Posted on 12/05/2005 2:36:33 PM PST by Eaglewatcher
Imagine if all of these trillions of dollars were added back to the American economy. On top of that, imagine saving the $500 billion compliance costs every year. These two things would give a huge boost to the American economy. Fortunately, there is a plan to make this happen, a plan sponsored by Georgia Representative John Linder. The plan is called The FairTax, or H.R. 25. Part II of this paper will describe The FairTax.
Officially called the FairTax Act of 2005, the FairTax would do many things to simplify the way Americans pay taxes, including completely abolishing the Internal Revenue Service. The FairTax would replace many of the taxes Americans pay, including the individual income tax, the alternative minimum tax (AMT), corporate and business income taxes, capital gains taxes, Social Security taxes, Medicare taxes, the self-employment tax, estate taxes, and gift taxes (Boortz 74-5). The elimination of all of these taxes would allow workers to take home all of their paychecks. No withholding and no income taxes. That's right, people would get to choose when they had to pay money to the Federal Government, and that would be at the retail counter. Their money would not be forcibly taken from them.
Notice the word replace in the paragraph above. Many politicians tried using scare tactics in the 2004 election, telling the people that their opponents who supported the FairTax would be adding the FairTax on top of all those other taxes. This is simply not true (81-2). The FairTax would replace all of those taxes. The FairTax is neither a tax cut nor a tax hike, but an alternative method of gathering revenue for the Federal Government (75). Remember the 22-cents-out-of-every-dollar embedded taxes described in Part I of this paper? Take all of those taxes out, and institute a 23-cents-of-every-dollar consumption tax, and the prices of goods and services haven't changed much.
What is the FairTax? The FairTax is a proposed national consumption tax on new goods and services at the retail level. Only new goods are included for two reasons: First, goods should only be taxed once, not every time they change hands and second, taxing only new goods keeps things simple. Imagine the bureaucracy that would be needed for all people to keep track and correctly file their taxes whenever they sold their car, etc. We are trying to move away from all of that complexity!
In Part I of this paper, I mentioned the IRS tax code and how it exceeds 54,000 pages and 2.8 million words (Americans for Fair Taxation). Ordinary Americans do not have the time to interpret this abomination called the tax code. We have to pay others called CPAs (Certified Public Accountants) to do it for us. Think about this: we have to pay people money in order to pay the government money. How ridiculous! With the FairTax, businesses would just collect the consumption tax at the time of purchase, much like they already do in states where there is a sales tax. This saves time, and money. Americans will be paying the same amount of taxes, while not having to pay CPAs. More money in the pockets of Americans (generated by not having to waste time and money with CPAs) means that Americans will have more money to spend on consumer items, and thus will be creating even more tax revenue! Additionally, those 5.8 billion hours (Boortz 43) that I mentioned earlier will be spent on producing. When Americans as an aggregate spend 5.8 billion hours trying to pay the Federal Government money, they are not at their jobs or at home doing anything truly meaningful. They are, in essence, wasting time. With the FairTax, and without the IRS, those 5.8 billion hours would add to the economy, generating more income for people to spend, which would then generate more revenue for the government. Those hours would also allow for more quality of life, giving parents more time to spend with their kids, etc.
While companies are forced to make tax-decisions they are hindered in making economic and capitalistic decisions. Eliminating the income taxes, both personal and corporate, and instituting the FairTax would help businesses. This is especially true of small businesses.
"President Bush recognizes that supporting America’s small businesses is critical to ensuring continued job creation. Small businesses create two-thirds of new private sector jobs in America, employ more than half of all workers, and account for more than half of the output of our economy." (The White House)
Small businesses employ more than half of all workers and generate more than half of our economy. Wouldn't it make sense to help small business owners? Help them out, and what do you get? More employment and an extended production possibilities curve. What kinds of things hinder small businesses? Taxes, and more specifically, personal income taxes and self-employment taxes. Because small businesses are small, the owners typically pay taxes on the personal level or as small corporations. Because they are small, these taxes hit them much harder than they would a larger corporation. Eliminating these costs would allow all businesses, small and large, to focus their attention on producing goods and services, generating wealth for themselves and taxes for the government.
