Posted on 09/16/2005 5:15:32 PM PDT by Man50D
Dear Editor, I've just read a new best-seller, which I highly recommend to you and your readers: "The Fair Tax Book, Saying Goodbye to the Income Tax and the IRS."
The co-authors are "reformed lawyer" and syndicated talk show host Neal Boortz, and Congressman John Linder, R-Ga.
Linder is also the principal author/sponsor of The Fair Tax Bill (H.R. 25), currently before Congress.
In the interest of brevity (the book is only 180 pages, by the way), I'll quote from the back of the dust jacket.
"What the Fair Tax will do for America: eliminate the income tax and the dreaded IRS; jump start the U.S. economy; bring businesses and jobs back to the United States; and recapture billions of untaxed dollars currently lost to criminal and offshore businesses.
"What the Fair Tax will do for you: allow you to keep 100 percent of your hard-earned paycheck; let you choose to save all the money you want .... and pay taxes only when you spend it; eliminate countless taxes you don't even know you're paying; lower interest rates; and make April 15th just another beautiful spring day."
The authors provide ample citations from the works of various economic think-tanks to back each of those assertions.
The Fair Tax would replace all current federal, income-based taxes with one universal, federal "consumption tax," on both goods and services, at the retail level only. There would be no exemptions whatsoever. The proposed, "revenue neutral," initial tax rate would be 23 percent. Predictions are that the resulting economic boom would make it possible to lower that rate in short order.
As described so far, the Fair Tax would be so regressive as not to stand a snowball's chance in hell of passage. Here's the solution.
At the first of every month, every head-of-household, irrespective of income/net worth, would receive a federal "pre-bate" check equal to the taxes due on his or her appropriate "poverty level spending" for the coming month. To quote the authors, "'Poverty level spending' is, by definition, that spending necessary for a household of a given size to pay for its necessities. It is adjusted every year by the Department of Health and Human Services."
For example, if the Fair Tax were currently in effect, every family of four would receive a monthly pre-bate of $491.82 to cover the 23 percent tax on its first $2,138.22 spent -- its "poverty level spending." All spending above that level (that month) would have a net federal tax cost of 23 cents on the dollar -- be it for sneakers or a yacht.
The federal sales tax would be collected by the states' sales tax offices. Moreover, don't forget that everyone's "take-home-pay" would be their full, gross earnings under the Fair Tax.
It is a most interesting, concise and thought-provoking read that can be knocked out in two or three sittings. Suggested full retail is $24.95. There is at least one copy available at the Camden County Public Library.
I hope that you and your readers will both enjoy the book and come to support the bill.
I just don't see putting in a National Sales Tax as having anything to do with cutting taxes.
Your taxes will be cut because they would be shifted from your income to consumption. You choose how much you spend, therefore you also choose how much you will be taxed! You will also get a rebate on taxes of necessities up to the poverty level.
My worst fear is that we'd end up with a National Sales Tax AND a National Income Tax.
The purpose of the Fair Tax is to eliminate income tax. People who support the Fair Tax will never condone an income tax and an NRST.
One fact remains even if you ignore all the above facts. The IRS and its 60,000+ page tax code will cease to exist! The only way to eliminate your fear is by getting involved to make sure your scenario never happens.
"I just don't see putting in a National Sales Tax as having anything to do with cutting taxes."
"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
"Wouldn't it be great to pay no Federal Taxes as long as you buy no Foreign goods if the Federal Government got all it's money for operating expenses from import Tariffs as allowed by the Constitution?"
Totally unworkable in practice. There is no way to set the tariff rate high enough to be revenue neutral without shutting down imports drastically. Then you would have to raise the rate exponentially to make up for the revenue shortfall, which would lead to (you guessed it) still higher rates.
One of the frequent FairTax opponents on FR, Willie Green, has advocated substituting import tariffs for corporate income taxes for several years. Even that limited measure won't work for the reasons mentioned above. Willie has been advocating that approach for several years and it wasn't even seriously entertained by the President's Tax Reform Commission, as far as I can see.
"BTW, he claims to make more in one deal than my house is worth. It's hard to figure, since he stays on these threads almost 24 hours a day. I guess he has minions working for him who do all of his bidding and he rakes in all of the money."
He has also claimed that his business operates in an environment in which price competition doesn't exist. He charges his customers/clients whatever he chooses and they have no option but to pay up.
That says a lot about his credibility, as well as his understanding of economics. It also raises the obvious question about why a multi-millionaire would spend his time posting on FR.
He has also claimed that his business operates in an environment in which price competition doesn't exist. He charges his customers/clients whatever he chooses and they have no option but to pay up.He just tells them it "embedded taxes" and his customers will pay anything. Isn't that how it works? The business sets the price and the customer pays it.
People would be less inclinded to accept the idea if the proponents told the truth.
Do you lay awake at night thinking about me?...Am I your last thought before you drift off and your first thought when you awake?
He adds nothing worthwhile to the conversation and he actually hasn't had many rational thoughtsAre your posts an example of your adding something worthwhile to the conversation and rational thoughts?
BTW, he claims to make more in one deal than my house is worthSee, there's an example of a liar. I said no such thing. I've never disclosed what I make and even if I did, how would I know what groanup's house is worth?
Do either of you have anything about the Fairtax you want to know about or do you want to start a thread about me?
