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.
The "abuse" of business property has the same problems today under the income tax and it is probably even worse since the incentive to cheat is greater due to the higher marginal rates of the income tax.
Additionally, the checking of this sort of defalcation is more easily checked under the FairTax with more experienced tax administrators used to this consideration. If you add in the other forms of "non-compliance"/avoidance/evasion, the picture clearly favors the FairTax since these thing all add up to truly massive amounts of lost tax revenue under the present system. The illegal economy alone probably will do better under the FairTax by 1/4 to 1/2 Trillion dollars in tax receipts ... sums which make other possible "non-compliance", etc. with the FairTax fade into triviality.
The present system is rotten to the core with these sorts of failings to tax things properly (or at all in many cases). All of thesse gross difficulties of "evasion" , etc. exist right now and are far, far worse than they could possibly be under the FairTax.
Neither study addresses compliance costs!Both studies address the growth implications of taxation and government spending on the economy. Their conclusions essentially say that for every dollar collected and spent by the government the economy could have generated about two dollars in additional growth if the money were left in the private sector. That is not compliance cost (or any cost, for that matter) it is lost opportunity because the government collects and spends tax dollars. It has nothing to do with the price of goods, or whether those taxes are collected from income or consumption.
Now, don't get me wrong: increasing growth potential is good. Just don't confuse it with reducing prices.
The Payne study (a compilation actually) does essentially the same thing. MOST of it's so-called "costs" are really lost growth potential, not costs that help reduce prices if eliminated.
Add that to the $300 of the lead-in to this thread: http://www.freerepublic.com/focus/news/1487572/posts?page=1 and you're easily up to $500-600 billion.Why are you adding the tax gap to compliance costs? They aren't related in any way.
The Payne Study often referenced by many FairTax supporters lumps enforcement and avoidance (planning) together and values their total impact at about 1/3 of the value attributed to actual "compliance costs" (filing forms, record keeping and such.) That would suggest, using your study as a base for "compliance cost" for businesses at $91 Billion, that "planning" adds no more than $30 Billion, or so ... and that double counts enforcement (Payne lumps enforcement with planning, Slemrod lumps enforcement with compliance.)
That bring compliance, enforcement, and planning to no more than $121 Billion. Still far short of the FairTax claims.
Do have another source that would help pin down the actual magnitude of "planning costs?"
The Payne study (a compilation actually) does essentially the same thing. MOST of it's so-called "costs" are really lost growth potential, not costs that help reduce prices if eliminated.Also, looking at the lost growth of the current system would only matter if there would be no lost growth under the FairTax, and there most certainly would be. You would have to somehow figure the difference in lost growth between the different tax methods.
In fact most of the studies referenced by the FairTax supporters are studies of the impact of taxation and government spending IN GENERAL and NOT studies of one form of taxation over another. The actual thesis of the Payne study is "don't tax and subsidize the same thing" because it's costly to tax and even costlier for the government to hand out subsidies. None of that has anything to do with the FairTax, per se.
Good to be back, I didn't think about the FairTax more than a couple of times as I was hanging around in French Polynesia for twelve days. (except when I was in the top secret IRS planning meetings in our secret lair in the crater of a dormant volcano filled with voodoo dolls of every American and lots of pins to stick them with) What a great place and they hate the French there too. I highly recommend it to anyone who likes the Caribbean. Moorea and Bora Bora are both spectacular, and the diving was great-- sharks, rays, moray eels, sea turtles, and a huge variety of fishes and coral.
I'm glad to see a lot happened to expose the truth about the Free Lunch while I was gone, and that Boortz capitulated on his assertions in the book. BUSTED! Very interesting that some FairTaxers are still denying the obvious.
"... That is the one real advantage of the sales tax ... "
in fact is not correct as it undersates things since those are actually two advantages (helping exports and also taxing imports) and not THE advantage. There are many other advantages and they have been discussed many times. the fact that you do not agree with and will not accept many of them changes nothing ... you're welcome to your opinion.
They are still many advantages.
So let's see ... you're saying that paying for studies is OK unless done by the FairTax organization which makes it terribly wrong??
1. Does the Helping State Help?
2. Compliance Costs
3. Enforcement Costs: Audits and Correspondence
4. Enforcement Costs: Litigation
5. Enforcement Costs: Forced Collections
6. Disincentive Costs
7. Evasion and Avoidance Costs
8. Governmental Costs
9. Emotional, Moral, and Cultural Costs
10. Tax System Burdens; Summary and Trends
11. The Culture of Taxing
12. Making Taxpayers Count
Seems to me that a LOT of costs, ALL of which are paid by someone, are addressed but, as always, others will decide for themselves.
