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A Fair Question about Fair Tax
August 3, 2005
| RobFromGa
Posted on 08/03/2005 4:51:43 PM PDT by RobFromGa
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To: pigdog
Please correct me if I am wrong.
Under the FairTax, If I went into Wal-Mart and picked up a new radio that had a $100 price tag, I would hand the cashier a $100 bill and walk out of the store. (Assuming no state sales tax). Wal-Mart would then send the Fed $23 and pocket the rest.
This is why it is being called an Inclusive tax since it is included in the retail price, not added above the retail price.
821
posted on
08/08/2005 7:58:43 AM PDT
by
Gvl_M3
To: JOHN W K
"1. It increases the revenue to the Federal Government."
Silly argument. It is revenue neutral when measured in static terms. When measured in dynamic terms, it would increase the revenue (assuming no subsequent rate reductions) because of the much faster growing economy. Please explain to me how a faster growing economy is bad for America.
"2. It increases the scope of the Tax and broadens its taxing power"
I'm not sure what this means. The FairTax taxes consumption, not the various forms of income that our current system does. The consumption base is, in fact, significantly broader than the taxable income base. Sooooo, taxing a broader consumption base is bad because ....?
" 3. It increases the ability for invasion of private property of individuals who purchase anything."
Incorrect. When was the last time you had your private property invaded because of a state sales tax issue? The poster should check out some websites on the abusive tactics of the IRS.
" 4. It eliminates the pitfalls of income tax Fraud by the Federal Government against the defense of private citizens under due process in courts of law."
Again, not a very lucid or articulate expression. Due process does not exist in tax courts today. You are guilty until proven innocent. That would be eliminated by the FairTax.
"5. It eliminates all tax exemptions of businesses in America while shifting the burden of taxation onto individuals."
Nonsense. Only individuals pay taxes now. That has always been the case and always will. It doesn't just eliminate tax deductions for businesses - it eliminates the taxes that those deductions are taken against. The poster seems to be opposed to eliminating deductions for businesses (which would have the effect of raising their taxes) while at the same time being opposed to eliminating taxes on businesses. Sounds like an SQL to me.
"6. It puts every citizen onto the socialist payroll"
Incorrect. It provides the fairest and simplest way to ensure that the tax system is not regressive. The research that went into developing the FairTax revealed that the American people were strongly opposed to a regressive system. Do you consider the tax refunds that some Americans get at the end of the tax year to be "socialist"?
"7. (Since it doesn't mandate the repeal of 16th Amdendemnt) it legalizes a direct tax on people's property without provisions of apportionment."
It can't mandate the repeal. The repeal bill is separate and is supported by FairTaxers. In fact, its primary sponsor, Rep. Steve King (R/IA), is one of the FairTax's strongest proponents. In fact, the 16th amendment legalized a direct tax without apportionment. The FairTax is the only politically realistic way to get the 16th repealed. Every other legitimate tax reform proposal that I am familiar with would require the perpetuation of the 16th, thus a continuation of what the poster is objecting to.
All in all, one of the sillier attempts to bat down the FairTax that I have seen. I would prefer that the poster give us their REAL objections, such as, "my son is an IRS agent and he would have to find productive work to do". "I have spent years figuring out how to game the current system and now that I have, you want to change it to one that will be much harder to game?" "I make my living selling imports and now you want to put US producers on a level playing field with foreign producers?"
822
posted on
08/08/2005 8:00:46 AM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: JOHN W K
"But the Boortz assertion that 'It doesn't matter that paying taxes will be voluntary under the Fair Tax plan' is only unassailable if, and only if, the necessities of life and supplies necessary to conduct business are not taxed under the Fair Tax plan. But they are taxed, and to conclude as Neal Boortz and you do, one must pretend that starving ones self to death and the shutting down of Americas businesses and industries is a rational approach for Americans who wish to choose to avoid paying the voluntary tax on the necessities of life and supplies necessary to conduct Americas businesses. And so, we list this assertion of Neals, and yours in the MYTH column where it rightfully belongs."
