Posted on 04/20/2009 3:15:05 PM PDT by pissant
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?"
(Excerpt) Read more at hughhewitt.townhall.com ...
“And you believe crying about the Constitution is the only way to solve the problems.”
I’m not sure who you’re referring to, and I’ve never heard active support of pro-Constitution organizations (financial and otherwise) described as “crying”.
“You will find no bigger supporter of our Constitution then me and my entire family. “
Not believable.
“The Fair Tax is but one step in the process. No one argues about the positive impact economically of the Fair Tax...once it is working we can get the Constitutional amendment to banish the income tax.”
The Fair Tax is a huge step backwards because it guarantees that we have both an income tax and a national sales tax for decades to come. The time and resources wasted on this socialist FT scam could be used to educate the public about the Constitution and limited government instead of the vile FT deception.
You don’t seem to understand that we are going to be forced to consumption based taxation system anyway. The economic factors both here and globally will make it so.
The income tax will have to be eliminated anyway.
You will not fix the “education” about our Constitution until we can make charter and school choice the majority choice in this country and not public schools.
We have been infected and it is going to take a variety of treatments and cures before we are right again and this will take decades in itself.
Your list is excellent, as follows:
“I actually think the Fair Tax has more potential of happening now than ever.
When you truly understand what the Fair Tax represents it makes complete sense to get behind it.
There are some key aspects of the Fair Tax that no other tax approach delivers (non-consumption based).
1) You as an individual are no longer a target of the government
2) The elimination of waste is very high - as in...more of the tax collected will actually end up in the spending budget
3) All illegal money ends up getting taxed
4) 65,000,000 tourists a year will pay into our coffers
5) We would become the #1 place in the world to do business - how many jobs would that create?
6) As an individual you would have complete control on how much you paid in taxes per year, and you wouldn’t be penalized for saving
7) No more double taxation through instruments like the death tax, etc...
8) Our ability to complete on a global level would skyrocket
9) Without a capital gains tax the amount of capital available for business expansion would literally be unlimited
I could go on for quite a while about the benefits...I literally do not see the downside to it. It actually is fair if you accept we must pay some taxes...”
I stopped reading Hewitt when he was busy carrying water for Harriet Miers.
“The income tax will have to be eliminated anyway.”
No, it will not have to be eliminated, and it won’t be eliminated, because it was created by the same money trust which gave us the Federal Reserve.
“You will not fix the “education” about our Constitution until we can make charter and school choice the majority choice in this country and not public schools.”
For real conservatives and real constitutionalists, there is no government solution or government voucher for education will can ever solve the (inherent) problem(s) of the socialist government schools aka pagan academies. For us non-troll adults, private grassroots organizations such as (but not limited to) the Campaign for Liberty are the proper vehicle for voter education.
“We have been infected and it is going to take a variety of treatments and cures before we are right again and this will take decades in itself.”
This is one of the most bizarre statements I’ve ever read on FR.
The major gain of the Fair Tax is the repeal of the 16th Amendment and the disbanding of the IRS Gestapo. Look at how much of the collected taxes is used by the IRS itself before any of the money gets go the ends that it is supposed to. Previous discussions on this forum have proposed that the IRS uses 30% or more of collections just to maintain itself. The IRS is a cancer on the American People and must be done away with.
I certainly agree.
A Flat Income Tax would leave us where we are, with a lower rate ... temporarily. As history has shown, Congress will continue raising it again and again. Then we’ll be back in the same spot in another 50-100 years.
The FairTax isn’t perfect, but it does remedy the vast majority of ills of the present system.
We need not stop with the repeal of the 16th Amendment though. We also need to repeal the 17th Amendment also and institute term limits. I believe the USSC was wrong in their decesion not allowing term limits on federal offices.
We can set in the shade and beat our gums and chomp the bit all we want to, but we are not going to get this under control until we get a number of things done, the IRS issue, 16th amendment, 17th, but most of all, we have to pull the elected representatives back down to home and threaten to castrate them. They have to fear the voters and they have to get Washington under control.
Once those buggers leave their home state they become a resident of Washington, and they begin squeezing the home state to support Washington. It has to be the other way around. They have to be called back into the state at least once each month to gather with and answer to the people. There needs to be a clause in their election process that says that they can be dismissed at any time for failure to show loyalty to their electorate.
So a “residence” that is an 8-bedroom McMansion with 15 people living there owes the same tax as some single person living in a studio apartment ?
You might want to rethink that idea just a bit.
Closer would be “National Budget / # of Residents” ? In other words, $3T / 300M people = $10,000 each ? $50,000 for a family of five.
