Posted on 08/03/2005 4:51:43 PM PDT by 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???
Revenue neutral is not a facade. It is a requirement imposed by the President who would, presumable, veto any other such plan.
And the FairTax is not "open ended" taxation. That's what we have right now with the income tax which sometimes gets it rates boosted greatly higher. The FairTax has the self-limiting feature that has been mentioned earlier where if too high, consumers reduce consumption, lowering tax revenue.
With no income tax available (it is eliminated by the FairTax and its records destroyed), Congress would have to - guess what - cut spending. And don't forget if the FairTax has sufficient support to pass there would be a major political fight in even trying to raise rates assuming they weren't too high to begin with.
The funding for the prebate is already included in the FairTax bill as it the payment of the merchants and the states collecting the tax. There is no provision (nor any support for same among FairTax backers) for "exempting" businesses in that they are noit taxed to begin with - the consumer is.
The FairTax would be the strongest possible message to the government that the rules have changed - make no mistake about that ... and that's why so many Democrats and those embedded in the staatus quo fear it.
A grassroots movement has been started some years ago and it has blossomed to become the FairTax with tax bills before both the House and the Senate.
Talk about "garbage"!
So we are now to believe that you are more knowledgeable than the 75 economists who agree that the employees will get all their money??
Where was your economics degree from and how many years of experience have you in that field?
You can "claim" all the "points" you like. That has no meaning at all. Even common sense should indicate to you that many employees have contractual agreements with their employers specifying gross wages. The FairTax does nothing to abrogate those agreements in any way. In fact, that gives all the more impetus for others to receive "NET = GROSS" as it's sometimes called.
Hannibal ... Carthage ... wow!
I believed elephants dropped out of the cavalry even before horses. Thanx for the Roman History but what do you believe the parallel might be with today's era???
You have not presented the use of the model correctly at all - nor the equation which you claim represents something; and your claim is misleading, indeed. For starters, you have not presented the equation as it is used in the economic model nor have you decscribed it accurately. You have assigned your own bias to what you believe the equation (supposedly) does.
You have neglected to present in the equation the aggregation weights or "constants" (which are not constants except at a particular node in the model and assume differing values at these different points). These also affect the value of the equation as it is used in the model rather than having it remain a single value as you pretend and the calculations and equations used to arrive at the output or interperiod point are quite involved as I said - they are not just simple arithmetic (they are mathematics).
In fact Wilcoxen (who derived the model originally as his PhD thesis) says this:
"Essentially the model consists of two parts, one which determines a single period equilibrium given specific values of certain dynamic variables, and one which links the dynamic variables across time. For convenience, these will often be referred to as the intra and interperiod submodels. The intraperiod part is basically a static general equilibrium system which determines market-clearing prices and quantities for given values of stock variables and expectations. The interperiod segment, on the other hand, determines expectations consistent with the path of stock variables and income flows generated by the intraperiod model."
You have always burned with the desire to claim that (as you put it a few months ago):
"These clowns have been claiming for years that Jorgenson's model shows that consumer prices would stay the same while take-home pay went up. And it's just not so. "
Sorry, Nightie, it IS so. And the model's results show that to be the case. The equation you attempt to present represents labor demand (and not just some simple price level) and the numerator does not remain as a static value except in its initial state where it can be set to represent the effect of a desired marginal tax rate as a simulation starting point ... nothing more. The numerator includes leisure as well as work values and this leisure value also changes over the dynamic characteristics used by the model. You'd like us to think the numerator is a single value that remains the same in your simple arithmetic world ... that's simply not so. If you can, however, show conclusively where the things you have claimed for your flawed version of the equation is derived and ends up in the output (intertemporal) version of the model we'd be interested to see it I'm sure. Just be certain to show all the manipulations of the formula required at the intermediate stages so your work can be seriously analyzed.
And you ask:
"How could workers no longer paying taxes on their wages affect prices unless those wages are reduced? This all fits with everything I've posted, from Jorgenson and every other source."
Well, that's not hard to discern since with taxes removed that the producer no longer pays to the worker (so the worker can forward the taxes to the government), it is quite apparent that prices reduce and then (due to increased economic activity) go right back up to about where they were. If anything, wages will increase because of this increased economic activity - not decline. That's typically what a demand increase does for workers - boost wages.
It's not the WORKERS no longer paying taxes that lowers prices, but the fact that taxes have been eliminated at that point (and later paid by the consumer under the sales tax). THAT'S what lowers prices. The wages remain the same initially (before being raised) as should be apparent to you sinc many employers are contractually bound to pay a certain gross wage. That gives workers the old NET = GROSS as has been pointed out a good deal on these threads. The fact you wish it were otherwise is of no import at all.