You don't agree with the way the FairTax approaches the definition of "necessities" by way of the prebate. Fair enough .... give us your definition of "necessities", please.
823
posted on
08/08/2005 8:05:52 AM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: DakotaRed
"I thought this was supposed to be a "simple" method of taxation?"
In its curent form, the FairTax bill is less than 200 pages and it replaces a system which, according to CCH, has now grown to more than 60,000 pps. In relative terms, there is no doubt that the FairTax qualifies as "simple".
"Why not just simply mention to potential supporters it is actually 30 cents on the dollar?"
I always explain the tax inclusive/exclusive issue to people when I explain the proposal now. As far as your suggestion, the 30 cents on the dollar depends on which dollar you are comparing it to - the pretax price of the item, or the total aftertax price. The reason that we don't just call it a 30% sales tax (as the SQLs would love) is that it leads to the misunderstanding that the same taxes paid under the FairTax would be at a higher rate due to the historical differences in rate calculation. It would introduce a subtle bias in favor of income taxes into any analysis, which is, of course, exactly what the SQLs want.
824
posted on
08/08/2005 8:14:43 AM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: JOHN W K
"A.G. wrote: You do have at least one sponsor and a bill introduced into the House or Senate don't you?"
"Cant seem to find anyone. Sorry, they all seem to be signing on to your plan......."
Sounds like a little bitterness there, misplaced though it is. The last time I checked, the FairTax only had one sponsor in the senate and fewer than 40 in the house. That leaves 99 potential sponsors in the senate and almost 400 in the house .... and that assumes that none of the existing FairTax sponsors could be persuaded to back a competing proposal. In fact, several of our sponsors are signed onto a flat tax bill.
If your proposal is going nowhere in congress, it certainly isn't because of the FairTax.
825
posted on
08/08/2005 8:20:16 AM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: Gvl_M3
Correct!
And the price of the product, the amount of the tax, and the tax inclusive rate involved are specified on the receipt.
The merchant makes a two line report each month and sends your tax and the others collected to the state sales tax agency - and is well-paid from the tax funds for doing so. There is no unfunded mandate on the retailer as at preesent.
826
posted on
08/08/2005 9:19:15 AM PDT
by
pigdog
To: lewislynn
That's garbage and you know it, Looey. You SQL types are a case apart, that's for sure ... apart from reality, that is.
827
posted on
08/08/2005 9:21:25 AM PDT
by
pigdog
To: lentulusgracchus
If a particular practice is universal in an industry there would be little competitive pressure to change. If, however, the practice is not widely done, your discriminating retailer wouldn't remain in busiess too long with the same set of employees.
That's what happens with marketplace competition. It is your evaluation that needs some alignment since you've done nothing to convince anyone that the practice you cited is an any way universal.
828
posted on
08/08/2005 9:26:22 AM PDT
by
pigdog
To: lentulusgracchus
Breathing and oxygen use are involuntary. Consumption is not (except for a few people, it seems - and perhaps you're one of those).
Consumption and the timing and type thereof are VOLUNTARY.
As for used goods, the market itself will level out that particular playing field.
829
posted on
08/08/2005 9:29:04 AM PDT
by
pigdog
To: Gvl_M3
This is why it is being called an Inclusive tax since it is included in the retail price, not added above the retail price.
It is indeed tax inclusive as the tax rate is with regard to gross payment (including the federal retail sales tax) for the product as is clearly stated in the bill:
H.R.25
Fair Tax Act of 2005 (Introduced in House) http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.25:
`SEC. 2.(a)(5) GROSS PAYMENTS- The term `gross payments' means payments for taxable property or services, including Federal taxes imposed by this title. `SEC. 101. IMPOSITION OF SALES TAX.
`(a) In General- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services. `(b) Rate-
- `(1) FOR 2007- In the calendar year 2007, the rate of tax is 23 percent of the gross payments for the taxable property or service.
- `(2) FOR YEARS AFTER 2007- For years after the calendar year 2007, the rate of tax is the combined Federal tax rate percentage (as defined in paragraph (3)) of the gross payments for the taxable property or service.
