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-

[Your Nightmare]

Variations in quality, consumer preference, myriad reasons.

So you aren't selling the same product. The question then becomes whether the consumer is willing to pay the premium you are requesting for the variation in quality and their preference. The amount of income taxes you pay doesn't sway them in the least. The price is still driven by the market.

Why do you think all prices of a good are not the same? Milk can go for $3.25 or $3.89 or $2.99.

You usually won't find milk at this wide a price range at the same store or even the same general market. Some similar products will be sold for higher prices because the business has investing in marketing campaigns to differentiate their product from others (that's why people buy name brands over generics). The consumer perceives a premium and is willing to pay extra for it. But still - THIS IS A MARKET DRIVEN PRICE. If the business tries to sell the differentiated product for more than the market it will bear - they won't sell and they will be forced to reduce their price. The income taxes the business is paying doesn't mean squat to the consumer.

[Your Nightmare]

No. That's stupid. Stupid, stupid, stupid. That's not what was said now, was it?

Yeah, I think it was.

When costs are greater than available funds.

But if you can just raise your price, why wouldn't you be able to make sure revenues were greater than costs? How could any business go bankrupt in your world? If they aren't making a profit they just raise their price.

You can if you like, but you cannot price to the extent of eliminating sales - because sales revenue is the only indefinite stream of cash flow with which costs may be paid.

But if you could raise your price without eliminating sales, wouldn't you do that even if you weren't paying taxes? Don't you like as much profit as you can get or are you a communist?

[pigdog]

It's good to know that you are really so foolish as to think everyone sells the same product at the same price (or even needs to). That helps us peg you for what you really are.

At the store where we buy milk there are different suppliers of the same milk and each charges a different price from the other. No, I'll take that back since two of the five suppliers happen to charge the same price for one of the three or more types they supply. Probably they all got together and dis this to confuse us, don't you think? Check with your wife if all milk prices are the same since you obviously don't do the shopping. Maybe she'll send you out on a "honey do" errand to research it (and buy some).

Actually Nightie I don't assume you've made four errors, I know you've made many more than that. Guess you don't remember the eleven you had on one thread. I guess the memory does dull with overuse and old age so you probably HAVE forgotten those nasty old "errors". I don't recall you admitting any of them - ever - no matter how egregious.

Certainly I will not admit to being in error for interpreting Jorgenson's work since I have not done so. That's what you SQLers have been doing - except that you've been misinterpreting it. I've merely been trying to set your malpresentations straight. You are the folks putting out repeated interpretations of his work and then claiming that your interpretation is what the FairTax supporters are claiming - while all along it's merely your misinterpretations that are in play.

[Principled]

Do you think I'm that smart? Wow!

Thanks, lewislynn!

[Principled]

You simply increase the price, if possible, to cover anticipated expenses. The result is reaching your profit goal.

Back to changing quotes to alter meaning eh? So predictable.

Fool.

[Principled]

So you aren't selling the same product.

I could be - consumer perception alone can allow differing prices. So the question remains, why a variation in price for the same product?

You usually won't find milk at this wide a price range at the same store or even the same general market.

You're wrong. I see it every time I go to Kroger.

If the business tries to sell the differentiated product for more than the market it will bear - they won't sell and they will be forced to reduce their price.

Right. Until they can't reduce it anymore - at what point will that be?????? When their revenues do not exceed their COSTS!

HELLO!!!?????

[Principled]

How could any business go bankrupt in your world?

Same as in your world - when expenses exceed sales revenues. Because, as you know, sales revenue is the only indefinite cash flow source from which expenses can be paid.

Since sales revenues are the sole indefinite source of funds, sales revenues must be sufficient to pay expenses - ALL of them. Even tax costs.

But if you could raise your price without eliminating sales,...

This is not what I've said. It's what you want to argue.

[Your Nightmare]

Right. Until they can't reduce it anymore - at what point will that be?????? When their revenues do not exceed their COSTS!

Don't you mean "costs plus income taxes"? Oh, right. There wouldn't be any taxes if they weren't making a profit. Does the price of this product the business is selling at cost have embedded corporate income taxes in it? (Your own logic is failing you.)

So what happens to a business that reduces their price "until they can't reduce it anymore" and still nobody is buying? HELLO!!!????? Their costs don't enter into the equation at this point. They sell for a loss and either try to cut costs or get out of the market.

