased demand, the price of good, used goods will increase--poor folks who rely on thrift shops and second hand stores will get hit the hardest!

They're "bit" by a nearly 23% embedded tax in every item they purchase today! The overall cost will be almost the same under The Fair Tax as the 23% will be removed from the price and added as a separate entry on a receipt.

Math class. 'nuff said.

Nobody said just revamping the tax code will resolve the spending problem ...

But that is precisely what needs to be done.

It does not matter so much how you fill the bucket, if the bucket has no bottom in it.

Unless and until someone reins in the Government, and returns it to within its Constitutional boundaries, it will spend too much.

No, my understanding is perfectly correct.
You clearly haven't read the bill nor understand the purpose of the prebate.

What is the poverty level of Emergency care?

You'd realize how ludicrous this statement is if you did a little research. Poverty level expenditures have nothing to do with the type of service. It has to do with house hold size based on already establish parameters form the Department of health and Human Services A< href="http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#2"> Fair Tax FAQ #3

To say they are not going to be taxed is a lie, anyway

You either need to read my comments more thoroughly or stop being disingenuous. It only weakens your position. I stated there will be no tax on necessities up to the poverty level. That also means people will pay a tax but their overall tax burden will be less than with the current income tax code.

Bogus. Bogus, Bogus.

Tantrums are unbecoming.

No, it makes allowances for those who needed more than the average poverty level person.

Oh really? Where did Congress get the money to give you a refund if it was used for someone else?

Actually, no.

Recall the prebate?

Actually yes. You have no clue of the purpose of the prebate. IT is not a tax! The prebate covers the tax that will be paid on necessities up to the poverty level.

Who exactly, decides what is the "average poverty level" of need for necessities?

unelected bureaucrats

If you actually took the time to research the Fair Tax information instead of making increasingly ludicrous statements you'd know it is the Department of Health and Human services per their already established guidelines! Fair Tax FAQ #3

If you live in Minnesota, you just might need a little more heat to keep from freezing to death than the average Floridian. If you need more than average poverty level needs, you still need it, but there will be a bureaucrat deciding you don't?

Will this tax be on top of the 'cap and trade' taxes as well?

Does the average person need a parka rated for -30 weather? A snow shovel?

Averages always screw someone over.

You screw yourself over with your increasingly inane scenarios and comments You clearly have not read the bill or done any research at the links provide. I sincerely hope you are the best the Fair Tax naysayers have to offer. The Fair Tax bill will surely we become law if that is the case.

That also means people will pay a tax but their overall tax burden will be less than with the current income tax code.

What people? As the overall Baby Boom population ages, they will spend their already taxed savings disproportionately on health care, medication, medical services, and eventually (for many) nursing homes, and then funeral services.

Every one of those things, paid for with already taxed dollars will be taxed again,

Nothing "fair" about that.

The prebate for the average household will not reimburse nearly enough to cover the taxes on households of one or two, even though their taxes paid on the above named services will be well above the average, because the level of care will be well above the average.

This isn't rocket science, here--unless you're James Hansen.

A) The FT is a completely altruistic quest
B) The Govenrnment will magically loose it propensity to tinker
C) All the people you never trusted before will be completely trustworthy now
D) 30,000 Treasury Dept employees will magically disappear
E) You will “Git Yer Hole Paychex”
F) Tax rates never go up
G) Pay rates never go down
H) People just love double digit sales tax rates
I) Used food and personal items are good things
J) Social engineering will magically disappear
K) The rich don’t pay taxes
L) Prebates and Prefunds aren’t really welfare
M) Retirees should take a hosing for no good reason
N) Getting $77 worth of goods for $100 is OK with you
O) Paying 30% tax on medical care is a great idea
P) You believe the Government should tell you what a “necessity” is
Q) Bureaucrats will always know what the "right" poverty rate is
R) The rest of the modern world is clueless about tax policy
S) Good tax policy can be pro-re-gressive depending on the argument at the time
T) Revenue neutrality is more important than spending control
U) Talk Show Hosts are the best brain trust for tax policy
V) There is no "wizard behind the curtain" but those three Texans..
W) $20 million plus only buys "the truth"
X) Asking tough questions makes you a "Marxist"
Y) Asking tough questions makes you guilty of "spreading lies and disinformation"
Z) Debate only requires insulting and attacking people who ask tough questions
AA) There’s no such thing as a black market.
AB) Living like a hermit is the best way to beat the taxman.
AC) Companies will immediately deduct all the embedded taxes from what they sell.
AD) Pretzyl logic is your friend.