Still kind of tough for a lot of people. Not very workable. Even if Federal spending was whittled down to just the bare necessity of National Defense and Interstate Infrastructure and Judiciary, it would probably still exceed $750B and require $2,500 per person — and $12,500 tax for the average family of five is still pretty unlikely.
No ... much as I wish otherwise, expecting equal AMOUNTS from each person to foot the whole bill is just not gonna happen. I’m all in favor of making taxes painful, but they also have to be collectible. How about this:
1) Eliminate all Corporate taxes and income taxes
2) Institute a “resident tax” on every man, woman, and child of $100/month
3) Implement a flat sales tax (no rebates, no items excepted) on all goods and services sold here of 10%.
4) Require IRA savings of at least 10% of actual income or median income (whichever is less) until age 65 in order to be excluded from SS/M or else be taxed the difference.
The above 2 & 3 would only provide about $1.7T to the General Fund and require Federal Spending to be cut in half. It ensures EVERYBODY pays for the privilege of living in America but is not so high it scares anyone away. The scariest thing about the FairTax is that the 23% rate would drive away the wealthy and leave the rest of us with an even higher rate to make up the difference. A 10% sales tax, on the other hand, would still be much lower than VATs in most other countries and therefor encourage the wealthy to both earn and spend their money here in the USA. Item 4 stops the punishment of success that SS/M taxes currently represent, while still ensuring there is enough savings+funding for a minimal retirement.
If you are honestly looking for flaws in the FairTax, they are not difficult to find. Here are two:
1) it effectively eliminates the “cap” on Social Security and Medicare taxes. Instead of these being taxes on only “wages” and thereby “stopping” punishing people at some point, the FairTax “never” stops the punishment. Somebody with a ten million dollar non-wage income that spends it all on servants, cars, yachts, etc. will pay almost a million dollars of FairTax diverted into SS/M, yet receive ZERO additional benefit from those programs as compared to what he gets today. Including the SS/M taxes in the FairTax is just a sneaky way to eliminate the cap and punish high achievers even more than the current system does.
2) suppose you are one of the top 1% of Americans who presently pay 39% of all the income taxes and you owe those taxes no matter where you live on the planet, so you mostly live and spend your money here. Now, the FairTax passes and you have a choice: spend your money in America and pay 23% in FairTax on all your spending or live outside the USA and pay a 15% VAT — still zero income tax either way. Obviously, you spend as little money in America as possible. That leaves FairTax revenues about $500B/yr short of what the FairTax projections assume. That means the extra $500B has to come from the other 99% of the people still here. It also means the FairTax rate of 23% no longer is sufficient, but actually needs to be bumped up to a higher rate of about 35%.
The FairTax is really a blatant attempt to shift the tax burden even more onto the shoulders of the high income citizens. Class warfare at its worst. It is a particularly lame attempt, though, since it is easily and legally avoided by simply moving out of the country. So it can’t possibly work. Removing the provisions that so obviously target the high income/rich, the FairTax could be restructured to a decent replacement for the income taxes — but the key is to encourage the high income crowd rather than punishing them. That means a much lower rate, no rebates, and stripping out the SS/M portion which is of no benefit to the rich.
Hey Hugh, how is your pal Harriet Miers doing?
yep
You have been consistently right all those years. I can’t believe that there are people that still think the FairTax isn’t completely a scam.
This question is to everybody in this forum;
Is there a better solution for a tax reform or a better suggestion we can adopt?
I’m a supporter of the FairTax, BUT, I’m also a supporter in abolishing ALL federal taxes and allow states to have their own soveriegn tax system, then compete based on that tax system, that’s MY suggestion apart from the FairTax.
You wrote: “If you are honestly looking for flaws in the FairTax, they are not difficult to find. Here are two:
1) it effectively eliminates the “cap” on Social Security and Medicare taxes. Instead of these being taxes on only “wages” and thereby “stopping” punishing people at some point, the FairTax “never” stops the punishment. Somebody with a ten million dollar non-wage income that spends it all on servants, cars, yachts, etc. will pay almost a million dollars of FairTax diverted into SS/M, yet receive ZERO additional benefit from those programs as compared to what he gets today. Including the SS/M taxes in the FairTax is just a sneaky way to eliminate the cap and punish high achievers even more than the current system does.
2) suppose you are one of the top 1% of Americans who presently pay 39% of all the income taxes and you owe those taxes no matter where you live on the planet, so you mostly live and spend your money here. Now, the FairTax passes and you have a choice: spend your money in America and pay 23% in FairTax on all your spending or live outside the USA and pay a 15% VAT — still zero income tax either way. Obviously, you spend as little money in America as possible. That leaves FairTax revenues about $500B/yr short of what the FairTax projections assume. That means the extra $500B has to come from the other 99% of the people still here. It also means the FairTax rate of 23% no longer is sufficient, but actually needs to be bumped up to a higher rate of about 35%.
