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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To pick a single instance out of your cavilling
Great word. The cavilling is obvious. Especially in his last post. He chose to evade The Point of post 317. The Point directly addressed/challenged his often proclaimed, thus not trivial, instead important remarks wanting to get onboard or support the FairTax.
cavilling: noun, An evasion of the point of an argument by irelevant distinctions or objections
cavilling: verb, raise trivial objections.
i'm so sorry. what in 317 did i not address for you?
for some reason i see the exact opposite. my questions and points are ignored and instead the responses step around what i ask and claim irrevelance, "cavilling", politicization, etc.
i've directly responded w/o name calling to every issue asked of my opinion.
It's been explained to you several times in terms that anyone should be able to understand that you are merely attempting to pretend that the $3,101 price increase under the present system does not exist so that you can add another $3,101 into the person's spendable income ... if he's spent it on these higher-priced things, the money is no longer part of his spendable income, it is already spent and cannot be counted twice as you wish to do.
The FairTax chart you gripe about shows the taxpayer as having the $14 K spendable (as you claim it does not. You're merely attempting to lower the prices paid under the present system - sorry, won't wash. Even Beardsley Ruml who started the withholding knew that.
On the FairTax side of the table, the taxpayer DOES receive the $3,701 spendable money - and, though not shown in the table, gets the additional benefit of lowered prices.
The table is not misleading at all, but your grasp of what it shows is definitely off base.
The prebate and exemptions are not at all "equal evils" since the prebaate is clearly defined in the bill which will be the tax law using longstanding and widely-used measurements of poverty-level income (which definitions, BTW, are not simply "easily manipulatable" since they are widely used in many government programs. OTOH, exemptions ARE easily manipulated by politicians as can be seen by the present tax law mess (and by exemptions in state sales taxes now). The two things are quite different in the ease with which they can be manipulated (or not) with exemptions being far more subject to such political mischief.
i'm so sorry. what in 317 did i not address for you?
"Don't pi$$ down my back and tell me it's raining." -- Outlaw Jose Wales. Don't feign that you failed to notice The Point on my account because you evaded it on your account. It exposes your fraud. No way you could not have noticed it. In final analysis, there is nothing to address, for it is what it is.
a) ok. so we disagree on how the table should present the potential reality of future spending power. fine.
b) prebate. ok, so you're for 'income' redistribution - just via puting everyone on welfare (oh, wait, "refund") paid for by a sales tax. fine. have at it. if the EIC did not exist there would be no need to propose prebates in fairtax.
i'm sorry, yes i try to ignore name calling because i do want to discuss the issues.
why are you calling me a fraud because i have questions or criticisms?
My apologies for expressing it in a way you did not understand. It is certainly not a mere matter of definitions of sales tax in the sense of your dictionary definitions (inclusive vs. exclusive) but rather in a state's electing (since it is not mandated by the FairTax law) to conform its sales tax system to the FairTax. This has a much more profound effect on the state tax rate than the inclusive/exclusive convention.
As I pointed out to you the dictionary definitions allow the use of either "inclusive" or "exclusive" while you seem to try to interpret the definition as only meaning exclusive. the rates can be expressed either way and still be within those definitions.
You need to devote some research time to how existing sales tax rates are constituted and it would greatly help your understanding to read all of the estimated state sales tax information from the FairTax website.
The upshot of this is that most state's doing so will have sales tax rates that drop dramatically. And that means the ACTUAL rate and not just the expressed (inclusive or exclusive expression of rate) one.
And I have responded to your remarks with substantive information much of which you prefer to ignore or misinterpret while repeating things that are incorrect that had just been explained to you.
And, yes, many of your presentations amount to cavilling. And, BTW, that is no "name-calling" is any respect but a description of the overall quality and content of your posts.
You fraudulently proclaime that you'd like to get onboard the FairTax when your words contradict that. See post 317.
In post 317 I reposted the three links that you put in your 313 post. You supplied those links to support your assertion that you would like to be on board the FairTax. I read those links and other posts by you on each of those threads. But I repeat myself because I already told you I read them. You gave supporting links and I used your own words from the same threads to show how you contradicted your assertion.
yes ok. thank you.
yes. sales tax rates may drop if states adopt a fairtax methodology of their own because right now most services aren't taxed and under a fairtax system they will be -- thus states will be able to lower the rate across the board.
also, to clarify, i never said only. i said commonly accepted definition. i.e. the math text book example of "compute the sales tax rate if a shirt costs $15 and the tax is $4.5" -- like i said that is not made up, it is what it is. by "commonly accepted" i meant both taugh in schools and accepted be common people -- i can't think of anyone, except maybe yourself, who would look at the above math problem and answer 23.0769%. (it's humor, lighten up)
"You fraudulently proclaime"
i was on board 100% middle of last year. since about a year ago i've been straddling the fence between fairtax and flattax. status quo is not an option.
re 317:
in 08/2004 i expressed my full support for fairtax (that link was the only 'proof' i could find on fr quickly). if you don't believe me then you don't believe me, i can't help that.
in 11/2004 i raised a question/concern regarding the 16th amendment which was pleasantly addressed in post 32 of that thread.
in 12/2004 there was a post that indicated that i might be questioning a few things about fairtax
in 11/2005 (the one you brought up) i first indicated that i may be 'leaning' towards a flattax
i'm sorry but i don't see the fraud or contradictions in my progression of thought. most people should be able to just claim to know what they were/are thinking and you'd have to accepted it at face value -- here i went and even provided some 'evidence' to back up my claim, and get called a fraud.
