Posted on 08/02/2005 12:22:49 PM PDT by phil_will1
FairTax would free markets, individuals from income tax.
In “The FairTax Book,” Rep. John Linder (R-Ga.) and libertarian talk radio host Neal Boortz offer a witty and straightforward explanation of the political and economic consequences of making April 15 “just another day.” Published by Regan Books, it hits bookstores this week. And if tax reform is not a “hot” topic now, then give this book a month on the New York Times bestseller list for things to change.
The FairTax is a bold idea to replace the income tax with a national sales tax. What’s so bold about it? Not only would the FairTax get the IRS off the nation’s back, but it would unshackle the economy to grow free of an achievement-punishing income tax.
The FairTax is a 23 percent sales tax designed to be revenue-neutral, meaning the tax would generate the same amount of revenue as the old system. Why 23 percent? Because once the cost of the income tax was phased out, prices on consumer goods would drop by that amount.
The Free Market Project is pleased to present the following excerpts from “The FairTax Book.” by Neal Boortz and John Linder. All rights reserved. No part of this book may be used or reproduced without written permission from HarperCollins Publishers, 10 East 53rd Street, New York, NY, 10022.
Exactly, so unless you state otherwise, 100% of the people will think you are talking about tax-exclusive rate. Is that point so hard to understand?
The so-called FairTax is such a simplistic, nonsensical idea that it's hard to know where to start in criticizing it, but here goes:
1. The 23% Rate is a Lie. The book claims that the FairTax rate would be as low as 23% (on all goods a services, including new homes, cars medical treatments, insurance, rent, food, basically everything you spend money on to survive). But look at Boortz's own examples. An item that costs $100 pre-tax would cost $130 with the tax. That's a 30% tax rate any way you slice it (in addition to state sales taxes, which would boost the rate even higher). When they lie about the rate, how can you trust them with anything else? Also, the true tax rate would have to be to around 50%-60% in order to collect as much tax revenue as our current system does. Don't take my word for it, though, look at an objective source on this subject, such as the Brookings Institution webite.
Well, I co-authored the book, and for the life of me I can't find anywhere in the book where we say that an item that costs $100 before the tax would cost $130 after the tax. It's simply not there .. not anywhere. In fact, due to price reductions brought about by the elimination of embedded taxes in all consumer goods, the price after the FairTax would be pretty much the same as the price under the current tax system. What's the problem here? Why did Mr. Kepner find it necessary to lie about what is written in the book in order to critique it? He says "look at Boortz's own examples:" Well, go ahead and look You won't find that example in the book! Amazing, isn't it? Kepner says "When they lie about the rate, how can you trust them with anything else?" My question is when Kepner lies about what's in the book, how can you trust him with anything else?
Kepner also refers to a Brookings Institution article which says that the tax would have to be 50 to 60%. Sorry, but that's not the FairTax plan. Brookings is talking about making many consumer items exempt from the tax ... food, clothing, medicines. Brookings changes the provisions of the FairTax in other ways to arrive at that higher tax figure. That's what the prebate is for. Again, Mr. Kepner tries to mislead. Did he do so out of ignorance, or malice? Wonder why?
2. Tax avoidance would skyrocket. Boortz claims the FairTax would eliminate tax avoidance. Wrong! Here's a simple example. Let's say I'm Neil Boortz and I want to buy a $200,000 yacht. Under the FairTax plan, I'd need to pay at least $60,000 in taxes to buy that yacht if I purchase it in the US. But if I go to the Bahamas and buy it, I don't pay any tax. Let's see, do I be a good citizen and pay the $60,000, or do I vacation to the Bahamas, buy the yacht there and pocket the $60,000? Gee, tough decision, but I know what ol' Neil would do. Same thing with expensive jewelery, vacations (why ski in Colorado and pay taxes on lift tickets, hotel and restaurants when you can ski tax free in Canada), you name it.
