Posted on 06/07/2006 3:47:07 PM PDT by pigdog
FairTax Strikes Back - Introduction On April 8, 2003 I wrote my first article on the FairTax proposal. The article FairTax - Income Taxes vs. Sales Taxes detailed the costs and benefits of moving from a system of income taxes to a system of sales taxes. In the article I concluded that "[the]FairTax is an interesting proposal which is unlikely to ever be implemented." The response I received to this article was overwhelming. I've gotten hundreds and hundreds of e-mails on the article, every last one of them from a FairTax supporter. While many of the supporters had something negative to say about the article (and its author), one FairTax supporter wrote a number of intelligent, passionate e-mails about the benefits of the FairTax system, and pointed me towards studies supporting the FairTax.
That supporter is Al Ose, author of the book "America's Best-Kept Secret: FairTax." I was quite impressed with Al's e-mails, so I invited him to write a pro-FairTax article for Economics at About.com. This is that article.
Our current system isn't a flat tax so why are we discussing this?
Seems to me core to understanding what kind of tax system we actually have, especially if we intend to change it to a system that is actually a consumption tax instead of a combination that we currently have.
This is especially true, as many claim the flat tax is a consumption tax not taxing "income".
Seeimng that there are many viariants in tax reform all claiming to be consumption taxes, and the Congressional Research Service pointing out that even the current system has elements of a consumption tax. It behooves us to explore what really is a pure consumption tax system and what is not before we jump the shark and try to implement a true consumption tax system at the national level.
Our current system does not tax the value added at each level, it taxes income.
Certainly it does tax value added, in addition to many other elements in its tax base. For the current system is clearly a combination of taxation modes with elements of consumption taxes as well as elements of "income" taxes. The Flat Tax clearly includes taxation of wage income, and does not exempt that income that is saved, yet is claimed to be a "consumption tax", by many.
Is income equal to value added?
I behoves us to determine what actually constitutes a consumption tax, or the equivalent thereto, and what does not in determining what elements do equal value added and elements of consumption. That is true especially where so many, wrongfully or rightfully, want to claim there favorite tax reform to be "consumption taxes" to be associated with the political bandwagon for whatever it is worth.
| http://www.taxfoundation.org/files/rl33443.pdf Congressional Research Service Flat Tax Proposals and Fundamental Tax Reform
The Relationship Between Income and Consumption Although our current tax structure is primarily an income tax, it actually contains elements of both an income- and a consumption-based tax. For example, the current tax system includes in its tax base wages, interest, dividends, and capital gains, all of which are consistent with an income tax. At the same time, however, the current tax system excludes some savings, such as pension and Individual Retirement Account contributions, which is consistent with a tax using a consumption base. |
Hmmm, sure looks like a use or consumption tax generally collected at point of consumer sale, just like state use or consumption taxes to me. Even has provisions for collection where taxable property or service is aquired in transaction other than retail sale, just as a state use or consumption tax would.Well, golly, if it says it's a consumption tax, it must be. AG, you know as well as I do that the FairTax doesn't tax true consumption. The purchase of a car or a new house is a good example. I pay the FairTax on the full purchase amount but I wouldn't be consuming that amount. You are essentially prepaying the tax for the consumption you might use.
Although our current tax structure is primarily an income tax, it actually contains elements of both an income- and a consumption-based tax.This makes our current system a VAT?
Perhaps we should listen to this man's take on encroachments on our liberty.
"It is proper to take alarm at the first experiment on our liberties. We hold this prudent jealousy to be the first duty of citizens, and one of the noblest characteristics of the late Revolution. The freeman of America did not wait till usurped power had strengthen itself by exercise, and entangled the question in precedents. They saw all the consequences in the principle, and they avoided the consequences by denying the principle."
James Madison, A Memorial and Remonstrance, 1785: Works 1:163
The purchase of a car or a new house is a good example. I pay the FairTax on the full purchase amount but I wouldn't be consuming that amount.
You are essentially prepaying the tax for the consumption you might use.
Which you have every right to recover as unconsumed by you as you may when you sell your house.
You are right the FairTax legislation provides for only taxing once, at retail sale, and not multiple times as you would have it do in the forms of taxation that you advocate which either accumulate to a total revenue collected or cascade rates where no provision in made for deduction or credits for inputs, all of which increas the costs of tax administration as well as compliance on the the individuals subject to taxation.
Tax once but only once is the rule of the NRST implemented in the FairTax legislation. Once tax is paid, neither the owner of goods or property nor his subseqent assignees need to be bothered with the the tax system again, minimizing the impact of compliance and other tax costs that otherwise accrue in systems that would tax the same goods repeatedly throughout eternity.
I would much rather take a tax system that hits once, that one that continues to plague the citizenry and burden the economy repeatedly without end.
I think that you are probably right but what action they took was based solely on what they considered 'necessary' and ignored the part that limited them to what was 'proper'.
In all things, the government is still to be bound by the strictures placed on it no matter how onerous the government feels those strictures are.
They, and too many of 'we', have forgotten that the government is there to serve us and not to serve as our masters.
This is getting sillier and sillier with every post. I think y'all are just being your usual contentious selves.
Of course, all that disagrees with your narrowed sights and views are being merely silly and contentious.
Sorry, debate requires exploring that which even you may not care to look too closely at. Your characterizaton is noted that such investigations are merely silly and contentious. Especially if they challenge your positions I have noted.
The only part that you got right was that it was a 'simple answer'.
This is a conservative web site and promoting ideas that expand liberty are part and parcel of being here. Your proposals work to limit liberty so perhaps it is you who is out of place.
Indeed....... Unfortunately, in 1913 the citizens did not take alarm......
Then don't challenge my right to freely speak out against the FT fraud.
That's not what was done. Prices were reduced compared to today's income tax system prices.
For example, instead of requiring a 25% markup, a business may only need a 20% markup since they have less costs.
That's not a reduction, lewis. It's only less than the income tax price.
Our current system doesn't do this.
I didn't say it did, strawman.
Our income tax behaves like a VAT because it adds tax costs to the price of goods at every stage (JUST LIKE A VAT) - but our income tax adds costs regardless of value added.
Yes we were talking about tax costs at every level. You're wrong.
Neither then, nor now. Sad.
Sadder still are those who defend it.
Your weak assertions do not prove that the FT is anything but what we claim it to be and they certainly aren't conservative.
You want to perpetuate the IT scheme which is criminal in nature, totalitarian in its enforcement and blatantly unamerican by definition.
If company "A" manufactures a component of a larger assembly, and sells the component to company "B" for inclusion in the final product....there is tax cost associated with the sale of the component and the sale of the final assembly.So the income tax is really a sales tax.
What's the tax cost of a sale when the company makes no money on the sale? It is possible, especially for startup businesses.
Depends on his ER payroll taxes, his compliances costs AND the ER payroll taxes, compliance costs and any income taxes of ANY AND ALL of his suppliers.
It's good you recognize that ... recognition is the first step to healing - just like with AA.
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