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.
Perhaps you should jump in there and do the "open kimono" bit, too - eh?When I've been wrong, I've admitted it. You, on the other hand, wallow in errors.
Nonsense. On one thread of recent recollection I remember you had eleven lies - none of which were admitted. And that was only one thread in which one of your lies/errors for example entailed a greater than 400% "anomaly" unfavorable to the statements you made ... you never admitted even that one, however, despite being called on it. Perhaps you don't consider lies to be errors, though.
That'd be right in character.
Apparently you ignore the errors I've stated I have made, but which errors do you believe I "wallow" in ... and how?
Thanks, I really believe our tax system must change and that the NRST while not perfect is pretty darn good. It will be more efficient and fairer and take some of the power away from congress and lobbyists plus it will help the US compete globally. I do think some against the NRST are either misinformed or trying to find minute flaws in it, magnify them and sway those that don't take the time to really read the bill and its discussion by economists with more knowledge than I. regards rs
There serious questions about how the future under a sales tax scenario might develop: Will the dramatic growth predicted be inflationary (can production capacity grow at least as fast as the money supply)especially since consumption is predicted to decline in the early years?
Can Congress be restrained from morphing the proposed structure in to a multi-tiered rate structure to make it more "fair" ... you know, tax luxury items at a higher rate, tax necessities at a lower rate, etc.?
Can Congress be trusted to avoid raising the rate or expanding the base (taxing imputed rents on owner-occupied property) if changes in purchasing behavior result in substantial revenue shortfalls?
Can Congress be trusted to not start handing out industry favors by exempting healthcare or energy consumption because they are perceived to be too expensive when taxed?
Can Congress be trusted to not curry political favor with "the masses" by steadily increasing the prebate to effectively "soak the rich" and exempt the majority of voters?
Can Congress be trusted to avoid the invasive information gathering, supposedly done away with, by requiring states to collect similar information on consumers and their purchases under the guise of plugging the tax leaks in the system?
Will the "guilty until proven innocent" premise now afforded the IRS really be changed under the FairTax (since you apparently need to show your receipts to prove you paid the tax if audited)?
Do you really think large numbers of people will stop buying new goods just to send a message to Congress? What will that do to the affected industries (for every dollar you refuse to send to the treasury, you deny private industry three dolllars!)? How do you buy used food or used rent anyway?
Your tagline says: "Question Authority." Well I'm questioning it and you seem put off by it. Work with me and maybe we can find common ground.
As a result, you spend so much time defending your ego and attacking everyone who dares question the FairTax that you completely lose the thread of substance.
I'm not playing anymore.
If you want to return to substance, fine; I'll be happy to engage. If you want to keep playing "he said ... she said," you're gonna have to play by yourself.
You claim to be "holier than thou" and that I have no interest in the "... substance of debate ..." yet when I give you an extensive description of how cascading embedded taxation works and pose questions to you about it, it is you who attempts the personal put-downs from your perch on high.
You're still doing it.
You've never been able to demonstrate that the embedded tax mechanism works in any way other than as I described it and yet you still pretend (when it suits your purpose) that wages must drop for prices to drop. When called upon your claim that Jorgenson did not say that and that, in fact you agreed that he did not, you attempt to spin yourself out of the trap you placed yourself in.
You, my man, cannot stand up to the debate and you have clearly shown this many times. Other posters will soon find this out about you ... you are not at all interested, as you claim, to want to "... find common ground ..." but merely to attack the FairTax in any manner possible. That Rodney King tactic of "... can't we all just get along ..." has been used many, many times here by FairTax opponents.
If you don't wish to discuss the substance of the debbate about wages and prices and how they are affected by the elimination of income taxes, that's fine with me. Just don't persist with your haughty "I'll tell you everything you need to know" attitude. Most pople read that for exactly what it is - liberal nonsense.
If you wish to not "play" anymore, that's understandable since that is all you have been attempting to do ... seemingly consider it a game to see (with your superior intelligence) how you can fool these dumb Freepers into believing things about the FairTax that are simply not true. When called up short on the tactic, just try to trash the person who does so.
You've never been able to get off of home plate let alone to first base in your attempt to claim that prices will not fall when income taxes are removed unless wages fall - specifically due to business income tax removal and you've never responded to the questions I posed about that. So much for someone "running away" from the substance of the debate.
A business existing to buy food simply to consume it would never stay in business because it would not benefit anybody and is a ridiculous premise.
