Posted on 02/01/2008 12:06:25 PM PST by Man50D
There has been much misunderstanding-deliberately promoted by income tax system defenders recently-about the effects of the FairTax on different income segments of the taxpaying public. Let's clear the air a bit.
The greatest benefits of tax reductions under the FairTax, according to respected economists, accrue to low income taxpayers (an average 14% reduction) then to the middle class taxpayers(an average 7% reduction) and then even to the wealthy (an average 5% reduction).
How can this be and still raise enough revenues to replace all taxes now collected under the income tax system? It's because the taxpayers base is dramatically broadened under a consumption tax by bringing in illegal immigrants, as consumers, and the $1.5 trillion annual underground economy. In addition, the very wealthy pay the full 23% rate on spending, which is an increase over the typical 15% capital gains tax now paid on dividends and stock gains when redeemed (Warren Buffet's recent complaint). In a nutshell, the more you spend under the FairTax, the more taxes you pay. Remember, too, that all the gimmicks that those with tax lobbyists and tax lawyers are able to exploit in the current 67,500 pages of income tax regulations also disappear (along with the role of tax lobbyists as there are no exemptions, loopholes or deductions).
The President's Advisory Panel on Tax Reform declared that taxes would go up on the middle class under a consumption tax when they ignored the definitions in the actual pending FairTax legislation and created their own flawed consumption tax. They quietly loaded it with exemptions they felt more "realistic", ignored the distributional effects of eliminating highly regressive FICA taxes (you know, the ones that represent the highest tax payments by low and moderate income taxpayers) and refused to examine the $22 million of FairTax research. They then declared a consumption tax (which many writers have wrongly assumed was the FairTax) as requiring a higher rate and punitive to the middle class.
The FairTax monthly prebate actually wipes out all federal taxes on the poor and a diminishing amount of taxes are reimbursed the further one is from the poverty line.
There is great resistance to the FairTax within the circles of those who profit from the complexities of the income tax code. Last year 53% of all lobby expenditures in Washington, DC were paid to tax lobbyists. It's big business that includes not only lobbyists and tax related think tanks and tax reforms groups (entirely devoted to tweaking the income tax code) but academicians who have built careers on understanding the arcane details of the code.
Add to that the center of resistance to a simple, transparent system without gimmicks-the Congressional tax writing committees themselves. In truth, Congressional Members from both parties are addicted to using the tax code to reward friends and contributors, punish opponents and inept attempts to manipulate citizen behavior through the code. In other words, our tax writing process is driven by all the wrong reasons.
This is the single biggest reason that our tax code is so complex that it costs taxpayers $265 billion a year just to complete tax returns. It is so complex that the IRS can't answer taxpayer questions right more than six of ten times. It is so complex, the IRS comes up $350 billion short of owed taxes every year (raising the average taxpayer bill by about $2,000 annually).
On the merits, the FairTax takes politics out of the tax code and the tax code out of business decisions. It is the politics that are tough because passage requires overcoming powerful institutional players. To this end, Mike Huckabee and a host of other candidates have joined 72 Congressional co-sponsors and a growing army of citizens who believe that the public can still drive public policy ( a novel idea first suggested by the Founding Fathers). Otherwise, we are stuck with a system that makes debt more favorable than wealth, puts the "Made in America" label at a severe competitive disadvantage and punishes labor and investment. It's a system driven by politics, power and profit instead of economics or fairness. It's a lucrative gig for those in Washington and a destructive torture for everyone else.
Instead of borrowing money from the Chinese to pay out rebates to American taxpayers (as welcome as they will be) maybe we should think about what happens to the American economy when we make the USA the most desirable "tax haven" in the world. We have lost at least $12 trillion in American capital to offshore locations in recent years. Economists who have studied the FairTax agree that this wealth and a lot more in foreign investment will rush to our shores once the FairTax is enacted.
As FairTaxers say, "Dare to Be Fair". The FairTax won't be perfect and the transition will require adjustments but compared to the badly broken income tax system that so bedevils taxpayers and damages our economy, it's well worth it.
The FairTax research-as well as a recent article on how the FairTax helps the middle class by brilliant Boston University economics chair, Larry Kotlikoff, can be found at FairTax.org
If you notice, I did pull two of his posts.
Just saw that. Time will tell whether or not it helps.
If it really bothers you that much, push the “fairtax boo-hoo” button.
Just shut the hell up and leave me alone, damnit.
You are really trying my patience.
I'm monitoring this thread to make sure the personal attacks stop. So far, you seem to be the only one not getting the message.
I am glad that you are FINALLY on this case and will assure you that if you would look into the posting history of this particular poster you would find a LONG history of just such trash as has been posted on this thread by him on a great many more.
Just don't make the thread more heat than light. Stick to the subject.
That would be wonderful!
We'll see which side will allow it to be thus.
With respect to the argument “Never been tried. No proof that it will be successful, yadda, yadda....”
Which states have no income tax and only exist on a sales tax? Seems to me Texas was one of them and their economy is bigger than many countries.
you are dissembling.
this legislation does NOTHING to prevent dual tax systems existing.
Without a constitutional amendment the only thing done is change the name of the IRS building. All the LEGAL mechanisms will still be in place for a single stroke of the pen.
“Doing away with the Internal Revenue Service” is such a ridiculous lie.
Some government agency is going to be necessary to collect revenue, no matter how the amount of revenue due is calculated.
And if a sales tax is instituted without repeal of the 16th amendment, we will end up with a sales tax AND an income tax.
The difference is “an order of magnitude”, and many state tax departments have come out against the plan in the last couple of years.
No mere "bill" can amend the Constitution.
No wonder Huckster likes this plan: it's as ignorant as he is.
Correct. No additional revenue is collected by the government. The Fair Tax is calculated to be revenue neutral. Probably the better way to look at this is that working stiffs will no longer pay twice, once at the time when the wage/salary is earned and again when buying goods.
And I don’t believe nominal prices will remain constant when the Fair Tax is enacted. I believe purchasing power for the working stiff will remain constant. Purchasing power for the illegal alien/prostitute/pimp will be diminished. Stated differently: They will be bearing a greater burden than they bear now, hence we will be bearing a smaller burden.
If such repeal is not a condition precedent for institution of the sales tax, the plan will fail.
"Considerable effort?"
Congressmen tax the way cows piss.
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