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830
posted on
08/08/2005 9:44:49 AM PDT
by
ancient_geezer
(Don't reform it, Replace it!!)
To: lewislynn
831
posted on
08/08/2005 10:00:10 AM PDT
by
rwrcpa1
(April 15. Let's make it just another day.)
To: All
Regarding wages...
I currently have a contract signed by myself and my employer that I am to be paid $50,000 annually (for purposes of example). Now, out of that comes all of my taxes, 401k, insurance, etc.
It is my understanding that the passage of the Fair Tax will in no way change the contract that exists between myself and my employer. All that will change is the amount of my check will not be subject to any federal tax withholding.
I guess I could negotiate with my employer that since they are no longer paying for my payroll tax, that they should increase my salary, but I don't expect that to happen.
Am I understanding this correctly?
832
posted on
08/08/2005 10:34:16 AM PDT
by
Gvl_M3
To: Gvl_M3
Regarding wages... I currently have a contract signed by myself and my employer that I am to be paid $50,000 annually (for purposes of example). Now, out of that comes all of my taxes, 401k, insurance, etc. It is my understanding that the passage of the Fair Tax will in no way change the contract that exists between myself and my employer. All that will change is the amount of my check will not be subject to any federal tax withholding. I guess I could negotiate with my employer that since they are no longer paying for my payroll tax, that they should increase my salary, but I don't expect that to happen. Am I understanding this correctly? That's a pretty fair assessment. For those reasons, I usually assume that the "employer's share" of payroll taxes will be used to reduce production costs, rather than be paid to the employee. Of course, there's nothing stopping an employer from increasing wages, but that has to take competitive market factors into consideration.
833
posted on
08/08/2005 10:36:40 AM PDT
by
kevkrom
(WARNING: If you're not sure whether or not it's sarcasm, it probably is.)
To: Gvl_M3
"Am I understanding this correctly?"
Yes, you are.
834
posted on
08/08/2005 11:47:44 AM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: pigdog
Sorry, but the comparison is deceptive, to say the least. We currently don't pay income taxes on every single purchase. So, comparing the rate to income taxes and trying to make it sound like it's a regular sales tax to the masses will lead them into a lot of anger once they approve of this and see what it really will cost them.
Like I said, you are selling this white elephant to the American Public who thinks in a certain manner, from years and years of being guided that way. All of sudden, you come before them with a new proposal, new thinking and obscure actual costs by legalese. You want a really pissed off public, just keep obscuring the real costs to this, especially taxing bartering and employee discounts above 20% (also in the bill).
You tell them it will eleminate the income tax and the IRS, but don't mention what will have to be set up to monitor, collect and enforce the new taxes, as well as ensure rebates are properly sent out. You tell them no papers to fill out, but right in the bill, one must register (by paper) to qualify and if there is a dispute, of course they must have paper proof they are correct. Businesses each have to register as a seller, no telling where that can lead, and ensure receipts are proper, taxes collected, appropriate amounts sent off to the state and ultimately off to the feds.
No, this stuff that is in the bill itself does not get mentioned by supporters or at fairtax.org, it's just another "trust me, I know better than you" scenario. Even fairtax.org admits that a one dollar item will actually cost one dollar and thirty cents with the new sales tax and calls that "23% INCLUSIVE." The average American doesn't bother with the little words added here and there, they trust people like you and in the end, the Public gets screwed over again.
To: pigdog
That's what happens with marketplace competition. It is your evaluation that needs some alignment since you've done nothing to convince anyone that the practice you cited is an any way universal. Very well. Some examples:
- In the 1980's (as I remember, and as reported in The Wall Street Journal at the time), a notorious lawsuit was brought against the California department-store chain, I. Magnin. Former employees alleged age discrimination. I. Magnin, they claimed, had been in the habit of executing a "reorganization" (a corporate event, in the parlance of HR) about once every ten years, in which employees over age 40 were all purged, for the purpose of reducing I. Magnin's outyear exposure to pension and benefits expense. I. Magnin replied that they hadn't done any such thing. In the courtroom, plaintiffs' attorneys put a responsible I. Magnin manager on the witness stand and asked the following question: in the history of the company (since the turn of the century, or about 80 years), how many I. Magnin employees had retired with full retirement benefits? After some hemming and hawing, I. Magnin popped the answer: two. The defense was destroyed, and I. Magnin lost the case.