Perhaps, as you say something to the effect that "this all fits" with everything you've ever posted, it would only be a surprise if it did NOT fit - particularly so with you penchant for misapplying and mischaracterizing so many things ... if not completely misstating them. You have mischaracterized what Jorgenson was saying, what I was saying, and what the equation itself was saying in the context of the model. Aside from that, you did a great job.
But remember that if the "protected" money under the present system, just about as much will be taxed in the form of higher prices caused by the tax system that we pay right now.
That isn't a huge difference, but with the FairTax you can accumulate savings and investments and not be taxed until you spend (your choice) on taxable items. That's a big difference.
Take a look at IRS figures for non-compliance. They peg it at about 20-25% ... and that does not include avoidance, evasion, or illegal income. The present tax system is a menace at best and it penalizes all of us.
And what would you call the unknown rate to be instituted after the first year of 2007? Three factions added together, 2 of them variables. Of course, as they realize revenue doesn't meet expectations, rates go up even more. Seems open ended to me.
I don't "call" it anything at all - no need to. It is merely a way to express S/S & M/C funding as a rate since thpse are both controlled by other laws - not the FairTax law. The basic FairTax rate ramains at 14.91% - just as the bill says.
That's only one third of what will be determined to set the rate. With the other two be variables, you are leaving the tax rate open ended to greatly exceed the much loved 23% "inclusive" (30% sales tax at the counter) with no caps on spending.
Try reading something besides the propaganda you are being spoonfed. This reads like something right out of the Watchtower.
Are you completely unable to comprehend D. R. The two parts you refer to are the entitlements of S/S and M/C which are controlled by totally different laws from the FairTax or any tax law.
In the bill- if you'd read it with any understanding - the funding amount for each are expressed as a percentage so that it may all be handled as a single rate external to the bill. The General Revenue Rate (14.91%) is the REAL FairTax rate, the other two parts are the existing entitlements - which means that, together they now run you about 8% on a tax inclusive basis. That's way too much AFIC. But the tax bill affects those not at all.
It's worth pointing out, too, that those two rates (as well as the General Revenue Rate) are as likely to go down as up; probably more likely to decline actually when the FairTax gets into operation. The only "open ended" thing are the two entitlement themselves, not the FairTax.
ROFLMHO, Sorry, but that's funny. Imagine, the government actually lowering a rate. I guess next, you expect to see Liberals support Bush?
Sorry the truth and facts trouble you so.
What you meant to write is H.R. 25 suggests the repeal of the IRS. Why are you fibbing?
H.R.25 is nothing more than a list of suggestions to a future Congress. Even if adopted by a current Congress, and signed into law by the President, H.R. 25 is nothing more that a list of suggestions to all future Congresses and would not bind any future Congress. Future Congresses would be free to tinker with the original proposal and manipulate it to accommodate the politically influential just as is now done with the current system In addition, without a constitutional amendment expressly forbidding Congress to calculate a tax from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money, Congress would be free to calculated a tax from the subject matter mentioned. So, in short and sweet language, H.R. 25 is a fraud being perpetrated upon the people.
I agree with that statement, which is one of many reasons that I support the FairTax.
"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."
Alexander Hamilton in Federalist #21
My goodness, phil-willl, you omitted the most important part of the quote which shows us the way to success! “…and private oppression may always be avoided by a judicious selection of objects proper for such impositions” Fact is, your across the board tax which taxes the necessities of life, tools of production and supplies necessary to conduct America’s businesses is not what the founding fathers had in mind buddy.
I’m disappointed in you! Emphasizing things in such a manner as to give new meaning to the founder’s intentions, and doing so to intentionally pretend Hamilton is speaking about an across the board tax on all articles of consumption and services rendered, when in fact, such a tax cannot logically be applied to the quote in question. Nor is there any instance of the kind of tax you support [an across the board tax on all articles of consumption and services rendered] to be found implemented by those who framed and ratified our Constitution!
But now, what is Hamilton really talking about? How may the amounts to be contributed by the rich and poor to be determined by one’s own option? And, how is private oppression of taxes on articles of consumption to be avoided?
Surprise! The answer is to be found in that part of the quote you conveniently failed to emphasize! “by a judicious selection of objects proper for such impositions.”. And this my friend is not the kind of tax you would impose upon America’s businesses and poor working people. Your plan, in addition to being oppressive upon America’s businesses, is a plan to tax the food a mother buys to feed her child, taxes the clothing she purchases to cloth that child, taxes the fuel used to heat that child’s room during winter, taxes the medicine a mother needs to care for a sickly child, and then taxes the coffin used to bury her child because she could not afford the taxes imposed upon the necessities of life!
