A Fair Question about Fair Tax

August 3, 2005 | RobFromGa

[RobFromGa]

A simple question...

So, under the FairTaxI get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month. And businesses pay no taxes.

Where is the extra money coming from...

What is wrong with this reasoning below?

1. Right now the government collects $X in the form of all taxes.

2. All taxes are really paid for by consumers in the end result, either directly, or in the cost of their purchases which allow businesses to collect money in order to pay taxes. Companies do not really pay taxes they jsut collect them and pass them on.

3. The FairTax will collect the same $X per year in the form of taxes but using a different method.

4. Under the FairTax, the price paid for goods will not rise because getting rid of all the taxes built into goods will cause the prices to drop, then the FairTax will add onto the new lower price, resulting in the same price paid by consumers.

5. So, for a given taxpayer, shopping (consumption) will be revenue neutral. Ie. Prices are the same as before.

6. And each given taxpayer will get a "prebate" check every month that they are not getting now.

7. And each taxpayer will pay no taxes on capital gains, or on savings.

8. And, each taxpayer will no longer pay any taxes on income, or payroll taxes.

9. And, there will be no Fair Taxes on any purchases made for a business.

Are these all true so far?

Again, I get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month.

Where is the extra money coming from???

[ancient_geezer]

Nope. I support neither the current tax structure nor this proposed structure that just ends up feeding an out of control beast with an insatiable appetite. Odd how you missed the several times I stated that so far.

That's fine, hope you have a good plan to support then.

At the risk of repeating myself, I'll state it again, NO TAX REFORM WILL WORK UNTIL UNTIL THE OUT OF CONTROL FEDERAL SPENDING IS BROUGHT UNDER CONTROL.

I understand, you don't support the current system, you just don't support any tax reform that might address problem in the tax system because your Congress Critters repersenting you buy votes from the electorate.

Fine, now just what do you figure is going to cause congress to change its behaviour as long as over half the electorate does not perceive having to participate in paying the butchers bill for all the largess they demand from government.

A National Retail Sales Tax places the cost before each and every voter.

Under a single stage, single rate, ubiquitous tax system such as the NRST, it is in everyone's interest to assure that government is restrained in what it does; thereby constraining the burden of each individual to that which is minimum in regard the whole federal voting base not just a small group of local partisans showing up on special elections enacting bond issues and the such while most default for lack of interest in local politics.

The federal NRST hits everyone with the same rate at the retail register on all new goods and services. Increase the tax rate in a federal retail sales tax, everyone gets the the same percentage on those products they purchase and is not isolated to any single group.

Logrolling works when everyone has a common stake in the outcome.

Don't see how keeping the current system in place is going to do a thing for creating the necessary push from the American electorate to remove the Congress Critters propensity to buy votes from their constitutencies by offering freebees that that other guy behind the tree gets to pay for.

In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other.
-Voltaire (1764)

"It's like me in the restaurant: What do I care about extravagance if you're footing the bill?"
Walter Williams

As attributed to University of Edinburgh University History professor and Scottish jurist Sir Alex Fraser Tytler (1742-1813). by John Bagot Glubb :

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

 

Per-Capita REVENUES

Don't see your plan leading us anywhere but more of the same for the next 100 years

Remember the phrase, a government of the people, by the people and for the people? We don't have that as long as we allow our elected official to mandate to us what we can and cannot do. It's supposed to be the other way around.

And just who is it that keeps putting these Congress Critters buying votes in office?

Right now the bottom 60% perceive little to no "Individual Income Tax" burden,(in many cases even a handout) 70% of the public clamor for more from government seeing the top 40% of income earners/producers to foot the bill.

No tax reform, guess what, no end to spending.

[JOHN W K]

Well guess the founders were socialist friendly then, as any tax revenue can be used to support socialist causes, including your "direct tax" proposal.

Funny that I do not find any grants of power for tax revenue to be appropriated to socialist causes in our constitution. Perhaps you need to take a trip to Pearl Vision.

Sorry, your poor attempt to attach the FairTax retail sales tax system to socialist intents is plain foolish.

But I haven’t attempted to attach the Fair Tax to socialism. It does that quite handily all by itself with its family consumption allowance which extends the tentacles of socialism to every household in America, and creates a new army of voters dependent upon a monthly government subsistence check, which socialist in Congress like Senator Ted Socialist Kennedy will promise to increase during election time to remain in office, just as is now done with social security, aid to unwed mothers, federal minimum wage, Pell Grants, and etc. Give me a freaken break old man, wake up an smell the coffee.

