University Economists review "FairTax"

Americans for FairTax ^ | current | University Economist listed in article

[Eaglewatcher]

-1- An Open Letter to the President, the Congress, and the American people Concerning Reform of the Federal Tax Code

Dear Mr. President, Members of Congress, and Fellow Americans,

We, the undersigned business and university economists, welcome and applaud the ongoing initiative to reform the federal tax code. We urge the President and the Congress to work together in good faith to pass and sign into federal law H.R. 25 and S. 25, which together call for:

• Eliminating all federal income taxes for individuals and corporations,

• Eliminating all federal payroll withholding taxes,

• Abolishing estate and capital gains taxes, and • Repealing the 16th Amendment

We are not calling for elimination of federal taxation, which would be irresponsible and undesirable. Nor does our endorsement call for reduced federal spending. The tax reform plan we endorse is revenue neutral, collecting as much federal tax revenue as the current income tax code, including payroll withholding taxes.

We are calling for elimination of federal income taxes and federal payroll withholding taxes.

We endorse replacing these costly, oppressively complex, and economically inefficient taxes with a progressive national retail sales tax, such as the tax plan offered by H.R. 25 and S. 25 – which is also known as the FairTax Plan. The FairTax Plan has been introduced in the 109th Congress and had 54 co-sponsors in the 108th Congress.

If passed and signed into law, the FairTax Plan would:

• Enable workers and retirees to receive 100% of their paychecks and pension benefits,

• Replace all federal income and payroll taxes with a simple, progressive, visible, efficiently collected national retail sales tax, which would be levied on the final sale of newly produced goods and services,

• Rebate to all households each month the federal sales tax they pay on basic necessities, up to an independently determined level of spending (a.k.a., the poverty level, as determined by the Department of Health and Human Services), which removes the burden of federal taxation on the poor and makes the FairTax Plan as progressive as the current tax code,

• Collect the national sales tax at the retail cash register, just as 45 states already do,

• Set a federal sales tax rate that is revenue neutral, thereby raising the same amount of tax revenue as now raised by federal income taxes plus payroll withholding taxes,

• Continue Social Security and Medicare benefits as provided by law; only the means of tax collection changes,

• Eliminate all filing of individual federal tax returns,

• Eliminate the IRS and all audits of individual taxpayers; only audits of retailers would be needed, greatly reducing the cost of enforcing the federal tax code,

An Open Letter to the President, the Congress, and the American people -2- • Allow states the option of collecting the national retail sales tax, in return for a fee, along with their state and local sales taxes,

• Collect federal sales tax from every retail consumer in the country, whether citizen or undocumented alien, which will enlarge the federal tax base,

• Collect federal sales tax on all consumption spending on new final goods and services, whether the dollars used to finance the spending are generated legally, illegally, or in the huge “underground economy,”

• Dramatically reduce federal tax compliance costs paid by businesses, which are now embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world markets,

• Bring greater accountability and visibility to federal tax collection,

• Attract foreign equity investment to the United States, as well as encourage U.S. firms to locate new capital projects in the United States that might otherwise go abroad, and

• Not tax spending for education, since H.R. 25 and S. 25 define expenditure on education to be investment, not consumption, which will make education about half as expensive for American families as it is now.

The current U.S. income tax code is widely regarded by just about everyone as unfair, complex, wasteful, confusing, and costly. Businesses and other organizations spend more than six billion hours each year complying with the federal tax code. Estimated compliance costs conservatively top $225 billion annually – costs that are ultimately embedded in retail prices paid by consumers.

The Internal Revenue Code cannot simply be “fixed,” which is amply demonstrated by more than 35 years of attempted tax code reform, each round resulting in yet more complexity and unrelenting, page-after-page, mind-numbing verbiage (now exceeding 54,000 pages containing more than 2.8 million words). Our nation’s current income tax alters business decisions in ways that limit growth in productivity. The federal income tax also alters saving and investment decisions of households, which dramatically reduces the economy’s potential for growth and job creation.

Payroll withholding taxes are regressive, hitting hardest those least able to pay. Simply stated, the complexity and frequently changing rules of the federal income tax code make our country less competitive in the global economy and rob the nation of its full potential for growth and job creation.

In summary, the economic benefits of the FairTax Plan are compelling. The FairTax Plan eliminates the tax bias against work, saving, and investment, which would lead to higher rates of economic growth, faster growth in productivity, more jobs, lower interest rates, and a higher standard of living for the American people.