- Sears, Roebuck lost a similar case in the 1970's. A personal friend of mine worked for Sears for five years until she made supervisor and got a raise. Then she got closed out in a "corporate event" in the mid-70's. The lawsuit was instituted a few years later.
- As I may have pointed out to you earlier, drilling contractors executed a successful salary hold-down in the 1970's through the 1990's. A group of them recently lost a court case within the last two years. The conspiracy against wages had been successful for 30 years, since enough of the companies were abiding by its (illegal) terms that they were able to enforce a common wage. The companies' concerted action drove many of their best people out of the industry as inflation ate the employees' ability to support their families, but the companies (obviously) didn't care. Wage cost mattered more. Cached 2001 news story.
- In the 1960's and 1970's, a broader effort at wage suppression throughout the petroleum industry was modulated by an entity called the Salary Board, an intercompany committee. In the 1980's, the wage hold-down failed because independent companies wouldn't cooperate and continued to offer market-clearing wages to young white-collar employees. The starting wage for a geologist flew up from around $19,000/year in 1980 to more like $30,000/year in 1983, just before the topping-out of the 1970's oil boom snuffed out demand, and the bust began. Starting wages, however, didn't suffer a great deal of retracement, although some opportunistic situations occurred in which out-of-work veteran geoscientists were rumored to be working for a short-term contract rate of around $9/hour, or a nominal $18,700/year annualized, on an unnamed project.
After the Federal Trade Commission began looking, during the first Reagan Administration, at anticompetitive practices in white-collar wages (looking also at professional associations' codes of conduct for non-compete provisions), the Salary Board was discontinued, and the intercompany information exchange was delegated to a private company, Hay Associates, which "consulted" to the former Board member companies on industrial wages.
Those are a few examples that I happen to know about. These situations obey two general rules of thumb: the first, articulated more than 200 years ago by Adam Smith, is that businessmen will always try to combine against the markets, to leverage prices or costs. The second, articulated within the last 12 years by Milton Friedman, is that managements will always try to find marginal profits creditable to their own performance in their wage costs: or in other words, they will attempt endlessly to rummage in their employees' pay packets because, as a former boss told me with blunt honesty 31 years ago, "I want the money."
Combine those two concepts, and you have the universal tendency that I've argued persists among managements, to control labor costs by fair means or foul.
To: Your Nightmare
"75 economists. Big deal. That's probably fewer economists than graduate in one year from a large university."
But that exceeds by 75 the number of economists who have endorsed the Nightmare tax, doesn't it? :-)
837
posted on
08/08/2005 1:52:38 PM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: sitetest
"There are perhaps 20 million illegal aliens in the US. Many millions of them are working."
Indeed they are. Many, perhaps most of them, work for cash and don't pay payroll or individual income taxes on them. They would go from a tax preferenced position (since the only taxes many of them pay are the imbedded taxes on their consumption) to a tax disadvantaged one (since they would be paying at the register, but not receiving the rebate).
"The basic reporting requirement for a retailer is for a 2 or 3 line item report once a month along with payment of the tax receipts."
"I don't even have this level of intrusion, now. We have to have ADP send off a check for withholding every pay period, and we have to file our quarterly employer's report every three months, but we'll have to send off the quarterly report anyway, as reporting of wages isn't going to go away.
So, now you're forcing me to fill out a monthly report that I don't currently have to fill out! Where is my compliance going down?"
So your primary yardstick for measuring compliance costs is frequency of reporting? Does it not matter at all that sales tax reporting is trivial compared to payroll taxes or income taxes?
"And why do you think that, in order to avoid a THIRTY PERCENT TAX, there won't be informal retailers who bring merchandise to the market without the tax?"