More people would be subject to this tax as well, thus generating more revenue for the government (I keep mentioning more revenue for the government; I know that the government needs to greatly reduce its spending, but that's another argument for another time). Who else would be paying into our tax system? Illegal immigrants and tourists. Think about it, under the current system, neither pay income taxes or Social Security taxes anyway, because illegals don't want to get caught, and tourists don't work here. With the FairTax, they would pay into the system with every purchase they made at the retail level. Some people dislike the idea that foreigners should pay into out system, but I don't and here's why: if they want the privilege of being in this country (whether working illegally or visiting legally), then they should contribute. Don't think for a minute that Americans don't pay Germany their Value Added Tax (VAT) when we buy their products.
The FairTax would also tap the large shadow economy of the United States. Whenever you buy the services of a landscaper, maid, house painter, or hot dog vendor, and you pay them in cash, it is not likely that they are reporting most if not all of that income, and this is known as the shadow economy. That income escapes the clutches of the Federal Government, but is that really fair? If you have to pay taxes on your income as a college professor, but I don't pay taxes on my income as a theoretical house painter, is that fair? The answer is no. Under the FairTax, we both keep all of our income, and pay taxes at the cash register. In his book, which I have cited often in this paper, Neal Boortz cites a 2000 survey claiming that the “shadow economy accounts for more than 10 percent if America's GDP. . .†(93 *). Maybe that kid who mows your grass doesn't pay an income tax on the money earned by his services, but he'll pay the consumption tax when he buys a new video game at Blockbuster.
Many jobs are sent overseas when American companies take their corporate headquarters and manufacturing plants there. Why would they move away? Under the current tax system, businesses are burdened by the regulations and costs associated with compliance. How much money is overseas? “[T]he 2000 Merrill Lynch & Gemini Consulting study World Wealth Report estimates that one third of he wealth of the world's high-net-worth individuals is held offshore. How much would that be? Try $11 trillion - $11 trillion sucked out of the American economy, all of it immune to the tax obligations you suffer every April 15†(Boortz 97). Think about the size of that number. $11 trillion is enough to give 11 million people a million dollars each. This $11 trillion is not in the American economy. This $11 trillion is not producing jobs in this country, nor is it investing in capital or technology in this country.
Let's start putting all of this together, assuming that the IRS has been abolished, and the 16th Amendment has been repealed. People get to take home their whole paycheck every week or two. Their employers can hire more people because they have more money and a higher production possibilities curve. The cost of goods and services stays about the same as before because the 23% consumption tax is about the same as the previous 22% embedded tax (that most people don't even know they were paying). The shadow economy is drastically reduced. Additionally, businesses from overseas begin to come home to this relatively tax-friendly environment, bringing with them even more jobs and capital. Sounding pretty good so far, right? Now for the Grand Finale: The Prebate.
Lyndon B. Johnson launched his War on Poverty in the mid-1960s, and so far, not much has happened. Let's try a new War on Poverty: The FairTax. With this newly implemented FairTax, lower-income workers are already getting to keep their whole paycheck. Most of them never paid any appreciable amount of income taxes, but now they are not having to pay withholding taxes either. They have more money in their pockets. Goods and services cost about the same as before, so already these lower-income workers are doing better than before the FairTax. Let's help them out even further. H.R. 25, or the FairTax, provides for a prebate on the basic necessities of life. A prebate would be a check from the government given monthly to all working Americans to cover their costs of taxes on essential goods and services at the poverty line. That's right, the government would give Americans, and we'll focus on lower income Americans, a check to cover the taxes needed to pay for food and shelter up to the poverty line (Boortz 85).
Think about this for another minute, not only would lower-income Americans have more money in their pockets, but the cost of taxes on goods and services (the bare essentials) up to the poverty line would be eliminated by this prebate. This would essentially lower the prices of these goods needed by lower-income workers. Here's how this all flows out: 22% embedded taxes are eliminated, 23% sales tax is implemented, all Americans receive checks to cover this 23% up to their determined poverty line, lowering the costs yet again. The combination of more income and lower costs would greatly increase the purchasing power of lower-income workers, and would do wonders for the anti-poverty movement.
The FairTax would allow all Americans to keep their whole paycheck, while cutting taxes on goods and services up to the poverty level. The FairTax would eliminate $500 billion of waste every year, putting 5.8 billion hours to better use. The FairTax would tap the purchasing power of both illegal workers as well as perfectly legal tourists. The FairTax would greatly reduce the shadow economy in our country. The FairTax would bring back $11 trillion to our country. The FairTax would utilize all of this to generate more money for the Federal Government. The FairTax would grow the economy and help lower-income Americans. The FairTax is “about making April 15 just another beautiful spring day. . .†(Boortz XV). The FairTax Book by Neal Boortz and Congressman John Linder is a must-read, both informative and entertaining.