An Open Letter to the President, the Congress, and the American people -3- The America proposed by the FairTax Plan would feature:

• no federal income taxes,

• no payroll taxes,

• no self-employment taxes,

• no capital gains taxes,

• no gift or estate taxes,

• no alternative minimum taxes,

• no corporate taxes,

• no payroll withholding,

• no taxes on Social Security benefits or pension benefits,

• no personal tax forms,

• no personal or business income tax record keeping, and

• no personal income tax filing whatsoever.

No Internal Revenue Service; no April 15th; all gone, forever.

We believe that many Americans will favor the FairTax Plan proposed by H.R. 25 and S. 25, although some may say, “it simply can’t be done.” Many said the same thing to the grassroots progressives who won women the right to vote, to those who made collective bargaining a reality for union members, and to the Freedom Riders who made civil rights a reality in America.

We urge Congress not to abandon the FairTax Plan simply because it will be difficult to face the objections of entrenched special interest groups – groups who now benefit from the complexity and tax preferences of the status quo. The comparative advantage and benefits offered by the FairTax Plan to the vast majority of Americans is simply too high a cost to pay.

Therefore, we the undersigned professional and university economists, endorse a progressive national retail sales tax plan, as provided by the FairTax Plan. We urge Congress to make H.R. 25 and S. 25 federal law, and then to work swiftly to repeal the 16th Amendment. Respectfully,

Donald L. Alexander Professor of Economics Western Michigan University

Wayne Angell Angell Economics

Jim Araji Professor of Agricultural Economics University of Idaho

Ray Ball Graduate School of Business University of Chicago

Roger J. Beck Professor Emeritus Southern Illinois University, Carbondale

John J. Bethune Kennedy Chair of Free Enterprise Barton College

David M. Brasington Louisiana State University

Jack A. Chambless Professor of Economics Valencia College

Christopher K. Coombs Louisiana State University

William J. Corcoran, Ph.D. University of Nebraska at Omaha

Eleanor D. Craig Economics Department University of Delaware

-4- An Open Letter to the President, the Congress, and the American people

Susan Dadres, Ph.D. Department of Economics Southern Methodist University

Henry Demmert Santa Clara University

Arthur De Vany Professor Emeritus Economics and Mathematical Behavioral Sciences University of California, Irvine

Pradeep Dubey Leading Professor Center for Game Theory Dept. of Economics SUNY at Stony Brook

Demissew Diro Ejara William Paterson University of New Jersey

Patricia J. Euzent Department of Economics University of Central Florida

John A. Flanders Professor of Business and Economics Central Methodist University

Richard H. Fosberg, Ph.D. William Paterson University

Gary L. French, Ph.D. Senior Vice President Nathan Associates Inc.

Professor James Frew Economics Department Willamette University

K. K. Fung University of Memphis

Satya J. Gabriel, Ph.D. Professor of Economics and Finance Mount Holyoke College

Dave Garthoff Summit College The University of Akron

Ronald D. Gilbert Associate Professor of Economics Texas Tech University

Philip E. Graves Department of Economics University of Colorado

Bettina Bien Greaves, Retired Foundation for Economic Education

John Greenhut, Ph.D. Associate Professor Finance & Business Economics School of Global Management and Leadership Arizona State University

Darrin V. Gulla Dept. of Economics University of Georgia

Jon Halvorson Assistant Professor of Economics Indiana University of Pennsylvania

Reza G. Hamzaee, Ph.D. Professor of Economics & Applied Decision Sciences Department of Economics Missouri Western State College

James M. Hvidding Professor of Economics Kutztown University

F. Jerry Ingram, Ph.D. Professor of Economics and Finance The University of Louisiana-Monroe

Drew Johnson Fellow Davenport Institute for Public Policy Pepperdine University

Steven J. Jordan Visiting Assistant Professor Virginia Tech Department of Economics

Richard E. Just University of Maryland

Dr. Michael S. Kaylen Associate Professor University of Missouri

David L. Kendall Professor of Economics and Finance University of Virginia's College at Wise

Peter M. Kerr Professor of Economics Southeast Missouri State University

Miles Spencer Kimball Professor of Economics University of Michigan

James V. Koch Department of Economics Old Dominion University

Laurence J. Kotlikoff Professor of Economics Boston University

Edward J. López Assistant Professor University of North Texas

Franklin Lopez Tulane University

Salvador Lopez University of West Georgia

Yuri N. Maltsev, Ph.D. Professor of Economics Carthage College

Glenn MacDonald John M. Olin Distinguished Professor of Economics and Strategy Washington University in St. Louis