The words of Hamilton which you quote obviously indicate certain articles of consumption ought to be excluded from the list of taxable items___ the necessities of life, tools of production and supplies necessary to conduct American businesses___ thereby removing the oppressive nature of taxation and making the tax a more voluntarily paid type of tax.
The truth is my friend, as our founding fathers practiced, a consumption tax plan ought to be limited to articles of luxury, and each article must be individually selected by Congress, and then the appropriate amount of tax determined for each specific item chosen, just as was done in THE FIRST REVENUE RAISING ACT FOR OUR COUNTRY!
NOTE: those interested may use the PREV IMAGE and NEXT IMAGE buttons at the above link to study the bill___it is refreshing to study statesmen creating a revenue raising bill beneficial for America’s businesses, industries and labor force, as opposed to politicians acting in their own self interest and on behalf of internationalists who have no allegiance to America or any nation [the NAFTA< CAFTA CROWD] ! [1]
Limiting the tax to articles of luxury, and requiring each article to be individually selected and having Congress place a specific amount of tax upon each article chosen, as our founding fathers intended, creates a self regulating check and balance upon Congress, just as Hamilton indicates!
If Congress does its job properly and the nation as a whole is productive and prosperous, the purchase of articles of luxury will undoubtedly increase, and with it, the flow of revenue into the common treasury. But, if the legislative policies of Congress are burdensome and its regulatory requirements upon business, industry and our nation’s labor force impede a flourishing economy, or any particular article is excessively taxed by Congress, the first sign would be is a decline in the flow of revenue into the national treasury and thereby defeat an extension of the revenue, just as Hamilton explains above!
Have a pleasant day peddling your snake oil cure and a most oppressive method to raise a federal revenue, a method void of the self regulating checks and balances our founding fathers intended “by a judicious selection of objects proper for such impositions.”.
JWK
ACRS
[1]
Another example of our founding father’s intended use of the taxing powers granted by the Constitution is the use of “imposts” and “duties” at our water’s edge to encourage the growth of domestic industries. In addition to imposing a specific amount of tax on specific articles of consumption imported under our nation‘s first revenue raising Act, the Act also imposed an across-the-board tax on imports which was higher for imports arriving in foreign owned foreign built vessels, but discounted the tax for imports arriving in American owned American built ships:
“a discount of ten percent on all duties imposed by this Act shall be allowed on such goods, wares, and merchandise as shall be imported in vessels built in the United States, and wholly the property of a citizen or citizens thereof.”
This patriotic and skillful use of external taxation not only filled our national treasury, but gave American ship builders a hometown advantage, encouraged shipbuilding on American soil and predictably resulted in America's merchant marine becoming the most powerful fleet on the face of the planet. In fact, our nation’s first revenue raising Act, taxing at our water’s edge, did follow Madison’s suggestion, that: ___ “…a national revenue must be obtained; but the system must be such a one, that, while it secures the object of revenue it shall not be oppressive to our constituents.”
For those who are unfamiliar with our Founding Fathers original tax plan, as they intended it to work, a plan which even includes a specific method to extinguish an annual deficit, CLICK HERE and scroll down to :
American Constitutional Research Service Before the
Committee on Ways and Means
United States House of Representatives
June 1995
Mr. Chairman and Members of this Committee:
"What you meant to write is H.R. 25 suggests the repeal of the IRS. Why are you fibbing?
H.R.25 is nothing more than a list of suggestions to a future Congress. Even if adopted by a current Congress, and signed into law by the President, H.R. 25 is nothing more that a list of suggestions to all future Congresses and would not bind any future Congress. Future Congresses would be free to tinker with the original proposal and manipulate it to accommodate the politically influential just as is now done with the current system In addition, without a constitutional amendment expressly forbidding Congress to calculate a tax from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money, Congress would be free to calculated a tax from the subject matter mentioned. So, in short and sweet language, H.R. 25 is a fraud being perpetrated upon the people."
It dismantles the IRS and repeals those sections of the IRC having to do with income taxes. FairTax supporters also have a repeal the 16th bill in congress. Do you have a bill to repeal the 16th? If not, then it would seem that your proposal has a greater chance of having the problems that you fear with the FairTax than the FairTax itself does.
BTW, can we maintain some semblence of civility by refraining from inflammatory phrases like "fraud"?
If economic activity increases as much with the FairTax as it seems likely to, the FairTax will be taking in more money with lower rates than at present. It could very easily happen.
" ... truth and facts ..." don't trouble ue, but often what is claimed by FairTax opponents is anything but ...
If the shoe fits (and it does) ...
Oh - so now we say that laws passed by Congress are just "suggestions" to a future Congress??? My, My.
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