Which is wrong.

No, it's spot on. To quote the bill:

"`SEC. 303. MONTHLY POVERTY LEVEL.

`(a) In General- The monthly poverty level for any particular month shall be one-twelfth of the `annual poverty level.' For purposes of this section the `annual poverty level' shall be the sum of--

`(1) the annual level determined by the Department of Health and Human Services poverty guidelines required by sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a particular family size, and

`(2) in case of families that include a married couple, the `annual marriage penalty elimination amount'.

`(b) Annual Marriage Penalty Elimination Amount- The annual marriage penalty elimination amount shall be the amount that is--

`(1) the amount that is two times the annual level determined by the Department of Health and Human Services poverty guidelines required by sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a family of one, less

`(2) the annual level determined by the Department of Health and Human Services poverty guidelines required by sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a family of two.

You will still have to pay the tax to get the item out of the store.

If a check comes later to refund that tax, it does not mean you did not have to pay it.

Just try getting out the door without doing so!

No kidding. People will be reimbursed before they pay the tax, hence the term "prebate". It's amazing how you continue to make inane statements that clearly show you know nothing about the bill. Your arguments grow weaker with each post.

The question to me is has the Fair Tax been Prototyped and tried? I you look to the Euro VAT Taxes I'd say it's a failure.

No Fair Tax type of tax has been enacted anywhere in the world. I agree. VAT's are a failure, including our current income tax code that contains nearly 23% embedded VAT's in the price of every product today. The Fair Tax will not be a VAT. It remove VAT's by eliminating the corporate income taxes businesses consider a cost and pass onto the consumer.

Conversely, we are up to what 22 or 26 countries with a Flat Tax and they are kicking our a$$ in term of GDP growth.

The Fair Tax is a flat tax but on consumption instead of productivity. A flat tax on income has been tried in this country and has proven to be an abysmal failure. It;s called the income tax. It taxed 1% on the first $20,000 of income and 7% on income over $500,000 when the income tax was enacted in 1913. Almost everyone paid only the 1% since so few earned more than $500,000. It has evolved into the multi tiered increasingly oppressive and intrusive tax code that exists today in large part due to the thousands of lobbyists that have convinced politicians to create loophole and exemptions for big business. Another flat tax on income will morph into the same monstrosity we have today only faster thanks to the lobbyists that didn't exist in 1913.

Taxing productivity opens the door for an increasing tax burden on producers and is the very reason Karl Marx espoused taxing income as a plank in his Communist Manifesto.

What people?

Are you serious? The same people we've been talking about all along, those who makes purchases!

As the overall Baby Boom population ages, they will spend their already taxed savings disproportionately on health care, medication, medical services, and eventually (for many) nursing homes, and then funeral services.

Oh really? Who decides what is considered disproportionate? They're savings will no longer be taxed under The Fair Tax since it is considered income!

The prebate for the average household will not reimburse nearly enough to cover the taxes on households of one or two, even though their taxes paid on the above named services will be well above the average, because the level of care will be well above the average.

You're right because the prebate is not intended to fully cover all taxes paid. It's only intended to cover taxes up to the poverty level as has already been explained to you several times!

This isn't rocket science, here--unless you're James Hansen.

It wouldn't seem as though it were rocket science if you read the bill.

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