Once again ... either an intentional lie or honest misrepresentation. Nowhere in The FairTax Book do we say that "the FairTax would eliminate tax avoidance." In fact, we say just the opposite. We note that some degree of avoidance is a certainty ... just as it is under out present system. What was it that Kepner said? Oh ... I think it was something like "When they lie about the rate, how can you trust them with anything else?" Well .. here's another Kepner lie. What does that say about the rest of his critique? Now ... about that $200,000 yacht. First problem. $200,000 doesn't buy much more than a mid-sized Boston Whaler fishing boat. Pricing aside, If I were to go to the Bahamas and buy that yacht, as soon as I bring it into this country I pay the tax. Ditto for trying to buy an airplane in Switzerland, a car in Germany, Diamonds in South Africa ... whatever. I guess Mr. Kepner hasn't heard of the U.S. Customs Service. Not surprised. Also .. since when is Canada tax free?
3. It would destroy our economy. Remember, under Boortz's plan, virtually all purchases of new items by individuals would be subject to the FairTax. So when you go to buy a brand new house for $300,000, you now need to pay at least $90,000 in taxes. Are you going to buy a new house and fork over $90,000 in taxes, or are you going to buy a used home and not pay any taxes? Easy choice. Good-bye, construction jobs. Same with new cars and consumer goods. Nobody will buy new. Good-bye, Detroit. Good-bye, Wal-Mart (which might be a good thing).
OK ... now we know that Kepner hasn't read the book and hasn't read H.R. 25, the FairTax Act. The FairTax is inclusive in the price of a consumer item. When you buy a $300,000 home ... the price is $300,000. No tax is added. The tax is inclusive in the price. Further, a $300,000 home before the FairTax will cost approximately the same after the FairTax. Why? Because the embedded taxes incurred in the construction of that home ... taxes that will be removed from the pricing ... will be gone. Poor Heyden Kepner. That's strike three.
4. More tax avoidance. Remember, businesses aren't subject to the FairTax for their "investments". So I set up an LLC, buy a vacation home, and rent it out a couple nights a year. Bingo! It's now an "investment". No tax. Hey, why don't I do the same thing with my primary residence? After all, there won't be any IRS looking over my shoulder, will there Neil? In fact, maybe everything I buy from now on (clothes, restaurant meals, cars) will be for my LLC. Hey, good thing there won't be any IRS around to make sure these aren't for personal use.
That's called tax avoidance, Hayden. It's illegal now .. it will be illegal then. That same tax avoidance scheme is available to you right now. Why don't you get out there and try it? Let us know how it works out. It seems that Hayden Kepner's critique gets weaker as we go along.
5. Even more tax avoidance. Is a drug dealer going to pay taxes on the drugs he sells? What about deli's or retaurants that operate a cash business. Are they suddenly going to report all of their sales and pay taxes on them? Uh, let me guess.
These delis (there's no apostrophe, Hayden) and restaurants (that's the proper spelling) can do that now. Do they? Yes ... some do. Most don't. Again, there will be enforcement of the rules and regulations of the FairTax. Running out of steam, aren't you Mr. Kepner?
6. Fairness. I got news for you, Boortz. Poor and middle class people spend a much higher percentage of their income than do the rich. They need to, just to get by. The rich, on the other hand, have plenty of money left over to save and invest. So, by definition, the FairTax would fall disproportionaly harder on the poor and middle class. Maybe Marie Antoinette would think that's fair, but most American's don't. 'Nuff said about that.
The president's tax reform commission scored all of the proposals for tax reform, including the FairTax. The commission reported that the FairTax was the only tax reform proposal out there that completely relieves the poor of the burden of paying federal taxes. The only one. How many strikes does that make it now for Kepner? Not a very good at bat.
7. One good thing: No corporate tax. The only redeeming value of the FairTax system would be the elimination of corporate income tax. That in itself would make our corporations more competitive by eliminating the incredible expenses they incur in accounting costs as well as in paying the corporate income tax itself (the dreaded "imbedded taxes" as the book calls them). But we could accomplish the same thing under our current system by simply abolishing the corporate income tax today and taxing dividends and capital gains at the same rate we tax ordinary income (i.e., wages). After all, if the corporate income tax is eliminated, corporations' share prices will go up and/or they will pay out more in dividends. So what do we need a corporate income tax for? But we don't need to throw out the personal income tax just to eliminate the corporate tax.
Mr. Kepner doesn't recognize that all corporate taxes are paid by individuals anyway ... consumers, employees or shareholders. But then by now we understand that he hasn't read the book; so, no surprise here either.