What are "informal retailers"? Studies have shown that a very large proportion of retail sales take place at the level of the Wal-Marts, Targets, etc. I have heard some SQLs forecast that shopping centers will go dark while black-marketeers will set up shop off the back of trucks in their parking lots. As if that type of activity would be difficult to detect and stop!
Geez, if I am a cop and I am driving around a mall and I see people lined up at the back of a truck, don't you think I might be able to figure out what is going on? Especially if they are hauling away refrigerators and sofas?
"Well, get ready, his mortgage payment on his house is about to increase 30%!! So, too, will his homeowners insurance!! As well as the costs of all the food, clothing, and private education for his five kids."
Why will his mortgage payment and his kid's education go up? That isn't the FairTax you are referring to. Heck, it isn't even true for ALL his food and clothing costs. In fact, to the extent that those purchases are made up to the poverty level buying US produced goods, those costs will actually go down.
"Their twenty-year recession probably would have been a complete economic collapse if they'd have moved entirely to consumption taxes, and completely gotten rid of the income tax."
"I see no reason to take the risks associated with this program when it appears inevitable that the supposed simplicity of the system will be legislated away in a relatively short period."
"The so-called "fair tax" will do little, by way of compliance, than shifting it from compliance with the income tax to compliance with the national sales tax."
You certainly have an abundance of opinions, none of which appear to have any support that we can identify.
"More likely, more folks will flee to an underground economy, to save the dough, and with them, they'll take their state sales taxes, as well."
Certainly a legitimate concern. There will undoubtedly be a different set of compliance issues that we have to deal with with a sales tax than we have had with an income tax. However, with approximately a 99% reduction in the complexity of the system being administered and a 90% reduction in the number of points of collection/enforcement, it is inevitable that we will have a much higher level of compliance with much lower resources committed to enforcement.
The FairTax isn't perfect - it is simply much, much better than the existing system and any of the alternatives proposed so far. If someone comes along and develops the perfect system, many of us FairTaxers would support it. However, since there is no telling how long that process might take, it seems prudent to convert now to the best alternative available at this point in time.
838
posted on
08/08/2005 2:35:01 PM PDT
by
phil_will1
(My posts are in no way limited or restricted by previously expressed SQL opinions)
To: Your Nightmare
Well, Nightie, I have a very good idea of what Out Of Context means since we so frequently encounter it from you and Looey. It's obvious you don't, however, so here is an example of that very sort of thing:
http://home.austarnet.com.au/stear/creationist_out_of_context_quotes.htm
Claiming you "don't do it" is hardly credible to many readers who have seem much of your posting manipulations on these threads. That's sort of like the little boy telling his Mother that he "didn't break that window" while trying to hide the baseball bat behind his back.
Perhaps instead of Out Of Context they should be called "Selective Partial Quoting"??? I sort of think OOC has a nice ring to it so I'll keep calling them that. You're welcome to call them SQL Honesty or any other name you prefer.
#2 (Koltikoff testimony):
In the OOC bit you originally posted, BOTH sentences which you now list as different assumptions were highlighted. Both have to do with the same basic assumption he mentioned in the first sentence posted. They are certainly are not separate, unrelated assumptions but are together as an explanation by the author as to why he makes statements in APPARENT opposition to the sales tax and that is why he uses the words "assume" and "if" - they are suppositional and not statements he is making as a definite certainty. If the words "assume" and "if" weren't there you'd like it much better no doubt but the are there and your attempts to slither around the point are pretty lame - especially in view of the author's views as expressed in the Conclusion (which you, of course, didn't post).
And certainly the Conclusion IS quite germaine to the content of the paper (as well as the meaning of the snippet posted) since the author would hardly be so obviously strongly in favor of a tax plan that had the effects you try to make us believe it has by your use of the the OOC snippets. It's easy enough to see why you didn't post it, however ... you even are still trying to swerve the meaning around by saying it was only the price level in general being discussed in OOC (and the rest is "irrelevant") - but that was a theoretical speculation in an aside to show his underlying assumptions for the comment (and the "if" in the next sentence part of that as well).
Irrelevant if he REALLY thinks prices go up (as you pretend)?? Folderol - it's anything but; but you'd
certainly like all to ignore it as it destroys your obhjective.