Are you dense??? I'm talking about foisting off personal expenses on a business account. People do it all the time. I know people who drive cars registered under their business', boats, computers, you name it...
Banks have a vested interest for mortgage interest rates because they make a profit from the rates! Banks have overhead as any other business. The reduction of compliance costs will be passed onto the consumer.
Time to go back to Mortgage Lending 101. In todays world, you originate the loan and sell it. The interest rate is irrelevant and if NRST folks think it will bring interest rates down (which are actually based on demand for a commodity, money, which we are profligately printing and therefore driving down the value of and increasing the interest rate people want in order to hold instruments denominated in it) they are in fantasy land...
And just why is that done today under the income tax??? Obviously because a lot is evaded in personal taxes. The evasion is more beneficial under the income tax than it will be under the FairTax since the marginal rates are higher under the income tax.
If today your personal marginal rate is, say, 15% that means you are actually paying 15.0% plus 15.3% in payroll taxes or 30.3% tax inclusive - that's more than under the FairTax by a good bit. Obviously if you're in the next bracket up (25%) you'll be hit with over 40% ... and that's STILL tax inclusive.
With the FairTax, no one would ever pay the full 23% of their income since income is not taxed - only consumption of retail taxable items; in fact, most would pay substantially less. the upshot of all this is that there is massive evasion going on today - particular if you also add that from the illegal economy - and it is far more than could possibly occur under the FairTax.
If that same lawbreaker under the income tax who was buying personal consumption through his business were to coninue doing so his benefit would be much smaller - less than 23% instear of over 30% - and the likelihood of being detected would be even greater than at present since instead of looking at a potential 120 million "points of interest" there would be fewer than 20 million with substantial resources that are experienced in just that sort of evasion under state taxes.
If the evasion rate of these folks would continue at exactly the same level, the government would lose LESS to the evasion than at present. In fact they'd probably have a sizeable gain in tax revenue since the illegal economy will "contribute" when they buy taxable things at retail and they do not do so now.
Inteest rates also presently have to add in an amount necesary to cover the effects of income tax and this raises the inerest rates.
Here is one discussion dealing with interest rates and what will happen to them under the FairTax (and there are others on their site also - I'd sugest you check some of them):
http://www.fairtax.org/pdfs/interestrates.pdf
Yes they are but you don't pay income taxes on your gross income, you pay it on your net income (sales - expenses) under an income tax.
...under the sales tax you'd still owe 23% of your gross sales in taxes even when you have "NO income".
Except that the business with those sales is collecting the NRST from the consumer. State sales taxes are not an expense to the business(beyond the paperwork). Whether you make money or lose money you still have to pay state sales taxes on your sales.
What about smuggling? Splitting a 23-30% tax (it will probably end up being more) would GREATLY encourage smuggling. Watch the Border Patrol get increased then!!
I think you must have intended to respond to a different person.
I oppose a National Sales Tax.
bump^
What ABOUT "smuggling"??? Do you think it doesn't happen now? Do you think someone from Kansas is going to drive to Mexico to "smuggle" in a semi-truck load of bread and sell it in the parking lot without attracting attention and being turned in when everyone knows that would be an illegal activity?
You'll have to be much more specific than that. And keep in mind that there are customs laws and officers also to deal with that. And your unsupported assertion about the tax being "more" is probably the revessrse of what will actually happen since being revenue neutral today would result in a 19% tax inclusive rate.
With ANY savings that people have now (whether already taxed or not), they will be paying a "hidden tax" if they spend it under the income tax in the form of cascading, embedded tax costs that raise prices substantially on all that they buy. That goes away with the FairTax and prices decline.
In addition under the income tax many forms of savings generate taxable income which, under the FairTax, is not taxed at all.
Mexico has a 10 to 15% VAT and 34% corporate tax and 32.8% import duty. Other than cigarretes which don't have state taxes added, and contraband like narcotics, most smuggling is going into Mexico not out... Canada has a GST general sales tax of 7% and in some areas an HST harmonized sales tax (inc local) of 15% and various import duties....
Even if articles were smuggled into the US the collection point is not at the border but at the retail sale so any items smuggled in would have to be sold in an illegal manner to avoid an NRST, just like products produced in the USA. With less embedded taxes and compliance costs, the difference in prices is going to be less than the tax rate- 23/30%, our exports will flourish.
Do you think our current tax system adds nothing to the price of products?
