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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No. You are wrong. If it were a socialist's dream, then the socialists would want to pass the bill. But they don't. Socialists despise the bill and will do anything to prevent its passage. After all, it makes everyone share more evenly the cost of government and makes everyone's tax burden more visible and more painful.
...and the exemptions are a politician's dream.
What exemptions?
You seem to be what in olden days was called a mugwump or somethies a mugwamp (a fence-siter with his mug on one side of the fence and his wamp on the other). Can't make up your mind, eh?.
I see why I'm geting so many private mails about you and several of the Squirrels. The preponderance seem to believe you're a SQLer, too.
Privacy??? It's not the FairTax that requires reporting of earned income but the S/S laws. Those laws are quite independent of the FairTax and it is they that require the reporting.
Nor does the FairTax "require" you to register with them for the prebate which is optional. You needn't register at all if it a big point with you. Stick to your principles friend - waive the prebate and retain you private information about the family. (It's not to the FairTax anyway, but to the SSA that this is provided who, chances are, has it already if the truth be known - they just aren't going to assume you want the money in case you're one of those to whom family privacy is utmost. Your choice. Not required.
i said "requires...if you want your prebate" --- don't accuse me of not being able to read!
Both of your poison pills have been addressed multiple times by multiple FairTax supporters.
They are hardly worth further "pointing out" of the true situation to you with the exception of your gross mischaracterization of the prebate and exemptions as "equal evils". I just recently pointed out to you on this thread how and why this was not so yet you still profess the "company line" to try to combat the FairTax.
This amply illustrates why so many on these threads now believe that you are, indeed, adamantly oppoed to the FairTax.
i'm just stating that ONE aspect is a socialist's dream (to have as many citizens registered and receiving $ from the government on a monthly basis). it is the compromise to attempt to get liberals on board. (IMO)
(see Zon's reply re exemptions)
do you not actually read my posts? that would explain a lot. i stated i've changed my opinion since then. i've also stated that i question things for the purpose of discussion, such as the many items in the 309 post that are left untouched -- instead you'd rather harp on my opinion instead of agreeing to disagree like i've tried.
Understood, but read again. The point is that the prebate is optional, not mandatory. It is up to you to choose whether you want/need the money badly enough to comply with the requirement and supply the SSA with the requisite data or hold your family information private and not get the prebate.
That's called "freedom of choice" and it's something you don't have with filling out the income tax forms that actually require more of your "private" information than that.
Your choice, mugwamp.
How do they fare now? How do they fare under the FairTax?
| Current system | FairTax system | |
| Gross income | $10,712 | $10,712 |
| Less payroll taxes | -819 | 0.00 |
| Less Federal income taxes | 0.00 | 0.00 |
| Plus Earned Income Tax Credit | +4,204 | 0.00 |
| Add the prebate family allowance | 0.00 | +3,701 |
| Spendable income | 14,097 | 14,413 |
| Federal sales tax (30%) | 0.00 | -3,315 |
| Estimated hidden tax embedded in purchased goods (14.9%, or 28.2% on top of the cost of the good) | -3,101 | 0.00 |
| Purchasing power in after tax dollars | $10,996 | $11,098 |
thanks for the label. i really feel like part of your religion now.
"Both of your poison pills"
I DON'T HOLD TO TWO POISON PILLS. i'm really thinking you don't read the posts.
one i don't ascribe to at all anymore and the other I hold a negative opinion towards but understand that compromises have to be made.
please stop accusing me of being "ADAMANTLY OPPOED" to the FairTax. there are two reasons right now that i would be adamantly opposed: pigdog and Zon.
Only those Americans working for a living pay Social Security and Medicare taxes.Americans who receive income from stocks and bonds but don't receive a traditional "paycheck" don't pay Social Security or Medicare taxes.
That's paraphrased from The FairTax book. Do you know if a person with the above scenario is required by the SSA to report income to the SSA? It seems that they wouldn't.
S/S is for earned income only as I understand it.
M/C is a different breed of cat and costs whether one has earned income or not.
i said "requires...if you want your prebate" --- don't accuse me of not being able to read!
So now you claim you knew the prebate was voluntary all the time. You chose to misrepresent yourself. See below:
kpp_kpp: fairtax requires me to register with them and provide dependency info if i want my 'refund' (prebate), yet another invasion of privacy.335
You are not forced to sign up for the prebate, it is voluntary. Thus it cannot be invasion of your privacy.
i received a private reponse to an earlier statement i made "it is a liberal's dream to have every single family in the entire country on the dole of the federal government" stating "Privately, I agree with you." and went on to explain.
this from an individual here that strongly defends FairTax (in this thread) -- i can only assume that it was a private reply because they did not want to be attacked and labeled as "adamantly opposed" (humorous).
so, no, i have to disagree with you that.
the problem is the attack machine that is requiring fairtax supporters to be of one mind on all issues.
you can either defend the prebate as necessary to plan and a 'good' thing, including acceptance that it takes away privacy.
or
you can say well it's just an optional component, no real need for it if you don't want your privacy invaded.
not both.
how is it 'fair' that someone who chooses to give up their privacy gets a 'refund' but those that don't want to give up their privacy have to carry the full weight of the tax burden?
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To: Principled
The exemption of "primary housing and unprocessed foods" in return for eliminating the prebate. See post 317. 342 posted on 12/07/2005 3:59:05 PM EST by Zon (Honesty outlives the lie, spin and deception -- It always has -- It always will.)
do you not actually read my posts? that would explain a lot. i stated i've changed my opinion since then. i've also stated that i question things for the purpose of discussion, such as the many items in the 309 post that are left untouched -- instead you'd rather harp on my opinion instead of agreeing to disagree like i've tried. |
I read your posts. I responded to Principled. He wanted to know what and where the "exemption" issue came from. So I told him. See above^
if you've read my posts that quote is from a year ago.
in 318, my response to 317, i stated:
* i hold the OPINION that prebate and exemptions are equal evils
* i've since changed my mind on primary housing
* states don't seem to have all that much difficulty not taxing food
* skip the prebate and don't tax the two critical things that can't be purchased used: anything intended for human consumption but not a controlled substance, and medical care
* just my OPINION
so, no, "primary housing" and "unprocessed foods" do not reflect my opinion. and i know that exemptions are considered "a bad thing" from a political standpoint. so you do not need to keep reiterating, just try not to misrepresent my words to conform to your opinion of me.
I think your wording (which percentages are problematic. BTW) and repositioning of the $3,101 does nothing to improve upon the table as shown in the FairTax presentation.
If anything, your repositioning of the hidden tax figure of $3,101 implies that somehow the taxpayer could spend the $14,097 and somehow never pay the hidden tax, In fact, that is not the case as the hidden tax is embedded in prices and reduces his spendable income by the $3,101 so that his true spendable income is $10,996 which is the true purchasing power as stated in the last line of the table.
The FairTax table is just fine as it is and I see no rational reason for it be changed as you suggest.
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