REFUTATION #2 stands.
#3 (Gale refutation):
What is one to make of this????
"First, I didn't say you quoted them. Second, you most certainly did quote them."
I shudder to think what might be third with those 2 back-to-back bits of contradictory nonsense.
"I'm glad you are admitting that you changed what they said."
"Admitted" no such thing - I did not change their meaning but was restating it separately for emphasis as my own comment. Their meaning is as they stated it, also, and is not changed.
The responders didn't say that prices would drop, etc??? (your claim). In fact, the responders NOT ONLY said prices would drop with the onset of the new tax, but also that they would then go back up a bit due to the effects of the tax - all of which is quite correct.
"Gale completely overlooks the fact that prices would drop with the onset of the FairTax as the responders point out." After this price drop, prices would then be raised up again to some degree by the sales tax which is the meaning of their statement "... prices will increase by the amount of the sales tax but returns to labor and capital will be higher."
He (Gale) "... states that income taxes are clearly incorporated in the price of goods that are bought and sold. This means that when they are repealed, producer prices will come down as research conducted by Harvards Dale Jorgenson suggests."
They are pointing out that Gale is wrong, not "inconsistent", your characterization notwithstanding.
As for your "They didn't say "prices would drop with the onset of the FairTax" before "prices will increase by the amount of the sales tax but returns to labor and capital will be higher." You quoted out of context."
Hardly, since just above it was shown that (using Gale's name in vain) the authors DID say that and a few sentences later in the discussion of the same subject they also said:
"If the sales tax is fully incident on consumers, then prices will increase by the amount of the sales tax but returns to labor and capital will be higher".
That was shortly after the earlier passage saying that prices would drop so the lie is put to your claim quite clearly. But, hey, maybe you're just "inconsistent" like your hero Gale, eh?
"Inconsistent"??? A handy liberal/SQL euphemism for "wrong" - or so it seems. You are now pretending that saying two completely different things does not mean that one of them is wrong; merely "inconsistent"??? Balderdash.
Gale has said (on one side of his "inconsistencies") that income taxes are "clearly incorporated in the price of goods that are bought ..." and claimed the opposite elsewhere. Are we to pretend that one of these is not wrong, but merely "inconsistent" so that he is not wrong, somehow??? Then too, how are we to know which position is "right"? Take your word for it ... with your track record, I don't think so, Nightie.
But perhaps you're trying to tell us that if income tax effects are embedded in prices as Gale has said then, when removed, prices would go up??? Really???
Not insert your opinions when you quote?? Perhaps not inside the quote, but the OOC technique is very dependent on that very thing (and often on highlighting only selective things) which is basically the same thing to make sure one's attention becomes drawn to the interpretation desired by the poster. If you'd leave off the idiotic highlighting you might have more of a leg to stand on, but with it you're way out in left field as you are very much attempting to direct and influence the interpretation of what is posted. Yet you continue to pose as some sort of innocent and omniscient bystander.
Sure Nightie, you know it all and the FairTax has only defeciencies and downsides and all of the economists and others that support it are a bunch of ninnies, etc.... well, we've heard all those sorts of broadsides before (and
actually long before you came on the scene to do nothing but attack).
REFUTATION of #3 stands
#4 (Real Estate):
Here I made an error in that I used the term "housing prices" when the correct term should have been "cost of housing" (since that's what the article and footnotw are about). My apologies.
With that correction, one can see from the chart presented just before the text applicable to footnote "/13" that Figure 1 is discussing purchasing a house under the present system and the FairTax system. In fact the Figure is entitled "Cost of Purchasing a $150,000 house" and the associated text (paragraph [38]) is the one that contains the footnote in question.
Also before we continue, it should be noted that, yes the authors did misapply the wrong tax amount to the FairTax purchase but the total $10,000 does not change the overall picture to an great degree. And, in fact, that change was noted and mentioned in about the 1998 time frame (from memory) when this article was first posted on FR (with permission of the author and the publisher both). At that time the author requested the difference be noted though it was not material to the outcome. Nightie's finding it and highlighting is really more funny than anything. Had he followed the example he'd have seen it changed the outcome only a small amount.