Of course! Haven't you figured this out yet? If it doesn't support their side of the argument it is flawed, discredited, or otherwise worthless but notice they NEVER cite their souces for such claims!
Notice his first chapter. This outlines the premise of the book: sending tax money to the gov't so that it can redstribute it in the form of subsidies is wasteful and inefficient.
His book has nothing to do with the FairTax, or sales taxes, per se.
Show me where I ever said it did!
What I HAVE said is that a great many costs (whether or not YOU recognize them as such is irrelevant) imposed on the economy by the current communist inspired income tax system have been identified and, to some extent, quantified and that MOST of those costs would go away with the implementation of the FairTax. I stand by that statement completely!
And the context of the Payne study treats lost growth as a cost. Again, lost growth is not responsible for the current price level of products.
Your posts exhibit exactly what I stated about your arrogant and supercilious attitude. It shows up in almost every one of your posts including those I posted snippets from. And in this very post you display even more of the same attitude. It demeans you and you seem to not realize it so it makes you an easy (and vulnerable) target. One can feel the barely-contained anger and hatred just bubbling behind your posts waiting for an opportunity to burst forth. But that's your problem.
Indeed I've given a range in which I think price declines will fall, but I also said that I have not stated any sort of exact figure. Your attempt to get me to do so or to try to pretend I have said something I have not said reverts back to your attitude problem mentioned earlier. If "your choice" is 23% that's fine. It is not, however, mine - I have not made one beyond the range given.
Your 23% may not be so meaningful after all, you see, since it may very well be that the bill will end up with something like a 19% FairTax rate for revenue neutrality. THAT'S what you refer to as "the problem" - the rate is not yet determined and may be greatly lowered. Wouldn't that be grand???
As for what embedded tax costs might be, I've certainly defined them clearly enough to identify that they are composed of elements of cascading, embedded business income tax, of compliance costs whatever those mey be, and the intangible costs that influence business decisions and directions due to the convoluted income tax system. Your problem due to your own arrogance is that you somehow feel I must throw out some numbers so you may attack them. Give me a break; I've no wish to help you do that nor is it necessary to further identify the components of embedded tax costs. Perhaps you'd like to claim that there are no such costs? That would be quite in line with your identified attitude.
You fall prey to what others have done in claiming that the economist Jorgenson has claimed wages must fall. He did not despite all the opponents' claims that he did so. That's not what his study showed and you even agreed with that assessment with ancient_geezer in earlier postings. Are you now wishing to take back what you said to him? Sort of like putting the Genie back in the bottle isn't it?
As for your next-to-last paragraph where you say:
"... in fact it proves my point... "
... it actually does just the opposite and demonstrates conclusively what I have been pointing out on several threads now ... that you totally misunderstand what cascaded, embedded tax is and how it is placed into prices. Your attempt to substitute "embedded profit" for the failed try of "accumulated profit" is just more of an indication that you do not have any grasp of the subject. There is no such animal (either). The profit embedded remain in the particular level where it was earned which I had already told you when you were trying to use the term "accumulated profit".
It is the tax costs as a % of sell price that are embedded and passed along as I've explained to you several times with very clear examples. It is those costs that will be removed due to the removal of business income taxes. Any compliance, intangible, or even payroll costs (if applicable - which I doubt with the possible exception of the ER portion) would be in addition. It is clear there is ample leeway in prices inflated as they are by income taxes and other costs to be able to reduce prices significantly.
And finally -
The upshot of this is simple: Prices will not decline in the manner you claimed.
Have you perhaps missed he point that the rate is not yet a settled amount of 23%? It may end up being something like 19%.
We should find out in the next few months.
And Boortz has not "retracted his claims" insofar as I can see aside from saying it was never intended as a something for nothing idea which most of us have known all along but apparently you interpreted otherwise. Perhaps you could give the link and exact quote by Boortz where he "retracts his claim"?
Also, can you post the exact link and phrase where Boortz said "... he will change the book in subsequent printings ..."?
Also, if the tax inclusive rate ends up at 19%, then the tax exclusive rate is not 30%, but 23.46%. Keep in mind the actual rate is not yet determined.
It is clear that unless you believe that NO income tax becomes embedded in prices that the removal of the business income taxes will cause prices to decline. Removing a cost element is going to cause prices to increase or remain the same ... how?
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