JWJ

[ancient_geezer]

My apologies, in my tired state I misidentified it as Administering Secretary. The actual phrase used some 91 times is either Administering Authority or Administering State.

I'll try not to be so foolish from now on

That's good, only problem is the "Administrering State, and "Administering Authority" is not a federal agency, it is your state sales tax administrator, or whatever they call the office that administers state sales taxes in your state as they will be collecting the FairTax in parallel with their own sales taxes in their states.

All FCA sales tax rebate forms are submitted to them same as sales tax returns from retail businesses, the state agencies pass on the information to the Social Security Administration that tracks SSN with personal data today and provides for payment of the sales tax rebate under the legislation.

Now where is the new bureaucracy you are worring over. The federal IRS is disbanded, taxpayer records destoryed, and states take over adminsteration of the national retail sale tax in parallel with their own sales tax collections that exist today.

[DakotaRed]

Perhaps you will show us just where this is required by the Constitution.

Perhaps I am just a dumb aging Southern Boy transplated out of the South and nowhere near your par. I could have sworn the XXI Amendment stated the following;

Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.

Silly me, I guess that only applies to repealing certain amendments.

[ancient_geezer]

Funny that I do not find any grants of power for tax revenue to be appropriated to socialist causes in our constitution.

Hmm last time I looked the Constitution states that excises are to be collected for payment of the nations debts, common defense and those costs incurred under excercise of the enumerated powers.

Since the NRST is an excise under the constitutional meaning of excise as an indirect tax on commerce. you have a bit of a stretch in invalidating it on that basis.

Your direct tax proposal can be used to finanance any number of socialist projects that Congress manages to come up with, so it too obviously must be socialist as well.

Seems to me the way to address unauthorized socialist causes, to remove the socialist causes by removing the Congress Critters that favor such seeing as we don't seem to be getting anywhere removing bad law via the courts. Or is that to difficult for you to contemplate?

 

But I haven’t attempted to attach the Fair Tax to socialism. It does that quite handily all by itself with its family consumption allowance which extends the tentacles of socialism to every household in America, and creates a new army of voters dependent upon a monthly government subsistence check, which socialist in Congress like Senator Ted Socialist Kennedy will promise to increase during election time to remain in office, just as is now done with social security, aid to unwed mothers, federal minimum wage, Pell Grants, and etc. Give me a freaken break old man, wake up an smell the coffee.

I guess you don't like tax refunds either, since that is all a sales tax rebate is. The FCA as a sales tax rebate paid on a basis of household covering a specified level of taxation regardless of income, wealth.

When you can find a way to replace the Congress Critters supporting socialist ways of doing things, like buying votes from constitutents. Go for it. Until you do, figure that any enactable tax system will accomodate the poorest level of the economic ladder either by a system of rebating taxes, exempting sources of taxes, or by excluding taxes on essential products that poor folks buy. All of which are means of lowering the the tax burden on the poor at the expense of the rich. Pure socialism in your terms, and practiced from the earliest days of this nation in the selection of item to be taxed (e.g. luxuries purchased by the rich and similar dodges) or by taxing land owners rather than those not so blessed. Guess the founders were socialist's too in that regard.

Sorry don't buy into your trip. You can support the guchi gulch lobby way of selectively exempting persons or items from taxation to create the same preference for the poor, or treat everyone and all objects of taxation identically and and assure that no one pays for taxes at that level that is necessary to the maintenance of life, i.e. one of those unalienable "rights" spoken of by the founders that should not be taxed by government.

[ancient_geezer]

Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.

Silly me, I guess that only applies to repealing certain amendments.

Well, since we are not discussing the repeal of the 16th amendment until after implementation of a viable tax system as an alternative to the current income tax system, that is rather useless. Especially seeing as that has been attempted many times across the last century to no effect. We still have the 16th amendment inplace, no one has had the gumption to replace the income tax statute without a viable alternative in place yet.

Sorry if one does not learn from history, they are bound to repeat it. You can wait for your amendment. I'll continue to work to repeal the statutes and then see what we can do about repealing the 16th when it becomes obsolete.

By the way by your sights,

"NO TAX REFORM WILL WORK UNTIL UNTIL THE OUT OF CONTROL FEDERAL SPENDING IS BROUGHT UNDER CONTROL."