Well it's good that YOU never make any "disparaging remarks" (yeah, right!!). You're the one whose arrogance drove him to present the example you claimed to be the One True Way (and still do I note) and you made that very clear with your comments since you disliked the example I originally used.
I showed you using your own example how taxes cascaded in the example and had you even bothered to look at the most recent presentation, two examples were shown - one with a 25% rate and a 10% net profit ... and it STILL came up with over 14% in embedded taxes. And you have missed the even larger point that the examples are not claimed to represent the numeric values that might be involved, but instead show the manner in which the boosting of prices through business income taxes comes about.
As for any actual numbers I did not "admit" but rather stated that the embedded taxes would probably range from something like 10 to 25% (or perhaps even more). Your word choice attempts to carry with it the accusatory meaning that there was somehow something incorrect or dishonest in my statement. You have certainly not shown that. In addition, your claim that a 66% rate is needed, somehow, is poppycock.
As for attempting to mislead, the continual claims that you naysayers make that only corporate taxes (and then only when based as a percent of revenue - which is quite incorrect) are involved is in direct contrast to what I have clearly stated - that the business income taxes apply no matter the type of business entity involved (and not merely corporations) and that the tax is calculated as taxes paid divided by income subject to tax.
You guys remind me of the first person who viewed a running giraffe and then loudly proclaimed "there ain't no such animal". It is, though, nice to see that it is beginning to dawn on you that prices WILL go down with the advent of the FairTax - and not because of wages decreasing. Perhaps you'll even eventually understand how embedded taxes work ... but since you haven't so far it really doesn't seem too likely.
As for choosing selective companies or industries to illustrate some point you're hyping, why not choose an example that has the government refunding money to the business ... that would make it look even more exciting - even though that, too, would be of questionable value in the real world. Not all businesses pay little or no tax and not all are going out of business though you can bet that many of the large businesses spend a good bit on "tax minimization" efforts (which, it should be noted, become zetro under the FairTax).
He has also claimed that his business operates in an environment in which price competition doesn't exist.That would make you a liar.
Actually I've said it's highly competitive and volatile..
BTW, what about that debate with YN and Boortz, or are you just a phoney blowhard hoping to trap YN?
The FairTax proponents HAVE told the truth about the rate - you're merely unwilling or unable to understand it.
It is VERY clearly explained in a number of different places and on the FairTax website. It's even been explained hundreds of times on these threads, so your attempts at calling the FairTax supporters liars is very far afield.
Being against the Status Quo need not imply that one believes a National Sales Tax to be a Good Thing.
If you're "against the Status Quo" as you say, let's see your plan for the way to reform the tax system. Seems that most Status Quo Lovers really have no such real plan.
Please enlighten us.
It is VERY clearly explained in a number of different places and on the FairTax website.Why does it have to be explained even once?...How many times do you have to have you state sales tax rate explained to you?
It's there, Looey, for those like you who like to pretend there is some dishonesty in quoting it one way or another (as you typically do).
It's explained clearly enough on the FairTax site so that only a moron would fail to understand it.
Well, if you read carefully, you note that is NOT what I said. Let me make it a little clearer:
For after-tax prices to remain constant under the FairTax, the price of a product with embedded income taxes would have to decrease 23%.
YOU have claimed that all this (and more) can come from eliminating ONLY so-called "business taxes." You have stated countless times that these "business taxes" are only taxes on profits, and NOT employee wage or payroll taxes and NOT savings from compliance cost reductions.
Your overarching claim is that some fictitious cascading mechanism causes prices to rise far more than the actual tax collected.
Your claim is that prices will decline by some unknown amount, perhaps from 10% to 25% as you've reiterated here only by eliminating profit tax.
Now, if I've mis-stated any of these claims, I'm sure you'll point it out; but, if you do, please be clear about what you really mean.
As a sanity check, there is some simple math that can be done to check if your claims are reasonable:
What percentage of the retail sales price of a product must be accumulated profit in order for 23% of that retail price to be attributable to profit tax?For corporations, whose profits are taxed at 34.4%, the answer is 67% (sorry, I erred in typing 66%) :
if retail price(R) = cost(C) + profit(P),For non-corporate businesses, taxed at an average rate of 25%, the number is 92%:
then 34.4% of profit must = 23% of retail priceor
34.4% x P = 23% x R
Therefore, the ratio of profit to retail price (the % of price made up by accumulated profit)must be
P / R = 23 / 34.4 = .669 or 67%
if retail price(R) = cost(C) + profit(P),
then 25% of profit must = 23% of retail priceor
25% x P = 23% x R
Therefore, the ratio of profit to retail price (the % of price made up by accumulated profit)must be
P / R = 23 / 25 = .92 or 92%
Neither of those ratios comes close to the reality of embedded profit and therefore embedded tax.
If you want to know which posters lie, why namecalling occurs, or who is misrepresenting what, feel free to read the last 100 threads on this subject (keyword: FAIRTAX).
While I do often point out your errors in understanding and errors in your math which lead to erroneous conclusions, I have never called you names, attributed any hidden agendas to your position, taken your posts out of context, or selectively ignored central points of debate ... all of which you do regularly.
When I discuss your work with others, I use your name. You do not reciprocate.
I have reached level of exasperation with you at times when you avoid direct questions, or insist that 2 x 2 = "a very large number because of cascading" in the face of proof to the contrary, or take my direct answers to your direct questions and pretend you never asked the question. These lead me to believe you really do not understand the math or the argument ... and I say so.
It is always refreshing to see you return to these threads.
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