Yep, you'll have to imagine it because you won't get it from the NRST.
Posted on 08/26/2004 11:05:33 PM PDT by n-tres-ted
Two weeks ago a man stood up at a George Bush campaign appearance in Florida to ask about a piece of legislation known as HR25. Many, including myself, were pleased to hear Bush respond with some positive thoughts about the Fair Tax plan, a movement to replace the federal income tax with a national retail sales tax.
Washington is a city of inertia, and right now the inertia belongs to our present method of funding the operations of our government, the income tax. Politicians will not easily surrender a funding mechanism that lends itself so well to political demagoguery and which can be used to reward political allies and punish enemies.
The Fair Tax plan deserves a thorough public examination and debate. John Kerry seems dedicated to making sure this doesn’t happen. Soon after Bush cited the national retail sales tax as something worthy of further exploration, Kerry stepped forward with the typical class warfare rhetoric of the left. Acting as if he actually knew what was he was talking about (he didn’t), Kerry announced that the Fair Tax would amount to the largest increase in the tax burden on poor and middle income Americans in our history.
John Kerry was wrong. He was either speaking out of ignorance, or he was deliberately lying about the Fair Tax proposal in order to gain a political advantage. A politician lying in order to gain political advantage --- imagine that.
This column is lengthier than the norm, but I promise you that if you will invest the time it takes to read it you will be well on your way to becoming yet another rabid supporter of the Fair Tax plan. You will know that the poor and middle income Americans would be the prime beneficiaries of the proposal. You may even organize your own neighborhood march on Washington to demand that HR25 receive a fair hearing. In the next two minutes I’m going to turn you into a HR25 Fair Tax zealot. Read on:
First … the briefest of overviews: Simply put, HR25 would provide for the repeal of the 16th Amendment (the income tax amendment) and the dismantling of the IRS. All personal and corporate income taxes would end, as would all payroll taxes. There would not be one cent of federal taxes of any nature taken out of your paychecks. No more Social Security taxes. No more Medicare taxes. You earn $2,000 a payday; you get $2,000 a payday. The federal government would be funded through a national sales tax on goods and services sold at the retail level. No taxes on investments. No taxes on savings. You only get taxed on what you spend at the retail level. Store your earnings in a shoebox if you wish. They won’t be taxed.
When originally proposed, calculations showed that the sales tax would have to be in the area of 23%. A complete economic study is now being completed that is expected to bring that total to under 20%. For the purposes of this column, we’ll stick with the 23% figure.
OK … let’s put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation’s poor, poor, pitiful poor. After all, they can hardly afford a 23% sales tax when they’re living paycheck-to-paycheck in the first place, right?
Bear in mind that for the most part those whom we define as “poor” aren’t paying any income tax anyway. In fact, many of them are getting checks from the government; a form of outright income redistribution. The absurdly named Earned Income Tax Credit, for example. How can these people survive going from a no-tax situation to paying a 24% sales tax on all their retail purchases?
The implementation of the Fair Tax would fail in short order if, as the question presupposes, nothing were to change except that all of us would be paying today’s prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But … that’s would be far from the reality under the Fair Tax. Under the Fair Tax the poor won’t only survive, they’ll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool devised in this country since the concept of hard work.
Let’s begin by considering two realities.
First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For the poor this means an immediate 12 to 15% increase in their earnings.
Second. Don’t forget the 22% in imbedded taxes. These embedded taxes exist in virtually everything poor Americans or any other Americans have to buy. These embedded taxes represent all of the corporate and business income taxes and payroll taxes that the companies involved in the production, manufacture, marketing, distribution and sale of the goods and services must pay in the course of business. As soon as these taxes are gone, and after the competitive forces of the free market work their magic consumers, including the poor, will be paying at least 20% less for virtually everything they buy. This includes such basics as food, clothing, shelter and transportation. Yes... they’ll have to pay the new national sales tax, but when you factor in the lower prices caused by the disappearance of the embedded taxes you’ll see that the total price paid for consumer goods in terms of real dollars will fall or will remain very nearly the same.
So … just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny they earn on payday, amounting to a 12 to 15% pay raise, and when you factor in the Fair Tax and the lower prices, they’re actually end up spending less of their money for a retail purchase than before. What John Kerry calls the greatest increase in the tax burden on the poor in the history of our country is, in reality, their greatest tax reduction.
You need a clearer picture? Pull out your calculator. Let’s say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring the price of those groceries down to $35.10. The sales tax at 23% would be $8.07. This brings the total price to $43.17. That’s less than would have paid under today’s tax system. This single mother, whom we’ll consider “poor,” has just received a 12% to 15% increase in her weekly paychecks, and she’s paying less at the grocery story for her basic necessities.
So far, so good. At this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe not. Here’s the convincer. Brace yourself for the knockout punch.
The Rebate
Under the Fair Tax plan every consumer, rich and poor alike, will receive a check or an electronic credit to their bank account from the federal government every single month equal to the sales tax that person or that family would be expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government’s published poverty levels for various sized households.
Here’s an example of how the rebate payments would have worked in 2003.
Let’s say you’re a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government figures, which negates any marriage penalty. If the Fair Tax Act had been law in 2003 you would have been granted an annual consumption allowance of $24,240. This is what the government would assume you would have had to spend during that one year to buy the basic necessities of life for your family. The sales tax on this amount would equal $5,575. The government would have rebated this amount to you in 12 equal monthly installments of $465. What about a single woman with one child? Her monthly rebate in 2003 would have been $232. The lowest payment would be to a single person with no dependents. That person would have received $172 per month.