[Principled]

Don't you mean "costs plus income taxes"?

No, I mean costs - all costs, including tax costs... costs like payroll taxes, compliance costs, and any income taxes they're planning on paying.

[Your Nightmare]

It's good to know that you are really so foolish as to think everyone sells the same product at the same price (or even needs to). That helps us peg you for what you really are.

I didn't say I thought "everyone sells the same product at the same price." I said my theory is know as "microeconomics."

(Yet another pigdog lie.)

[Your Nightmare]

This is not what I've said. It's what you want to argue.

Wasn't it you who said "You simply increase the price, if possible, to cover anticipated expenses."

[Principled]

So what happens to a business that reduces their price "until they can't reduce it anymore" and still nobody is buying?

They go out of business. Like the many US manufacturers that have left the US because of the high embedded tax costs - they go to a country that has less tax costs in prices - because they can't compete against business that has such a lower tax cost component in prices. HELLO?!

[Your Nightmare]

They go out of business. Like the many US manufacturers that have left the US because of the high embedded tax costs - they go to a country that has less tax costs in prices - because they can't compete against business that has such a lower tax cost component in prices. HELLO?!

So can a business determine what price they get for a product or not? One minute you're saying "You simply increase the price, if possible, to cover anticipated expenses". The next you are saying that expenses could exceed sales revenue as if the business can't "simply increase the price." Make up your mind. How is the price set?

[Principled]

So can a business determine what price they get for a product or not?

Business can certainly affect the price fetched by their product. I have not expressed any position about whether "a business can determine what price they get".

One minute you're saying "You simply increase the price, if possible, to cover anticipated expenses".

If a business needs more revenue, ONE of the things they may do is increase their price, if possible, to cover anticipated expenses.

The next you are saying that expenses could exceed sales revenue as if the business can't "simply increase the price."

Business may inrease their price anytime they want. But that isn't to say that the price will earn greater revenue. Maximum price does not bring maximum profit.

There are many factors affecting price. Market is only one of the factors. Another factor in pricing is generating sufficient revenue to pay expenses- all of them.... utilities, payroll taxes, copier leases, tax compliance costs, salaries, and anticipated income tax costs.

[Paul C. Jesup]

Some folks aren't interested in what is right, logical, or factual. They want to protect their own bacon at any and all costs.

Yes and some just want to hurt those in the U.S. by any means they can, like those in the leftist press does.

Arguing with them is pointless. You can't convince someone the sky is really blue if they deny reality.

But can we use this as evidense to have them committed to an insane asylum. ;)

[Dead Corpse]

Oh wouldn't that be nice.

"1+1=2. Agree?"

"Noooo!!! You just want to bankrupt the housing market!!!"

"Fit him for a straigh jacket! NEXT!!!"

[Paul C. Jesup]

I didn't say I thought "everyone sells the same product at the same price." I said my theory is know as "microeconomics."

But the current IRS tax system is unfair because it allows to those who are already rich, like limo-socialists, to live off interest from tax free foundations and pay only 13% a year (from Mrs. Kerry's tax return two years ago). While the rest of us pay around 20% to 30% in income taxes, not including the amount and time it costs to file the paperwork.

Fairtax would force the rich socialists to pay the same percentage of taxes at the retail level, as we do.

[Paul C. Jesup]

"Noooo!!! You just want to bankrupt the housing market!!!"

Which housing market are we talking about. The over inflated urban housing market? Or the rural reasonably priced housing market?

My family is in the housing construction business and if you knew how may times over the price for a house in a major city is, it would make your blood boil.

By the way, the tax panel who recommended those cuts to hurt everyone but themselves were socialist college professors who bitter that they lack the ablity to work in the world where marxism does not work.

[pigdog]

Sure, sure, Nightie. Now that you've said it, it passes from human memory, right (or at lease Squirrel memory).

"I didn't say I thought "everyone sells the same product at the same price." "

???Really??? Then perhaps you could tell us what this (from your post #693) means ...

"And why, exactly, would someone buy from you if your price was higher than the market price? Answer: they wouldn't. So you would lower your price until it matched the market price. "

We'll ALL enjoy watching you do your normal tippi-toe tap dancing around THAT gem.

[pigdog]

A truly lovely - and apropos - word picture.