Dr. John Merrifield, Professor of Economics University of Texas-San Antonio

An Open Letter to the President, the Congress, and the American people -5- Dr. Matt Metzgar Mount Union College

Carlisle Moody Department of Economics College of William and Mary

Andrew P. Morriss Galen J. Roush Professor of Business Law & Regulation Case Western Reserve University School of Law

Timothy Perri Department of Economics Appalachian State University Mark J. Perry School of Management and Department of Economics University of Michigan-Flint

Timothy Peterson Assistant Professor Economics and Management Department Gustavus Adolphus College

Ben Pierce Central Missouri State University

Michael K. Pippenger, Ph.D. Associate Professor of Economics University of Alaska

Robert Piron Professor of Economics Oberlin College

Mattias Polborn Department of Economics University of Illinois

Joseph S. Pomykala, Ph.D. Department of Economics Towson University

Barry Popkin University of North Carolina-Chapel Hill

Steven W. Rick Lecturer, University of Wisconsin Senior Economist, Credit Union National Association

Michael Rizzo Assistant Professor of Economics Centre College

Paul H. Rubin Samuel Candler Dobbs Professor of Economics & Law Department of Economics Emory Univeristy

John Ruggiero University of Dayton

Michael K. Salemi Bowman and Gordon Gray Professor of Economics University of North Carolina at Chapel Hill

Dr. Carole E. Scott Richards College of Business State University of West Georgia

Carlos Seiglie Dept. of Economics Rutgers University

John Semmens Economist Phoenix College, Arizona

Alan C. Shapiro Ivadelle and Theodore Johnson Professor of Banking and Finance Marshall School of Business University of Southern California

Dr. Stephen Shmanske Professor of Economics California State University, Hayward

James F. Smith University of North Carolina- Chapel Hill

Vernon L. Smith Economist W. James Smith Dean of Liberal Arts and Sciences and Professor of Economics University of Colorado at Denver

John C. Soper Boler School of Business John Carroll University

Roger Spencer Professor of Economics Trinity University

Daniel A. Sumner, Director, University of California Agricultural Issues Center and the Frank H. Buck, Jr., Chair Professor, Department of Agricultural and Resource Economics, University of California, Davis

Curtis R. Taylor Professor of Economics and Business Duke University

Robert Vigil Analysis Group, Inc.

John H. Wicks, Ph.D. Professor Emeritus Department of Economics University of Montana

F. Scott Wilson, Ph.D. Canisius College

Mokhlis Y. Zaki Professor of Economics Emeritus Northern Michigan University

An Open Letter to the President, the Congress, and the American people -6-

[pigdog]

The worker gets - as stated - 100% pf his paycheck. There are no taxes paid until he spends some of the wages for taxable items ... and not all things are taxable.

Revenue neutral has nothing to do with the worker receiving all of his paycheck. Under the present system he doesn't get it all - or had you noticed that? He has no way to NOT pay the income tax where with the FairTax he controls not only the choice of expenditure (and thereby the amount of tax) but also the timing of the tax. Quite different than the income tax.

Revenue neutral would actually have more to do with obtaining increased tax revenue from those in the illegal economy who now pay basically nothing in income tax.

[pigdog]

Sorry, Little Mo - it's not spam. See post #321 for some of the reasons. You've shown nothing to the contrary and all I've seen you do is regurgitate old Squirrel spam that has been discredited.

What's your best plan for a tax system, pal?

[pigdog]

No - that's not at all what Jorgenson said. That's merely the distorted spin put on his description of his model and the assumptions he made to get it operating. He certainly made no such claim about actual wages.

Nor did he "clearly explain" anything about a 22% embedded tax or that such a claim was "a lie". In fact the embedded tax amount is likely to be someplace between 0 and 25% once things settle out and more complete information comes to the fore.

But your effort (and those of the other Squirrels) to say "it's all lies" are complete and utter nonsense.

[Always Right]

You are in an unbelievable state of denial.

[pigdog]

Please quote the section of HR25 that backs up this claim of yours my wild-eyed friend!

[pigdog]

And you are in a continual state of misstating things. Get real!!

[Always Right]

Jorgenson absolutely with 100% certainty without a doubt said that he assumed take home pay would be the same. I can't believe you are so dishonest you can't grant simple facts.