Sorry, Nightie ... totally INcorrect. The payroll tax is not an excise but a form of income tax withheld from the employees gross pay.
TITLE 26 [INTERNAL REVENUE CODE] > Subtitle C [Employment Taxes] > CHAPTER 21 [FEDERAL INSURANCE CONTRIBUTIONS ACT ] > Subchapter B [Tax on Employers] > § 3111 [Rate of tax]
§ 3111. Rate of tax
(a) Old-age, survivors, and disability insurance
In addition to other taxes, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 3121 (a)) paid by him with respect to employment (as defined in section 3121 (b))—
It is calculated using the gross pay as a base and is a tax inclusive rate.See #90.
Putting the word "excise" in the Title doesn't make it an excise, Nightie.
The ER is defined to be an amount equal to the EE portion which is 7.65% of the gross wage. The ER portion must equal that. It is called an excise in the Title so get around the fact that they are really taxing what amounts to the employee wage that he never receives as I said in my earlier post. Calling in an excise allows it to NOT be called an income-based tax (since the employee by definition of the way the ER tax is laid never receives it as income) ... it is an artifice allowing the government to do the Looey-rithmetic I mentioned.
It's a neat way of raising more money from wage earners, doncha' think??
The ER is defined to be an amount equal to the EE portion which is 7.65% of the gross wage. The ER portion must equal that.First, what's "EE" and "ER"?
How do we really know what the FairTax would generate in total taxation? Isn't that a guess...maybe albeit an educated one?????
I dunno...help me out here.
TIA
See #118.
See #118.For what?
On this thread, yes it is since we're talking about both rates and distinguishing between them but are mainly contrasting and comparing the IT against the FairTax - which require tax inclusive.
On the AFFT website and many of the books, papers, and publications the distinction is made very clear. Your pretense to the contrary is nonsense as is calling it a "lie", etc.
The Kepner guy sounds like one of the SQL tribe from these threads.
So you can find out what EE and ER mean. And so you can find out how the 'rithmetic works.
By the way ... how do you make money on our current system?
tax lawyer? accountant? gov. worker?
You must not understand the Constitution. There's something known as the "amendment process," which allows for changes to the Constitution. If you don't feel that the 16th amendment gives the government the power to levy taxes on the public, I suppose you don't agree with the rights protected by the first 10 amendments to the Constitution, or any of the others, either.
Mark
Yes, by all means compare apples to oranges so that you can scare people into thinking that the NRST is really high compared to income tax rates. Why is expressing both types of rates in the same terms so people can compare them head-to-head not considered by you to be "honest"?
Absolutely not. Such a plan would make the income tax seem simple, transparent, and non-intrusive by comparison.
You deduct the $100,000 from the $200,000 in order to determine the amount of tax your company owes, right? Well, with the "Fair Tax," your corporate tax rate is 0. The tax you pay on supplies needed in the manufacturing of your products? 0. You would only pay taxes on those products that are actually used by your company as an "end user." Sort of the way that current sales taxes are computer for most states. For instance, you don't pay sales tax on things you're going to resell, however the office supplies that you use, you will pay the sales tax on. Same idea.
Mark
Ditto. I much prefer to use tax-exclusive for implementation purposes, because separate tax-exclusive rates add up, whereas separate tax-inclusive rates don't (the overall tax-inclusive rate is less than the sum of the tax-inclusive rates). So when adding on a state and/or local sales tax, the tax-exclusive form is much easier to deal with.
Tax-inclusive rates, on the other hand, allow the sales tax to be compared to other types of taxes (specifically, income taxes) on even terms, since those taxes are represented as tax-inclusive rates.
U.S. Constitution; Article 1, Section. 8, Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
The income tax and the NRST are both classified as excise taxes, which fall under this heading.
How? Is there some sort of black magic that occurs??? How do the taxes going into the pockets of employees reduce the cost to the employer. This makes no sense. Employees have to take a PAY CUT, there is no other way around it. It is not even a debatable point.
He wasn't making a comparison, he was making a statement about what the sales tax rate would be. To 100% of the people not familar with the fair tax rate, it is intentionally misleading. No one could possible understand you mean a tax-inclusive rate. There are some points I can't believe you guys argue.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.