Bibliography Boortz, Neal & John Linder. The FairTax Book. New York: HarperCollins Publishers, 2005.
* “Friedrich Schneider and Dominik H. Enste, “Shadow Economies: Size, Causes, and Consequences,†Journal of Economic Literature, 38 (March 2000), pp. 77-114.†Cited in Boortz' The FairTax Book, page 93.
McConnell, Campbell R. & Stanley L. Brue. Economics: Principles, Problems, and Policies. 16th ed. McGraw-Hill/Irwin, 2005. Online. Americans for Fair Taxation. . Online. Tax Foundation. . Online. The White House: President George W. Bush.
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Read the bill, Nightie - what you seek is described there.
Don't waste your breath, Sprite. He has never once admitted to an error despite haveing many pointed out to him. That's also a characteristic of the SQL Squad.
A SALES TAX (the ST part of NRST) is: A tax levied on the retail price of merchandise!!
just admit that as a part of 'fair'tax webster's defintion of SALES TAX has to be modified -- then we can all get along.
my biggest problem with 'fair'tax is that more effort is wasted on fr discussion threads about the terminology (because of its label, because of its attempt to change the meaning of words, and because of its fuzzy math examples) that the real implications can not be coherently discussed and lobbied for (or against).
The FairTax doesn't change the benefit calculation...only the way the benefits are funded. AND because Congress has spent all of the money previously withheld, it is absolutely essential to sever the link between earned income and the funding stream. If we don't, we'll tax the productive sector to death....that's the reality.So we do this by taking money from people who won't get the benefits of the program. Nice... and socialistic.
Your attempt at some sort of static look at embedded taxes is incorrect since you include the payroll/withholding taxes that are not part of the cascading embedded tax picture. Those costs will remain under the FairTax so trying to claim they are embedded is not realistic.
Assuming some sort of breakdowwn as you do is also not realistic. I've showed you an example of how taxes cascade from one level to the next and become embedded into prices. This is not at all the same thing as the amount of income tax a given business pays, but is a part of tax costs passed to the next level and multiplying as they do so. that's a different animal that your assumed breakdown of a single situation.
We've been tropugh this before and yet is is quite obvious that you do not understand what cascading embedded taxes are nor how they work. The examples you cite have little or nothing to do with hidden taxes. I suggest you read #217.
If you're bothered by having all that savings and investments, why not send it to JimRob???
No, Nightie, he wasn't being dishonest --- YOU were. The poster said in his original comment that these were Rob's words, not those of the authors.Riiiight! When sprite518 told RobFromGa "Why do you always have to be so dishonest when it comes to the Fair Tax Debate? Please tell me where in the Fair Tax book does it say it's a 'Free Lunch'? Those are your words not Linder and Boortz." he wasn't saying that RobFromGa claimed The FairTax Book said the FairTax was a "free lunch." Gotcha!{wink}{wink}
The FairTax doesn't change the fundamental nature of the beast. Social Security is and always has been socialistic. Moreover, the FairTax does not change the way benefits are calculated. Benefits have always accrued on the basis of earned income, not unearned income.
As I see it, we have roughly three choices:
1. Continue the program as is, taxing the productive sector into oblivion.
2. Continue the program as is, taxing all via a consumption tax.
3. Tell the American people the truth about the Ponzi-scheme and severely reduce expected benefits.
It appears that NO ONE is willing to tell the American people the truth. It seems really stupid to tax our productive sector into oblivion, so severing the link between earnigns and the funding stream appears to be the only viable alternative.
Were I crowned Queen, I would put an end to the program, decree that all babies born after a date certain would be ineligible for blanket benefits. That would circumscribe the beneficiary pool, and halt the runaway train. I would permit IRA's to be opened for each and every newborn born after the date certain, to be funded voluntarily by parents, grandparents, aunts, uncles, God parents, etc. We could then start a dialog on how best to deal with the existing pool of people who expect benefits. Remember, the net present value of the unfunded liability exceeds the net worth of the country. Congress has spent and continues to spend the surplus now generated. This is not going to be a painless thing to fix.
I'm just the messenger, the bearer of the unvarnished truth.
If you have a better plan, I'm all ears.
No, the FairTax is revenue neutral including the prebate funds. And the prebate is not an allowance, but a rebate of some of your tax money in advance. Nor is it an enitlement.
Not everyday will be tax day - but only those on which you buy something taxable. In addition, there is no extra work on the part of the taxpayer in filling out forms, etc. as with the present system ... it's a whole lot less painful and there is no need to prove your innocence as a taxpayer; indeed no interaction at all with the taxing authority.