Um I'm not saying after-tax prices will fall by a substantial amount, but that the RST will not increase prices by a substantial amount(after tax), effectively IMO most people will be paying less taxes with NRST than without it..
There serious questions about how the future under a sales tax scenario might develop: Will the dramatic growth predicted be inflationary (can production capacity grow at least as fast as the money supply)especially since consumption is predicted to decline in the early years?
Consumption is also predicted to increase in anticipation of the tax, but all these things will soon reach a market equilibrium just like any other changes inthe market. Dramatic growth is over time not immediately.
Can Congress be restrained from morphing the proposed structure in to a multi-tiered rate structure to make it more "fair" ... you know, tax luxury items at a higher rate, tax necessities at a lower rate, etc.?
Yes
Can Congress be trusted to avoid raising the rate or expanding the base (taxing imputed rents on owner-occupied property) if changes in purchasing behavior result in substantial revenue shortfalls?
The rate is set by law as well as the base, did you read it? Congress may make changes to laws just like it does now, the difference is we start with a clean slate not a dirty one. and it will be easier for the people to oppose any changes they dont want.
Can Congress be trusted to not start handing out industry favors by exempting healthcare or energy consumption because they are perceived to be too expensive when taxed?
Congress does what the people want and currently they hide what they do..any changes in a new clean law will be debated vigourously and out in the open as opposed to what happens now.
Can Congress be trusted to not curry political favor with "the masses" by steadily increasing the prebate to effectively "soak the rich" and exempt the majority of voters?
Like they do now? More likely they can be restrainded under a new simple clean law than the old loophole ridden law.
Can Congress be trusted to avoid the invasive information gathering, supposedly done away with, by requiring states to collect similar information on consumers and their purchases under the guise of plugging the tax leaks in the system?
Uh what can be more invasive than what we have now? Must report all income, vehicle, medical expenses,deductions, contributions,dependents, interest etc,,LOL... Tax leaks are plugged at collection points not the end user, except for business exemptions. A straw argument.
Will the "guilty until proven innocent" premise now afforded the IRS really be changed under the FairTax (since you apparently need to show your receipts to prove you paid the tax if audited)?
Another straw argument, no receipts need be kept by the consumer.
Do you really think large numbers of people will stop buying new goods just to send a message to Congress? What will that do to the affected industries (for every dollar you refuse to send to the treasury, you deny private industry three dolllars!)? How do you buy used food or used rent anyway?
People will at least have the opportunity to send a message that they dont now. It doesn't take much to get Congresses action, just like a sick out for a few days..the message can get to them without any real damage to businesses. Hunt, fish, grow, campgrounds, you know like the old days.
Your tagline says: "Question Authority." Well I'm questioning it and you seem put off by it. Work with me and maybe we can find common ground
I am not put off by you questioning authority, but would hope you really investigate and consider the NRST and not stay with preconceived ideas. There is lots of common ground for those open to new ideas and those that realize what we have now is not fair or working. I never claimed to have all the answers, and am here to learn and discuss the issue.
thanks for bringing these important questions and answers to light...
Well, that is one of the central points of debate. Others on this and other threads are indeed claiming that after-tax prices will fall WRT real wages (ie. wages stay at pre-FairTax gross levels, and producer -- pre-tax -- prices decline enough to allow after-tax prices to remain roughly constant ... that won't happen.
most people will be paying less taxes with NRST than without it.
Hmmmm ... this is where the devil really IS in the details and opinions aren't worth a whole lot. Perhaps we can dig into that claim on another thread.
Dramatic growth is over time not immediately.
Actually no, the dramatic growth is in the beginning. Jorgenson predicts GDP to jump 13.2% in the first year then fall to 9% over the base case over time. Investment (a component of money supply) jumps 78% in the first year before settling down. The labor supply jumps 30% in the first year. It's not at all clear that these discontinuities, coupled with pricing behavior, will not be inflationary.
The rate is set by law as well as the base
... and that is no different than it is today.
In general you display a lot more faith in Congress than I have. Which masses are going to oppose raising the tax on vacation homes, luxury yachts, private aircraft and such in exchange for a healthcare consumption exemption or rebate? You're dreaming if you think this new law with its ability to buy massive numbers of votes is immune from tampering.
Tax leaks are plugged at collection points
Unless the leak is somewhere else ... if people are trading in under-the-table new goods, none of them, represents a collection point. The Bill makes the taxpayer liable for the tax, not the collection agent. If a taxpayer (not the retailer) is suspected of cheating how does he prove his purchases are legitimate? Who has the burden of proof?
