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Posted on 01/11/2006 11:59:10 AM PST by Eaglewatcher
There are essentially three tax reform proposals being considered by Congress. There’s Rep. John Linder’s (R-GA) FairTax, the flat tax, and the politically (though not popularly) preferred method of incrementalism.
Before we dwell on the differences between the flat tax and The FairTax Book co-authored by John Linder and myself, let’s acknowledge one political reality illustrated by the success of both The FairTax Book and Steve Forbes’ Flat Tax Revolution: the people of the United States are ready for bold and decisive tax reform NOW. They don’t want the incremental approach. The FairTax Book would not have debuted No. 1 on the New York Times Bestseller List if people were disinterested in wholesale tax reform.
Pleasantries aside, let’s illustrate the superiority of the FairTax plan over a flat tax. Flat tax advocates propose a flat 17% tax on all earned income with just a few allowable deductions. Nice try, but we’ve been there --- done that.
In 1986 Congress passed what was essentially a flat tax. The main difference between the 1986 effort and that proposed by Dan Mitchell, Steve Forbes and others was that the earlier effort set forth two flat tax brackets: one at 15% and the other at 28%. It’s now 2005, some 19 years after this attempt at a flat tax … and the tax code has been amended nearly 10,000 times.
A flat tax leaves politicians room to tinker, to manipulate the tax code for the benefits of large campaign donors or specific constituencies. As we’ve seen, with a flat tax it is all too easy for the political class to decide to add just a “small” surcharge to high income taxpayers; after all, the surcharge will only affect a small percentage of taxpayers, and the money can be used to buy votes from an even larger percentage! Under the FairTax, the national retail sales tax, there is no way to raise the tax rates on the rich, or to favor any one particular business group. The FairTax treats each and every citizen exactly the same, playing no favorites among people or business entities. You can’t raise the rate without raising it for everyone, nor can you offer one particular product a break since the tax is applied universally. Nobody, rich or poor, has to pay the FairTax on the basic necessities of life, because the prebate* is applied universally.
The FairTax would constitute the largest transfer of power from government to the people since the Revolutionary War. The flat tax takes no power from government. The FairTax is a revolution. The flat tax is an idea that’s been tried before, and found wanting.
*Prebate? Read The FairTax Book … you’ll love this idea.
Good find. Nice to see the attention being given the Fair Tax Act by NB.
If anyone would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
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With the FairTax Joe will get a monthly "bonus".
It is not that they wouldn't or couldn't! Its that it is a lot more obvious and people are reminded every time they purchase anything.
"The fact that they use a euphemism to describe it instead of calling it what it is, a SALES TAX, should be a red flag."
So you object to supporting a specific proposal, rather than merely a form of taxation? That is a red flag for me. There are a number of flat tax proposals in congress (and even more that are promoted by FReepers), none of which has any real political traction, even though the flat tax concept has been around for a long, long time.
The Burgess bill in the house (which is what Dick Armey's proposal has morphed into) does not replace single line of the 60,000* page mess we have now. It merely adds a few hundred/thousand more pages to cover the flat tax option.
* The 60,000 page total is from 2004, the total at the end of 05 will be significantly higher.
"False. You just magically declare education an investment and not consumption. The Fair Tax does exactly that. It has the same exact effect of exempting everyone providing education (teachers, suppliers of schools, etc.) from paying an income tax. Now who wouldn't want to be exempted from the income tax? Expect every industry to demand to be an 'investment' rather than consumption."
False. It can't be done "magically"; it requires legislation. If that weren't the case, we would just "magically" pass the FairTax.
In the event that the exceptions that you fear are incorporated into the FairTax via legislation, the overall rate for the rest of us would have to be increased to make up the difference. Do you think there might be political resistance to that?
"It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, 'in political arithmetic, two and two do not always make four.' If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them."
Alexander Hamilton in Federalist #21
"Even Boortz himself admits that the Fair Tax does nothing to limit Government spending, and is designed to be revenue nuetral."
I think you are putting words in Boortz's mouth. Saying it is revenue neutral does NOT mean that it does nothing about spending over the long term.
In fact, making the taxes that we all pay more visible is not only an effective way to appraoch the lack of spending discipline, it is the ONLY way.
The alternative is to adopt a defeatist attitude and covince yourself that nothing can be done.
“I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accept it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.”
Alan Keyes “The Power of the Purse”, WorldNet Daily, August 27,1999
Look at how many Freepers have misguided support for the Fair Tax even though it exempts the education sector from taxation. That increases the rate on everyone else.
You obviously haven't thought this through very carefully. Tax codes throughout history have favored certain sectors of the economy at the expense of all the others.
As a supply siders, I support the flat income tax. You do know that the flat income tax is a tax on consumption, don't you?
As a supply sider, I support the flat income tax. You do know that the flat income tax is a tax on consumption, don't you?
"This is true only in non monopoly situations. In situations that are monopolies or near monopolies, the business/owners really do pay the tax."
Incorrect. Monopolies only exist with government sanction. Where the government grants monopolies, it sets up regulatory authorities to set pricing. These are based on some sort of cost plus formula. An example is utilities. Any reduction in the cost structure will result in a corresponding reduction in pricing.
"And in non-monopoly situations both the producers and the consumers effectively pay; the relative amount depending on the specific demand and supply curves."
What is the mechanism for allocating the tax burden to producers?
"Don't get me wrong. I don't oppose the fair tax - I just think it's unlikely discourage Government spending, and may even make raising taxes easier."
Setting aside for a moment my belief that visibility is the key ingredient in addressing the level of taxation, let's look at the other side of the coin. Let's suppose that the FairTax is only successful in eliminating $100 Billion per year in wasted compliance costs. That is $1 trillion every ten years.
If that were all that it did (and both I and a majority of economists believe it will do a lot more than that), wouldn't it be worth doing?
"Look at how many Freepers have misguided support for the Fair Tax even though it exempts the education sector from taxation."
You consider it misguided; I consider it a difference of interpretation. You obviously consider education to be consumed. I do not and I don't think that many others would consider education to be an article of consumption.
"You do know that the flat income tax is a tax on consumption, don't you?"
I am aware that any income tax proposal can have adjustments to the base that will enable it to mimic some of the economic benefits of a true consumption tax. That is as true of the current progressive system as it is to a flat tax proposal.
However, I am not aware of any flat tax proposal currently submitted as a bill in congress which is in fact designed in that manner. Certainly the Burgess bill does not.
You speak of "the flat tax" as if it were a single, clearly defined proposal when, in fact, it is merely a form of taxation which can be designed in any number of ways.
This is why FairTaxers refer to their proposal specifically, instead of saying that we support sales taxes.
One of the economic benefits that no flat tax bill can offer is to make US produced goods more competitive in the increasingly global economy.
It's not a matter of interpretation. Either you want to tax all sectors of the economy or you don't. If you don't want to tax education, admit it. Admit that the tax code should pick winners and losers in the economy. But don't say that it is a matter of opinion whether you're taxing all sectors or not.
"It's not a matter of interpretation. Either you want to tax all sectors of the economy or you don't. If you don't want to tax education, admit it. Admit that the tax code should pick winners and losers in the economy. But don't say that it is a matter of opinion whether you're taxing all sectors or not."
Ok, I'll come clean. I want to tax consumption. I don't want to punish savings and investment.
Satisfied now?
No. Do you want to tax the consumption of education? Or do you want the education sector to be untaxed?
that horse left the barn long ago. they turned up the heat slow and the frogs didn't notice. in fact, the frogs liked it so much, they're now addicted to it.the addicted spawn more little addicts and the cycle continues and grows.
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