Tax Reform Panel Picks Apart FairTax Proposal

Tax Analyists ^ | 5/12/2005

[Your Nightmare]

Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.

Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.

Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.

Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.

Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.

Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.

Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.

Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.

Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.

[Principled]

I'm still waiting on that literature

You just keep waiting, ok? If it gets dark, just keep waiting!

[Always Right]

So you don't really know what might be saved, do you?

I know my compliance costs run under 0.1% of my gross sales. So I know 10% is pure fantasy. I know your tax system will not save me hardly a nickle on complinace costs. I still have to pay my book keeper exactly the same whether it is an income tax or a sales tax. The difference in work load is insignificant.

[Your Nightmare]

YOU'VE been nailed in lies so many times everyone is parsing what you say!

This is where I ask you for a specific example and you can't provide it. You may want to throw in a "They are there for everyone to see" or something like that. m-kay?

[Your Nightmare]

I'm still waiting on that literature

You just keep waiting, ok? If it gets dark, just keep waiting!

So I can assume it doesn't exist. Another lie?

[ancient_geezer]

Because FairTaxers preach that a major benefit of your plan is that the employee gets to keep his whole paycheck.

For a good reason, the employee will receive the contracted gross wage currently on his paystub with no federal income or SS/Medicare taxes withheld

If this is true, then much of the so-called embedded taxes will still be in the cost of goods and prices can not come down 20-30%.

Wrong as the price (20-30%) decline at producer level is due to multiple factors at the business level, repeal of the taxes businesses pay per-se, reduction in tax system related costs on the employer that go away when business taxes are repealed, and consequent increase in productive capacity that occurs from which lower prices make up in increased demand for product optimizing business profits at lower price higher volume point on the supply demand equilibrium relation.

Overall price received by producers will fall appreciably in most sectors of industry from market competition for maximizing profit utilizing the reduction in business costs and business taxes repealed to achieve a more efficient and productive return on their resources.

If you were honest in your presentation, you would inform people that for this plan to work as modelled, they must take a pay cut.

Perhaps you will explain for us how the contracted gross wage on your pay be cut, when your employers tax and tax related costs are removed. From whence does any pressure for this imagined pay cut come from?

Seems to me with a growing economy arising from more efficient business operations and increased capital investment providing additional implementation of technological productivity improvements, wages are more likely to increase with productivity and time than to fall as you seem to think.

 

Virtually all economic models project a much healthier economy if a federal sales tax replaces the current tax system. These models typically project that the economy will be 10 to 14 percent larger in 10 years.[2] A dynamic, growing economy will provide more and better paying jobs. Employers will need more and better-trained workers.

FIGURE 1: This figure shows the positive correlation between real wage rates and capital investment per hours worked, from 1947 to 1992. During this time period, the amount of capital per hour worked increased steadily and
these increases led to increases in real wage rates over the same time period.

[Principled]

So I can assume it doesn't exist.

You can do as you wish. But it would be stoopid to think that just because I don't do your research for you that the research isn't there.

[Final Authority]

Anytime anybody ends with LOL I say they aren't worth any more consideration. Your are a fool.

[Principled]

Anytime anybody ends with fool I say they aren't worth any more consideration.

[Always Right]

Wrong as the price (20-30%) decline at producer level is due to multiple factors at the business level, repeal of the taxes businesses pay per-se

Ok, $200 Billion

reduction in tax system related costs on the employer that go away when business taxes are repealed

That will save me less than 1% on gross sales, BFD.

and consequent increase in productive capacity that occurs from which lower prices make up in increased demand for product optimizing business profits at lower price higher volume point on the supply demand equilibrium relation.

LOL, can you take the derivative of that equation? Sounds like a statement from some cheesy sci-fi movie.

[Final Authority]

Since nothing in your posts are of your own hand or from what ever thoughts you have,I read nothing, as nearly everybody else does as well. Next time you comment to my replies, write in your own hand, I might read it.

[Always Right]

Since nothing in your posts are of your own hand or from what ever thoughts you have,I read nothing, as nearly everybody else does as well. Next time you comment to my replies, write in your own hand, I might read it.

AG does have an impressive collection of posts ready to cut and paste from. It begs the question, who is feed him all the info. FairTax have paid posters in the past to post on FreeRepublic.

[Your Nightmare]

You can do as you wish. But it would be stoopid to think that just because I don't do your research for you that the research isn't there.

I've done my own research, thanks, but I've never seen what you stated in the "literature." So just point me to the literature and I'll take a look at it.

[Principled]

You just keep waiting, ok?

[ancient_geezer]

Half of payroll taxes are paid by the employer from his gross sales revenues on wages he pays to employees.

That speak nothing of the incidence of that tax. The ideas on pricing coming from FairTaxers is laughable.

Sorry what goes down or is held back for one reason under one set of conditions, is not guaranteed to change status under a different set of conditions evoking behaviour on the part of the management of a business.

One must ask what pressure is there to cause an employer to chose to arbitrarily increase an employee's wage vs decrease his prices to solicit greater demand for his product ot maximize his profits by increasing his markets share.

I pick increasing market share raising profit level, over an arbitrarily increase in contacted gross wages of employees.

Don't know of many employers likely to raise wages of any employee without big guns behind him forcing it (e.g. unions & stikes), or exceptional merit of the individual (tail of the bell curve) in improving the bottomline of the business. Don't see either happening with repeal of a tax that is levied on a business. Can see a business take that action that will maximize his profit in a competitive market. Arbitrarily raising wages of all employee's has not genenerally been shown to be a profit maximizing activity.

[Principled]

FairTax have paid posters in the past to post on FreeRepublic.

So do status quo/income taxers. Still have 'em.

[Always Right]

So do status quo/income taxers. Still have 'em.

Name one.

[Principled]

He/she/they masquerade as regular people. But it's kinda obvious.

[Your Nightmare]

One must ask what pressure is there to cause an employer to chose to arbitrarily increase an employee's wage vs decrease his prices to solicit greater demand for his product ot maximize his profits by increasing his markets share.

One must ask if one might have in previous educational opportunities had the occasion to come to the understanding that, in addition to the supply and demand for products and services, there is a supply and demand dynamic for the services of labor and that any said increase in an employee's wage would not in the least be arbitrary, but, on the contrary, be a response to the previously mentioned supply and demand dynamic for the services of labor.

[ancient_geezer]

Since nothing in your posts are of your own hand or from what ever thoughts you have,

Yep just as this is not from my own hand either, it is out of my editer/formatter. I just type on a keyboard actually.

I read nothing,

Are we supposed to be surprised at this revelation?

as nearly everybody else does as well.

Gee, you a mind reader too? Speaking for the mouse in your pocket?

Next time you comment to my replies, write in your own hand, I might read it.

Don't bother you might learn something and contaminate a pristine wasteland.