Repealing the 16th is just a part of tax reform, doesn't address what you state as your goal. You had better get out there and figure out how to stop all them Congress Critters from deficit spending and buying votes first.

[DakotaRed]

Sorry if one does not learn from history, they are bound to repeat it

Correct! And given how our modern legislatures just freely throw our money around and don't ever actually repeal any taxes, you wish to trust them with repealing the 16th Amendment AFTER giving them even more taxes to play with?

You had better get out there and figure out how to stop all them Congress Critters from deficit spending and buying votes first.

Here again, you haven't been reading. My call to educate people about this is to stir a major tax revolt to force curtailing of spending. Once spending is under control, I might even go along with a National Sales Tax of a more realistic amount.

Simply changing how the same amount of taxes, with the possibility of even more taxes being levied after 2007, (see section 101, b 2) doesn't bring relief to anyone. It just keeps the status quo going.

[ancient_geezer]

Correct! And given how our modern legislatures just freely throw our money around and don't ever actually repeal any taxes,

Repealing taxes is accomplished by repealing the statute. Stange what every happened to all those 40% tarriffs that were repealed and replaced with the adoption of the federal income tax.

you wish to trust them with repealing the 16th Amendment AFTER giving them even more taxes to play with?

If the American people want the 16th repealed enough to push for it, it will be. It is up to the American electorate and always has been. Congress Critters don't just show up out of thin air, they come from the public that sends them and re-elects them.

Here again, you haven't been reading. My call to educate people about this is to stir a major tax revolt to force curtailing of spending. Once spending is under control, I might even go along with a National Sales Tax of a more realistic amount

Go ahead, most citizens have paid but minimal income taxes in the history of the income tax, most citizens don't pay income taxes now, you figure more not paying taxes is going to cause government to cut spending. You figure to beat these numbers?

Bush touts relief as tax day looms

Another 3.9 million Americans will have their income tax liability completely eliminated, officials said.

Your plan just assures that government keeps right on doing what it knows best, the same old thing, deficit spend and increase the enforcement bureaucracy just like it has with every yahoo running around promising tax revolts the last 92 years:

"A hand from Washington will be stretched out and placed upon every man's business; the eye of the federal inspector will be in every man's counting house....The law will of necessity have inquisical features, it will provide penalties, it will create complicated machinery. Under it men will be hauled into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the tax payer. An army of federal inspectors, spies, and detectives will descend upon the state."
-- Virginian House Speaker Richard E. Byrd, 1910, predicting the consequences of an income tax.

 

Simply changing how the same amount of taxes, with the possibility of even more taxes being levied after 2007, (see section 101, b 2) doesn't bring relief to anyone. It just keeps the status quo going.

Nice assertion however others disagree: Return control and first option on how ones income is utilized by the individual before government is key to any reform of contol of the citizen over the government supposedly set in place to serve.

Patrick Henry, Virginia Ratifying Convention June 12, 1788:

• "the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people.

 

 

Federalist #12:

• "The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury."

Federalist #21:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

"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.

Impositions of this kind usually fall under the denomination of indirect
taxes, and must for a long time constitute the chief part of the revenue
raised in this country. . Those of the direct kind, which principally relate to land and buildings, may admit of a rule of apportionment." (Emphasis added).

[Bigun]

I don't know about you, but a one year old car for $35,000 is a lot more attractive than a brand new car costing $38,000 with $11,000 dollars National Sales Tax added onto it. Same with a house.

See if you can get your mind wrapped around this concept my friend. The retail prices of cars and houses today have, HIDDEN in their retail prices, ALL the taxes and the costs of dealing with those taxes of every set of hands that touch the manufacturing process of those items. Once the fairtax is in place and all that disappears the retail prices of new cars and houses won't be much different than they are today WITH THE SALES TAX INCLUDED!

[Bigun]

I keep saying that nothing will bring true relief until we can regain control of spending out of Washington.

And I'm all ears waiting to hear your SPECFIC proposal(s) for getting that done!

[Bigun]

For something so simple, I wonder why the bill alone is some 133 pages (on pdf) long...

Hmmm?? Could it be that it has to be that long becuse what it is seeking to replace is in the neighborhood of 60,000 pages?

[pigdog]

That's a bunch of blather, John. There's no "shameful kneeling" to any "fist" - iron or oatmeal - and no "new army of voters" either for the prebate.