[pigdog]

Before you go off the deep end on housing, I'd suggest you read this:

http://www.fairtax.org/pdfs/FairTax_and_Mortgage.pdf

to find out the actual costs. You should, if you're interested in becoming a homeowner, be very much in favor of the FairTax to help you out.

You're also ignoring the effect of removing the present costs of the tax systemn which cause everything to be a good bit more expensive that it sould be under the FairTax. Both the new house and car markets will do just fine, thanks.

As for the prebate, you seem to misunderstand that it is based somehow on income. Nothing could be further from the truth; it is based only on family size and everyone is eligible to receive it (it's optional, though). Also, there IS no more IRS (or income tax etc.) as you would realize if you had read the bill. I suggest you do so. THEN come back and tell us all of the "loopholes" you think you seem.

[pigdog]

With you guys "simple facts" are never just that. They are always accompanied by a huge dose of your anti-FairTax misapplication of truth. Jorgenson was stating that assumption was for the purposes of his model and not that it was any sort of prediction of what might occur when the FairTax was implemented.

You SQLers are copntinually trying to put words in Jorgenson's mouth and give them an adverse meaning. Keep in mind that he also predicted huge economic benefits due to the FairTax and is strongly in favor of it - as are many other economists as can be seen by the letter from 75 of them urging it's adoption.

[Always Right]

With you guys "simple facts" are never just that. They are always accompanied by a huge dose of your anti-FairTax misapplication of truth. Jorgenson was stating that assumption was for the purposes of his model and not that it was any sort of prediction of what might occur when the FairTax was implemented.

You are one stupid SOB. I clearly stated that was his assumption in post 136 and the last post. You accuse me of 'misapplication of the truth'???? Can you even read??? I sometimes doubt it.

[pigdog]

Not so, and you've been shown this in past threads. Why misstaate it???

[pigdog]

You clearly fail to see why the different tax base will actually lower our tax burden I see. Guess you probably think that those in the illegal economy pay a full complement of income tax now, eh???

[Always Right]

What exactly did I misstate??? You are the one falsely accusing me of saying it was Jorgenson's prediction, when in fact I said 'assumption'. You are stuck on stupid.

[pigdog]

That wasn't what was being discussed. With the FairTax the compliance cost for taxes paid is zero. The discussion was not about the present compliance costs of the income tax. That's a different matter.

Get your subject straight before you start arguing.

[pigdog]

The poster Mojave seems to be one of those all-too-common cheap shot artists who do the hit-and-run thinking they are ultra-clever. They have never yet contributed anything substantive to the discussion and I doubt he will either.

[Always Right]

You get caught in a lie and then change the subject. You are the one who is clueless. Jorgenson 22% embedded taxes had nothing to do with compliance costs, they were in fact embedded taxes. You are the one who shifts and tries to change the meaning of words. It is a waste of time to discuss anything with some so dishonest as you.

[Your Nightmare]

You get caught in a lie and then change the subject. You are the one who is clueless. Jorgenson 22% embedded taxes had nothing to do with compliance costs, they were in fact embedded taxes. You are the one who shifts and tries to change the meaning of words. It is a waste of time to discuss anything with some so dishonest as you.

pigdog is the most pathetic FReeper I've ever encountered. Just horrible.

[pigdog]

Great, Nightie - a completely meaningless and off-topic study.

As I'm sure you know (but will not admit), state sales taxes are altogether different from the FairTax plan. Also, over and above just that basic difference the tax bases are totally divergent also so that using percentages from one to try to apply it to another is total foolishness.

Perhaps you believe you can trick those not used to your tactics into thinking that the percentages are, somehow, comparable or meaningful. THEY ARE NEITHER!!!

You post is trash and you are surely intelligent enough to realize it. Why post junk like that??? Are you that desperate?

[pigdog]

You should read the FairTax website. It clearly shows that the non-federal taxes apply to the basic product price - not the product price plus the subordinate taxes (as Looey continually states).

The FairTax does not tax state sales taxes. You've been given this information before - are you becoming a Looey???

[pigdog]

No - sorry - you're the one who's clueless. I was responding to Mojave about the compliance costs under the FairTax being zero ... which they are for taxpayers. See #119 & #142. You misunderstood the discussion

You are attempting to discuss compliance costs under the existing tax system - a whole different kettle of fish. Neither Principled nor I were talking about that at all (nor the 22% you try to sneak in there).