Zon: "You fraudulently proclaime"
The full quote is: "You fraudulently proclaime that you'd like to get onboard the FairTax when your words contradict that."
i was on board 100% middle of last year. since about a year ago i've been straddling the fence between fairtax and flattax. status quo is not an option.
Until today when I posted a quote of you from a recent thread (47) wherein you say "the more i lean towards a flat tax", your assertion on this thread has been that you want to be on board the FairTax. As soon as I highlight that quote you change your assertion. Now you assert you straddle the fence. How convenient it must be for you to contradict your often stated assertion and just gloss over the fact that you contradicted an important stance you've held on this thread Post 317 nailed it. It is what it is.
Side note: a flat tax is an income tax. Income tax oppresses freedom and invades privacy.
this is crazy. i really don't get what you don't believe about me.
i say i want to be on board with fairtax (which indicate that i'm not). you say that i never wanted to be on board with fairtax because of a post saying i was leaning toward flattax.
OK. WHATEVER. i can see why i got the private mails that i did regarding you and pigdog.
"Side note: a flat tax is an income tax. Income tax oppresses freedom and invades privacy."
right. which is why i WANT to be on board with 'fair'tax. but i have issues with it. so be it.
privacy? fairtax still require reporting of earned income so they can pay your social security based on it. yes, that is better than today but it still 'invades privacy' nearly as much as a flat tax. fairtax requires me to register with them and provide dependency info if i want my 'refund' (prebate), yet another invasion of privacy.
I'M ON THE FENCE. get over it.
a) No, it's not "OK". And it is not merely a difference of opinion. Tha presentation in the FairTax table you reference presents to situation honestly and fairly. Your representations do not but instead try to warp money already spent ($3,101) out of the spending classification and pretend that it instead represents additional spendable money. It does not since it is already spent out of the wages.
b) Also not "OK" as your characterization of the prebate as "income redistbibution" is nonsense and neither something I'm "for" as you claim, nor is it welfare. It is, instead, as has been mentioned many times a rebating to the taxpayer of his sales tax paid. Nor does it go only to a selected subset of taxpayers as does the EIC program or other welfare handouts intended for specific groups rather than the entire taxpayer base. That is a huge difference.
a) the $14k is money the person earned (or was given) and has in their hand - the $14k itself makes no indication of the cost of goods to be purchased with that $14k.
b) some will get 100% of their tax payment refunded, some will get 50% refund, some will get 10% refund, some will get a 1% refund. some, who don't want to sign up for this welfare privacy invasion will get no refund. redistribution, period - partially because if this redistribution wasn't necessary to get liberals on board the overall rate would be lower.
name one state that had to implement a sales tax refund to get a sales tax law to pass? in state systems the poorest of the poor still pay sales tax and don't get it refunded.
i say i want to be on board with fairtax (which indicate that i'm not). you say that i never wanted to be on board with fairtax because of a post saying i was leaning toward flattax.
And because of the two poison pills you hold onto which you know make it virtually impossible for you be on board the FairTax. Both of which are very important components of the FairTax and if they were eliminated would profoundly change the FairTax. Poison pill 1) eliminate the prebate by exempting certain products and poison pill 2) repealing the 16th amendment prior to implementing the FairTax--which is virtually impossible as there would be no way to fund the government without a replacement tax system already in place. And, your continued misuse of the embedded tax cost number, and your harping on the non-problem of the definition of sales tax. And, your caviling And, shall I go on...
i can see why i got the private mails that i did regarding you and pigdog.
Welcome to their club. You're on board.
i responded to (2) already. i made a statement over a year ago, someone responded (as i indicated) -- words said in a discussion do not mean they are set in stone forever. it is still a valid fear that politicians will jump on this train and in the "spirit of compromise" somewhere down the line drop the requirement to repeal the 16th amendment. but i fully understand that it cannon be repealed BEFORE, they have to happen at the same time.
as for (1) i stated the prebate and exemptions were equal evils and indicated my PREFERENCE. the prebate is a socialist's dream and the exemptions are a politician's dream. i fully understand that deals have to be made with the devil to move something like fairtax forward. that isn't going to stop me from holding or expression my opinion and searching for alternatives, etc.
You continue to use only the tax exclusive concept in trying to force all tax rates into such a channel. Call it "commonly accepted" definition all you want, your intent is to pose that this is the only way to consider tax rates ... and it clearly is not. If it were, then the dictionary definition would indicate that (and it does not so indicate but in fact some of those clearly show there are other rate definitions as well).
So if you "never said only" you certainly made it clear (with your many comments struggling to bless ONLY the tax exclusive rate) that your intent is to show that the inclusive method is somehow "suspect". It certainly isn't and might easily have become the more commonly used method - and may in fact do so when the FairTax becomes law.
Nor did I say your text book example was "made up" (or even inferred that), so where did such a notion spring from??? I observed that it could have shown both methods of calculating the rate.
BTW I don't object to your humor but in fact I can think of a lot of people who would recognize both inclusive and exclusive possibilities in your examples and I am amazed you cannot.
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