The FairTax is really a blatant attempt to shift the tax burden even more onto the shoulders of the high income citizens. Class warfare at its worst. It is a particularly lame attempt, though, since it is easily and legally avoided by simply moving out of the country. So it can’t possibly work. Removing the provisions that so obviously target the high income/rich, the FairTax could be restructured to a decent replacement for the income taxes — but the key is to encourage the high income crowd rather than punishing them. That means a much lower rate, no rebates, and stripping out the SS/M portion which is of no benefit to the rich.”
Everything I’ve written is well-reasoned argument which you are too lazy to attempt to refute.
You should try thinking for yourself instead of blindly believing fantasies and pointing to websites.
The reason why the FairTax won’t work is basically because it requires a rate that is too high.
It “needs” to be high because it attempts to untax poverty-level spending for everyone via a “prebate” and because it attempts to replace the SS/M revenues. If both of those aspects were removed, the rate could be less than 10% instead of the 23% of the FairTax HR25.
At 10%, legal tax evasion would be managable since the “wealthy” would not have as much incentive to leave the USA. At 23%, significant tax savings exist for living abroad, but not at 10%.
So my “better suggestion” would be to keep SS/M funding as-is (from wages with the cap), eliminate the “prebate” and implement the FairTax with a 10% rate. This would yield virtually all the benefits — eliminating the IRS and all income taxes, boosting American mfg, eliminating all the compliance and embedded tax costs, etc. — without driving away the high-earners which makes the FairTax completely unworkable.
http://huckabee.wordpress.com/the-fair-tax/
Mike Huckabee on the FairTax:
I’d like you to join me at the best “Going Out of Business” sale I can imagine – one held by the Internal Revenue Service. Am I running for president to shut down the federal government? Not exactly. But I am running to completely eliminate all federal income and payroll taxes. And do I mean all – personal federal, corporate federal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment. All our hours filling out forms, all our payments for help with those forms, all our shopping bags filled with disorganized receipts, all our headaches and heartburn from tax stress will vanish. Instead we will have the FairTax, a simple tax based on wealth. When the FairTax becomes law, it will be like waving a magic wand releasing us from pain and unfairness.
The FairTax will replace the Internal Revenue Code with a consumption tax, like the taxes on retail sales forty-five states and the District of Columbia have now. All of us will get a monthly rebate that will reimburse us for taxes on purchases up to the poverty line, so that we’re not taxed on necessities. That means people below the poverty line won’t be taxed at all. We’ll be taxed on what we decide to buy, not what we happen to earn. We won’t be taxed on what we choose to save or the interest those savings earn. The tax will apply only to new goods, so we can reduce our taxes further by buying a used car or computer.
Old news.
Perhaps you could explain how it refutes my argument ?
It doesn’t. It only confirms what I’ve already pointed out. The misguided attempt to replace the SS/M funding through the FairTax and the misguided attempt to not tax those living below the poverty line at all.
Part of the problem in America today is that there are too many people who can vote for bigger government without paying any taxes. Here you’ve quoted Huckabee as admitting that the 13% of the population living below the poverty line will go completely untaxed — therefor they are completely free to vote for as much government as they possibly can. No matter how much it costs, or how high the FairTax rate would need to be raised to pay for it, it won’t cost these people an extra dime ... because their “prebate” will always match it. They’ll even get SS/M benefits after they paid ZERO into it.
Meanwhile, people with high non-wage incomes will have their SS/M benefits limited just as it is today even though they must pay FairTax without any limits at all. They’ll have to pay and pay and pay ... with no additional benefit at all. Why would they stay here when the FairTax allows them to legally leave the country, retain their citizenship, and owe NOTHING ?
Answer these two questions, if you can:
1) Why should people be free to vote for big government if they are unwilling to pay for it ?
2) Why would a wealthy individual live here and lose 23% of their income when they can legally live elsewhere and keep all of their income ?
The 30% number arises when you add in state taxes to the final retail bill
Bzzzzt. Wrong.
The 30% tax on the item is BEFORE the state taxes are added in. The bogus 23% rate is based on a sales tax formula NOT used in any of the states.
A dollar item is taxed 23%. Then the tax is taxed 23%. Then the tax on tax is is taxed 23%. Then the tax on the tax on the tax is taxed 23%. And so on....
Well your correct in noting that the Fair Tax shills use a deceptive and misleading tax forumula that most people are unfamiliar with. But your example is wrong.
The Fair Tax shills use what they call the tax "inclusive" method, meaning:
Just one of the myriad ways "Fair Tax" tries to pull the wool over the Peoples' eyes.
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