Posted on 01/14/2008 6:51:54 AM PST by K-oneTexas
COLUMN: The FairTax Promotes Economic Equality Submitted by on 01-13-08, 10:16 pm | Updated on 01-13-08, 10:35 pm |
by Thomas Davis
President John F. Kennedy once argued that our tax system “reduces the financial incentives for personal effort, investment and risk-taking.” Unfortunately, there has not been much improvement since JFK's presidency.
In fact, the tax code has become more complicated and burdensome. Since 1954, the number of words in the IRS regulations has increased by 939 percent. Just consider, how much time do you, or more likely your parents, spend preparing taxes? Or how much money do your parents spend having an accountant prepare your family's taxes? And how much time does a company spend making business decisions with respect to the tax code?
The answer is astounding: Economists estimate that we spend over $200 billion every year and about 5.8 billion hours complying with the tax code. American companies spend another $200-300 billion making business decisions based on tax implications. The average American spends twenty-seven hours preparing his or her income tax forms, and almost 45% of tax compliance costs are directly incurred by individuals.
While the current situation is complicated, the proposed solution is simple. It's called the FairTax. Some of the nation's most eminent economists and businesspeople have researched and developed a system applying a national sales tax of 23% on all goods and services at the retail level. In return, no more income tax. No more corporate income tax. No more payroll taxes, gift tax, alternative minimum tax, self-employment tax, capital gains tax…you get the picture. By the way, no more embedded tax in the goods and services you currently purchase, which averages around 22%.
Whether you realize it or not, the cost of corporate income taxes, payroll taxes and other taxes have been factored into the price of the goods and services you purchase. So when politicians try to tax what they deem to be greedy businesses by assessing higher corporate income taxes, those taxes are actually passed on to you, the consumer. By eliminating embedded taxes, the prices of what you buy after applying the 23% consumption tax would hardly change from current prices. The difference is that you bring home your entire paycheck and that tax is transparently assessed at the end, not through an onerous and bureaucratic system applied within a price tag.
And don't worry; this simplified system is revenue neutral. The government will collect as much money using the FairTax as it does under the current system, having no effect on current ability to fund government programs. Actually, economists expect economic growth to be around 10.5% for the first year, effectively increasing the government's revenue.
Under the FairTax, you would get your entire paycheck and would only pay tax on what you consume, encouraging Americans to do something we do not do well — save. In order to make the FairTax fair, all people would receive a prebate, or advanced rebate, that reimburses them for tax paid up to the poverty line. In other words, you only pay tax for living beyond your necessities.
Without a corporate tax, America will encourage companies to come back to the United States, providing new jobs for Americans. Without embedded taxes factored into the price of a product, American companies can export goods and sell them at prices lower than foreign products. While the benefits are numerous and the drawbacks are few, I encourage you to question the FairTax Act of 2007. Challenge it. Look for shortfalls. But don't forget to take the time to find credible answers. Read The FairTax Book by Neal Boortz and Congressman John Linder. Visit FairTax.org. Search the Web for scholarly criticism. You will see that the FairTax stands for innovation and equality. Do you?
How quaint of you to avoid comment on the important part of the statement...
A few folks will disagree with you, as soon as they step off their Gulfstreams in the Caymans.
A few.
I was in error to say ''nobody''. But surely, they are a tiny, tiny minority, wouldn't you agree?
Good trading to you!
“Here in Michigan I hear far more people grousing about the 2% increase in sales tax that took place a few years ago than I ever hear them complain about what they pay to the Federal Government.”
You are making a point that FairTax supporters have been making (and the founders before that) for some time now.
“It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, ‘in political arithmetic, two and two do not always make four.’ If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.”
Alexander Hamilton in Federalist #21
“lemme clarify - if your income barely covers your cost of living, all of it (what you spend) is subject to tax.”
Your “clarification” is inaccurate. It ignores the rebate, an essential element of the proposal. With the rebate NO ONE pays taxes up to poverty level spending.
“ANY new tax regime introduces uncertainty into the mkt...”
Even if that were the case in the short run, it clearly would not be the case in the long run if you assume that the new system would be more stable and predictable than the current one. Given the extreme high level of uncertainty associated with the current system, that would seem to be an easy threshold to meet.
“The exception to this WOULD be (it hasn’t been through all of history, but perhaps this time we’ll get lucky) a new tax regime that, presumably by its stringent definitiveness, would reduce uncertainty. The ‘fair’ tax doesn’t begin to meet this standard; hell’s bells, you lot can’t even offer a clear and complete and consensus description of how this mystical ‘prebate’ would operate.”
The FT is by far the simplest and easiest tax reform proposal to understand and much, much, much simpler than the current system. If your objection is that it still isn’t simple enough, then it would seem that no tax reform proposal would ever meet your exacting requirements. The irony in that is that the default position is a system which miserably fails the standard that you are establishing for any new tax system.
How about a fairer tax? Everybody pays the same amount.
“If, e.g., the typical ‘necessary spending’ by a four-member household is about $50k. to $60k. per year, the salestax on that hits households earning less than $80k. per year more than households earning over $200k.”
So what. Why should somebody that makes more money pay more taxes. Are you a marxist?
You are so correct on inflation being monetary. One of the dead wrong FReeper conventional wisdoms is that higher energy prices cause inflation.
“Income taxes predate Marx by a couple hundred years....”
Not in the USA.
When was Marx in the USA... oh, I remember now...
‘’In the long run, we are all dead.’’ — J. M. Keynes
Notwithstanding, they plunged on. In fairness, a number of their positions were both large and illiquid, not much could be done about them directly. However, in a curious process of shat might be called ''avoidance avoidance'', LTCM didn't even attempt, afaik, any indirect hedges for interest spreads that were going South on them.
Then, they decided to spec Russia from the long side. Total complete insanity. What could they have been ''thinking''?? Say goodnight, Gracie.
Thanks for the kind word, and good trading to you!
Very interesting, thanks.
Ultimately, then, Boris placed the margin call.
The other way is to say that Harvard did. Jeff Sachs and his bunch (all Johns, btw, afaik) were ''helping'' Russia develop at the time. Of course, they were all statists of one flavour or another, and their views of capitalism were/are, shall we say, stunted.
How bright would you consider yourself if you had set up a short-term instrument for gov't to borrow with, and, within a year of its establishment, you found that the necessary rate of this 90-day paper was....80% ?
And that's just ONE of Sachs' team's contributions to Russian stability! The paper in question was called a VKO, and it may hold the record for shortest-time-until-becoming-toilet-paper of any gov't instrument, ever. (Think about that in the light of some of the Latin crappy paper that's been issued over the years!)
In Walden Pond, Thoreau wrote: ''If I knew that someone were coming to my house with the conscious design of doing me good, I should run for my life.''
File that thought away just in case you ever meet Jeffrey Sachs.
Sorry.
A **much** needed correction, not a direction change. Consider writing short-dated silver and gold puts on a further decline in those mkts. Buy Aussie $/Sell Loonie against it.
Ouch! I still remember a little of my 2 years of H.S. Latin.
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