EVERYONE who is a legal resident and has a SSN is eligible to receive the prebate if they wish - no matter what "class" they may be in. Stop the Communist rhetoric, please.

[pigdog]

Well, D.R., I'm not sure by "paying it" but I assume you mean the prebate - once registered. What do you see as incorrect about that?

You've made in apparent you're a big disciple of John WK & his notions, but lets read the bill with a bit more understanding and thought, shall we? The "registration" amounts to pretty much what is already done with the SSA - who is the administering agency of the prebate. They don't necessarily "write checks" either as many government payments are now done via wire transfer directly to bank accounts. So it not a "mew administrative arm" at all.

And the IRS is, indeed, eliminated as are the income tax records.

[pigdog]

That's more nonsense, John WK. Did you send your 16th wording letter to John Linder yet?

[pigdog]

Uhhh - D, R, - we're not discussing the requirement to repeal, but the tax system.

[groanup]

Were we not warned by Hamilton in Federalist Paper 79 that “A POWER OVER A MAN’s SUBSISTENCE AMOUNTS TO A POWER OVER HIS WILL”?

Absolutely. And since the income tax directly affects the ability to acquire subsistence we should eliminate it and insutitute a consumption tax that gives one a CHOICE.

[pigdog]

Sorry, D. R. - the rate specified in the HR25 bill is actually 23% - ant that's tax inclusive. That t.i. rate allows one to compare it to income tax rates which are also t.i. Tax exclusive rates are frequently used when discussing state sales taxes applied to over the counter sales. That's not what we're discussing here, but the FairTax bill itself - which states a 23% rate (though that may possibly decline before passage).

If you wish to use t. e. rates, then the correct such rate would be 29.87% calculated from the 23% t.i. rate ... but the 23% rate is the base to calculate the t.e. rate from. A lof of people merely round it off to 30 so that it sounds higher and some just do so because their opponents can' understand anything except integers. Just wanted to clarify that point.

[pigdog]

There's no "slieght of hand" and that's not what the bill says, D. R. I suggest you read it more attentively.

And getting a new tax bill that will offer some help in controlling spending by the consumer controlling his consumption choices is certainly the right was to do it.

The other approach has not worked in the last 100 or so years, it seems.

[pigdog]

And you seem to miss the point that the underground economy is not going to be able to do some sort of wholesale evasion of the FairTax - it'll be there in everything they buy at retail except for some extremely rare (and short term) instances. The illegal economy will be contributing greatly to the tax revenues (which they aren't now) and that helps lower the burden on the rest of us. The "evasions" you have outlined will not be too successful or for too long as I pointed out.

Also you seem to be in denial about any tax cost component being embedded into prices. Generally, economists admit that prices are increased over what they might otherwise be because of increases caused by income taxes. You seem to not understand that and are looking within your own business for something that stuck out like a big, red-tagged item and said "tax and tax costs here" so you can "remove" them. That's not how it works and such costs are not tagged like that - but they are there. Many come in the form of increased prices of the things you buy for your business or your personal consumption. You obviously don't grasp what those sorts of costs are.

You can be in denial all you wish - which clearly you are by your "bull****" comment but you are paying those increased costs in everything you buy and it IS chargeable as a "benefit" of the income tax. We can argue about the amount all day long (and there are studies that show the amount to be in the 20-22% range despite what you've been told by the rest of the SQL crowd), but pretending they do not exist - or that they cost you nothing is only a dream.

Let's pretend that the embedded tax costs amount to 1/2 of the 22% ... even then you would be paying an amount of income tax or costs increased due to income taxes of $20,188 plus $127,485 x 0.11 = $14,023 for a total of $34,211. That's still a hell of a lot MORE (54% MORE) than with the FairTax of $22,263 - all using your unchecked figures.


So you just keep right on living in your economic dream world. I'll support the FairTax and see my tax burden lowered - as you would if you stopped to think.

[pigdog]

Are you trying to convince people that those in the illegal economy will buy all used items to save money???? If so, what do they do with the savings (including tax savings) - invest them in offshore drilling???

You know full well that most with illegal income LIKE getting the newest and best and certainly here many things that can only be bought new at retail. At any rate, though, the point remains that the illegal economy will "contribute" more to tax revenues with the FairTax than at present (when it contributes little or none).

That goes to help reduce the tax burden on the rest of us.