Now … bear in mind, this rebate isn’t only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class distrust or outright warfare.
OK … let’s add it up for America’s lower income citizens:
1. They get their entire paycheck. 2. Even with the sales tax, and considering the drop in prices, they’ll be paying essentially the same or less for everything they buy. 3. They get a check from the federal government every month to rebate any sales taxes they had to pay on life’s basic necessities.
Are you beginning to see just how far off-base John Kerry was with his intemperate criticisms?
Though most of the poor don’t have what we would call complex tax returns, let’s also include the time these they (all of us, really) will save by not having to keep tax records or file tax returns.
If you’re looking for some reason to oppose the Fair Tax plan, you’re going to have to find a better excuse than its effect on the poor. John Kerry might find it politically expedient to demagogue the issue for votes, but now you know enough to know what he’s up to.
For more comprehensive information on The Fair Tax you can visit http://www.fairtax.org.
Neal Boortz is a lawyer and nationally syndicated radio talk show host.
©2004 Neal Boortz
So?
"Why do they have to give a rebate to make it 'fair'???"
Because the research which went into the FairTax's development indicated that the American people were overwhelmingly opposed to a tax system that made it impossible or more difficult for those at the bottom of the economic ladder to afford basic essentials. The FairTax is a representation of what the American people wanted in a tax system. You are, of course, free to disagree with a majority of Americans. However, those of us who want to see something done on this issue and SOON consider that a fairly important attribute of a tax reform proposal.
Bump for later read!
That was the idea (tariffs) behind Smoot-Hawley in 1929-30 that led to a 68-69% drop in our exports-imports by 1933, and 25% unemployment in the U. S. The result would be the same today. And the "foreigners" don't pay our tariffs - we do - in the prices of the goods we buy.
Huge BUMP!!
I think this is where this idea falls apart. I just don't think there's any way in hell a company's going to start charging lower prices because their costs are less. I think retail products will still cost the same as they do now, and the companies who produce these retail products will simply pocket extra profits.
Take, for example, a compact disc. CDs cost, retail, pretty much the as they did 15 years ago, even though the cost to produce a CD has declined dramatically.
Why would you do that? Prices remain stable.
Thank you for correcting the article.
Yep, you'll have to imagine it because you won't get it from the NRST.
That's not right. THere already is existing taxes included in prices amounting to 22% inclusive or 28% "sales tax".
It's just that the included 22% (28% sales tax) has always been invisible. That's the only difference.
ping
THere are very clear reasons why the rebate exists. IIRC it increases the rate by 1.9%. It does, however, eliminate the divvying out of tax favors by pols. It eliminates lobbying the code. It prevents the tax from being regressive.
It's not confusing at all, IMO.
Thank you for the clarification. THe bill does NOT include repeal of an amendment. It simply "calls" for its repeal - whatever that means.
The repeal of the 16th amendment comes from HJR 45 IIRC.
But there are those that argue the 16th is not what gave feds power to tax income in any case.
For this reason, HR 25 makes the taxation of any kind of income illegal (not unconstitutional).
Of course, this is assuming the embedded taxes will be removed by businesses. Some economists believe so.
Even if prices do not drop the part that was used to pay corporate income taxes once those are gone, the rebate and option for freedom in what you pay tax on STILL makes the FairTax the best plan out there.
I am pretty darn sure that prices would drop to the 35 dollar range as Boortz predicts, however. Why? They would need to drop in order to keep customers from sticker shock. Perhaps they could get by with 38 bucks or so. They would get a couple bucks more profit than now (since again, that extra dough above 35 now is currently used for taxes anyway, so its removal would just make common sense). But, it would not be an outrageous amount, and consumers would be able to choose what to get their taxes paid on.
So you support making my dollars worth less? You support the isolation of American goods and services to the NA market only? You support trade wars? You support the restriction of goods available to American consumers?
BTW, the 16th made the income tax constitutional, so your "get back to the constitutional method of taxation" stance also implies that your supportive of income taxes as the revenue to fund the Fed. Gov't.
So am I. All the better. No self-employment taxes, no income taxes. Goods stripped of embedded taxes on labor (that's another 25% or so, right there. No costs to keep records, file returns, comply with audit demands, make quarterly installment payments, etc. Celebrate! and Support!
Why would AFFT allow this guy to jeopardize his credibility with an article full of lies like this?...
The lies and misunderstandings in this article says more about the lack of credibility of AFFT, their desperate attempt at any cost to push this fraud than it does about the actual tax plan...as phony as that is.
If he doesn't know he's lying, he should know he's being made a fool of.
That IS high!
Anyway, the price that you'd pay for a car today would be the same price you'd pay under the nrst. The reason is that you are already paying a tax of a nearly equivalent amount when you buy the car today.... you just don't see it.
The nrst repeals the invisible taxes and makes the replacement visible....that's why socialists hate it. We'll all KNOW our real tax burden!
BTW the rate is 23% inclusive, meaning if you have $100 to spend, $23 must go to tax leaving $77 to spend. Like the income tax...if you earn $100 and pay $23 in tax, you have $77 to spend.
Next year will begin to push to enactment. First we have to re-elect the President who will gladly sign it.
"Many will see this as an opportunity to increase their profit margin, fund capitol improvements, ramp up research that has been put off, etc."
Therefore an employment explosion would take place. Nothing wrong with that either! Think about it, these actions will increase the need for employees, therefore the leverage of the employee to demand higher wages is increased, potentially a greater benefit that will offset your theory of prices not going down.
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