People will at least have the opportunity to send a message that they dont now.
This is another area where your faith exceeds mine. First, most expenses by most people go to food, housing, clothing and transportation. Food is off the table; people are no more inclined to stop eating or grow their own to protest tax policy than they are to protest current prices. New housing represents a too small transaction volume to be representative of massive protest, and operating costs fall into the food category: you gonna turn off your electricity because you think the tax is too high? Used clothing ... to protest tax policy??? Finally transportation. First gas: not even a doubling of fuel price has significantly dented demand ... you think people will stop driving to protest tax policy? As for new car purchases, presuming a significant enough boycott of new vehicle purchases to get congress's attention (how many quarters of boycott are needed?) what do you think will happen to the folks employed by auto manufacturers?
Besides, any boycott of taxable goods is likely to have an inflationary effect on the prices of substitutes making the substitutes less attractive. I am not put off by you questioning authority, but would hope you really investigate and consider the NRST and not stay with preconceived ideas.
Sadly, this comment represents a common belief among folks I've debated with here. For some reason, they seem to think I (and others of my ilk) have not "really investigated" the NRST. I won't pretend to guess how much time I've spent finding, reading, and understanding dozens of publication by dozens of economists on this topic. I don't now how many times I've sifted through the NIPA tables or Tax Stats. I can't even begin to adquately estimate the hours I've spent in constructing my own models based on those publications. And I'm embarrased to think of the number of hours I've wasted responding to people here who either ignore, avoid, or simply attack that investigation then dismiss it out of hand without bothering to actually ponder what is said. There is no debate here with some; there's only dogma.
I came into this discussion several years ago with no preconceived notions. I looked into the claims, I did the reasearch, I asked questions, I pondered the responses, I did the math, and I reached conclusions on my own ... some in agreement with the FairTax, some in opposition to the FairTax.
The least you could do is leave room for the possibilty that some of us who disagree are doing so from a perspective of knowledge and integrity.
Right-oh, Dimples. Exactly which of the FairTax conclusions might it be that you reached that were in agreement with the FairTax??
Do you really expect to be believed when you try the old "I'm only trying to be discern the truth" stunt by claiming you came aboard with a pure heart and friendship in your soul? Your "years ago" posts that I recall sound like nothing of the sort but rather that you have always opposed the FairTax. Claiming otherwise now is (at best) a tad misleading.
The continual pretense so many of you display reminds me of some of the pacifists in Britain before WWII - they thought Hitler was really a good guy down deep who had the best interests of Germany at heart and that he should be "given a chance" to straighten out Germany - all this in spite of his obvious efforts to arm his country for war. Many of these folk were in favor of any number of the "Hitler reforms" because they were as intellectually pure as you.
Their tune changed before 1940 for most though, and then they typically claimed then to always have viewed him with "concern". If you oppose the FairTax there's nothing wrong with honestly saying so. The pretense is what is so ghastly.
With a tax system such as the FairTax I DO believe that consmers will trim their buying habits if they don't like the rate. Trying to fit that into an income tax scenario which is what you're trying to compare it to is meaningless since any such protest at present would serve no purpose at all.
The present tax system encourages - in fact, almost mandates - consumption in preference to savings and investment while under the FairTax the opposite is true which causes a reduced consumption to be more effective and more noticeable to government. In fact, the reduction of consumption will be magnified by the fall-off you mention and rather than adversely affecting a particular industry in moe than the short run (if at all) will merely help the government to notice the taxpayer displeasure more quickly due to pressure from that industry and react to it by rate decreases. In connection with any such decrease there would be an increase in savings and investment to offset ill effects so it is anything but a one-way street.
Lastly, Dimples, you're a fine one to talk about some having "dogma" on these threads as you have continually refused to accept reality when presented to you in no uncertain terms and have made outlandish claims of absurd reasoning in attempting to defeat the FairTax. I might point out that you haven't done so.
Well, sheezam!
Today, just for the hell of it, I was doing a name search on my own name.
Imagine my surprize when I stumbled across this site.
I’m Jay Moreno, of St. Marys, GA - the guy who wrote the precipitating letter-to-the-editor way back when.
So far, a quick, sampling, perusal of the 350-some-odd posts has not dampened my enthusiasm for the Fair Tax one iota.
Jay
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