In fact, there will probably be very few checks issued since the goivernment typically issues S/S payments wia wire transfer directly to bank accounts.
Nigntie, Nightie ... you're hopelessly ignorant.
OK, and you remain unknowledegeable about hidden taxes.
Where is it you think you see someone trying to change the meaning of those two terms???
And THAT'S Bovine Scatology (B.S.). It was related at least twice that I can think of in this post as to how the name originated.
You Squirrels carping about the name of something merely shows how your arguments have degenerated into nothingness.
How about calling it the "kpp_kpp_kpp_kpp" tax instead???
And it has been clear from your postss on several threads now that you do not understand what embedded, cascading taxes are nor how they umple through he production/distribution chain.
You "estimations" of embedded taxes are not at all that but are merely what you think a static tax amount might be at a single level of the chain. That's not what hidden taxes are nor how they come about. Read #217 more thoroughly to begin to understand.
Is it 'fair' that all wage earners pay higher tax burdens to help pay your medical expenses?
Is it 'fair' that others pay a greater burden so you can have he benefits of enjoying those little cherubs - escecially when some of those taxpayers will remain childless forever (and not by choice).
Is it 'fair' that I spend X dollars raising a child and that child is killed or maimed in a terrorist attack by some religious fanatic (or has his family and his entire city destroyed)? (Your "paying nothing in comparison with no children" makes no sense so I've ignored it).
You're speaking about life,not the FairTax. Life isn't fair, the FairTax is in that everyone pays taxes at the same tax rate. No one is given preferred tax treatment.
Once again, though, you've missed how the name originated.
They both describe the same amount of taxz. What is it you misunderstand about that?
all i'm saying is an income tax is levied AGAINST the income BY DEFINITION and a sales tax is levied ON the retail price of the merchandise BY DEFINITION.
to say "inclusive sales tax rate" is both doublespeak and doublethink -- all i mean by that is an attempt to change the commonly accepted definition.
i don't have a problem with saying the rate is 23% in comparison to an income tax. i don't even necessarily have a problem with the rate being a 30% SALES TAX (although promoters of 'fair'tax seem to abhor/avoid-if-possible that fact).
but it is a silly attempt at deception to try and show sales receipts as having line item showing a 23% tax rate.
Sales Tax (Dictionary.com, Amer Her): A tax levied on the retail price of merchandise and collected by the retailer.
Sales Tax (m-w.com): a tax levied on the sale of goods and services that is usually calculated as a percentage of the purchase price and collected by the seller
Sales Tax (Cambridge Dictionary of American English): is tax on things people buy in stores
Sales Tax (encarta.msn.com): a tax on retail merchandise that is levied by the federal, state, or local government and collected at the point of sale by the retailer
Sales Tax (www.wordsmyth.net): a tax on retail sales, usu. set at a fixed percentage of the sale price and paid by the consumer.
i don't care if they call it Might Be More Fair Tax, National Sales Tax, Pay Your Gov Dues Tax, Give Me Your Cash Tax, but 'fair'tax is doublespeak regardless of its original intentions. my opinion, i'm entitled to it, it doesn't change any of my other questions or points, end of subject.
regarding "that's life" -- sure it is, but i'm not talking about the expenses themselves, i'm talking about the taxes on them as a way of funding our government in light of the word 'fair'.
I understand them. I just reject your extremely high estimate of their figures. Business profits are about 10% of the economy. Taxes on those profits are about 2% of the economy. Unless you are saying that tax compliance costs are 20% of the economy (full time work for 30 million people), you have to find other costs to get to a 22% embedded tax.
If the average $100 item has $22 of embedded tax, how much of that is business tax, how much is compliance cost, how much is employment related tax and how much is something else?
this whole argument is pointless considering i prefer neither.
it gets funny now considering my preference is for "inclusive", just not the way 'fair'tax proposes. my preference for a national sales tax would be to have it HIDDEN like the gas taxes are today. you pay the posted price, period. state+fed included. if you want to show the tax amount, fine put it in fine print at the bottom of the receipt - you can tell how much went to fed, how much went to state, how much went to soc security, etc. and in that fashion it makes perfect sense to show it at the inclusive rate -- you are showing the % of the total payment that went to the various departments. my only point is that if a gal of milk is going to cost you $2.49 the just post the price as $2.49 not as a $1.77 (+ 30% Fed, 8% State sales taxes).
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