The article illustrated what the price of a given home at a specific base price (without taxes, etc.) required in the way of earnings to purchase under the different tax systems. this is not, directly the "price of the house" but it certainly illustrates how much more costly is is to buy one under the income tax and the FairTax. The text also explains how the buyers are considerably better off financially. It is not consumer PRICES here that are the point of interest, but consumer COSTS ... i.e., how much that must be earned to buy a house of a given price under each system. If you follow the Figure 1 and reelated text, it is quite clear that the buyers are greatly helped under the FairTax.
SO - sorry for my error, but the principle still remains - the FairTax is much more helpful to consumers than the present system. In fact it is best summed up by paragraph [39} which says:
"[39] In short, homeownership under the Fair Tax is vastly more affordable." and that's even with the small error in applying the tax rate.
Most people, I think, would believe that the cost of ownership of a home would pretty closely relate to the term "home prices" so the article really is about home prices in that it includes all the factors of costs in home purchasing. I suggest you read it.
Just as we saw in refutation #3, the same price reduction mechanism applies which would then be raised back up somewhat by th FairTax, but the article is much better in that is assumes a home base price remains the same (rather than drop) and how -EVEN THEN - the buyers are much better off under the FairTax.
The part of footnote /13 you SHOULD have (but didn't) highlight was :
"The real purchasing power of wages will undoubtedly ncrease considerably over time because of a larger capital stock (increasing productivity), microeconomic efficiencies caused by a more efficient allocation of scarce resources, and higher productivity from lower compliance costs."
As it is there was some text just preceeding the footnote that would also have been helpful (but not to your cause)"
"These two factors would save our couple over $148,000, which consists of $97,335 in additional wages and $50,913 in reduced interest costs. If we were just to consider the interest rate reduction, the cost of homeownership would be $337,487, or 25.7 percent less than under current law. Our homebuyers would also have $97,335 more in income over those 27 years with which to purchase the home. /13/"
And while you noisily claim that the paper is not about house prices, we find the following starting in the very next paragraph, [40}:
"[40] Most of the studies indicate that home mortgage interest rates will fall by 25 to 30 percent (i.e., about two points on a 30- year conventional mortgage). A legitimate question is "why?"
[41] The answer is that current mortgage interest rates include a tax premium, which is the amount lenders pay in taxes on the income received. The magnitude of the wedge can be seen by comparing the interest rates on taxable bonds to tax-exempt municipal bonds of comparable risk and term. The impact of eliminating the tax wedge or tax premium on interest is evidenced each day in The Wall Street Journal. Tax-exempt municipal bonds tend to yield about 30 percent less than taxable corporate bonds of similar term and risk. The decline in interest rates will occur entirely because of the elimination of the tax wedge or premium on interest and will happen independently of the impact of the sales tax on savings and investment. /14/ Investors will simply no longer need to charge a tax premium to achieve a particular after-tax rate of return.
[42] A national sales tax is neutral toward savings. Because the attractiveness of savings relative to consumption will increase, investors will choose to save and invest more of their money rather than use it to consume immediately. The after-tax return on their investment makes deferring consumption worthwhile. In contrast, the current income tax is biased against savings and investment. The income tax double, triple, and often quadruple taxes savings."
It is almost as though Nightie really didn't want readers to peruse things any further than his OOC posts. Ain't it amaxing what those can do in skillful hands. I guess it's true that "idle fingers are the devils tools".
#4 REFUTATION stands as well
839
posted on
08/08/2005 3:38:03 PM PDT
by
pigdog
To: DakotaRed
The only thing "deceptive" is our understanding of the bill ... or your refusal to do same.
You assume costs and complexities in the bill that are not there merely because you oppose it. That's certainly not uncommon as we have seen.
And you're incorrect - a "one dollar item" will cost one dollar ... and 23 ents of that will be the FairTax and so indicated on the receipt they receive.
840
posted on
08/08/2005 3:42:54 PM PDT
by
pigdog
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