Posted on 05/05/2006 1:35:32 PM PDT by RobFromGa
In my letter to Rep. Linder and Mr. Boortz of August 24, 2005, I pointed out a number of what I called “serious misrepresentations” of the Fair Tax plan contained in “The FairTax Book”. I specifically named many of these by page #.
Now that the revised second issue is out, let’s see what they did to these passages in the book:
First edition page 55, you go on to explain that these embedded taxes are “in addition to the money taken out of your check in income and payroll taxes.”
Second edition- this line was eliminated. This means that they are acknowledging that the 22% embedded taxes INCLUDE the income and payroll taxes which was one of my points all along.
First edition page 59, “Once the FairTax takes effect, you’ll be receiving 100 percent of every paycheck, with no withholding of federal income taxes, Social security taxes, or Medicare taxes and you’ll be paying just about the same price for T-shirts and other consumer goods and services that you were paying before the FairTax.”
Second edition- “Once the FairTax takes effect, you’ll be in complete control of your paycheck as nothing will be withheld and your purchasing power for t-shirts and all other goods and services will be almost exactly what it was before the FairTax.”
This means that they are acknowledging that “purchasing power” will remain the same, not a big increase in purchasing power as they previously asserted with their larger paychecks/same prices verbiage. They eliminated the “100% of paycheck” wording.
First edition page 83: “Remember that the poor, along with everyone else—will no longer have Social Security taxes or Medicare taxes removed from their paychecks. Whatever they earn, they get on payday. For most of those we categorize as poor, this would mean an immediate 25 to 30 percent increase in their take-home pay.”
Second edition- “Remember that the poor, along with everyone else—will no longer have Social Security taxes or Medicare taxes removed from their paychecks. Whatever they earn, they get on payday. If employers leave this money in paychecks instead of taking it out of price, most of those we categorize as poor, this would mean an immediate 25 to 30 percent increase in their take-home pay.”
Of course, this acknowledges that the employer has a choice to make—to pay the worker his current paycheck and not reduce prices (meaning prices with FairTax added go up 30%) or to cut paychecks to present takehome levels. They cannot both give workers more takehome pay and reduce prices. The Free Lunch described in the first edition is eliminated.
First edition, page 84, you make it clear though that even though the workers will keep all of their paychecks for a big raise, you still believe that because of “the disappearance of the embedded taxes, the total price paid for consumer goods will remain very nearly the same”.
Second edition—“when you factor in the combined lower prices/higher takehome pay caused by the disappearance of the embedded taxes” prices will remain about the same.
This again acknowledges that they money currently deducted as taxes can either be used to increase take-home pay or reduce prices but not both at the same time. If they were being more honest here, they would have referred to purchasing power remaining the same rather than prices, but they are trying to put the best possible spin on this major admission.
First edition page 111, you tie it all together with a Quick Review in which you erroneously assert that “Here’s what happens when we pass and implement the FairTax plan:
“We start collecting 100 percent of our earnings on our paycheck.
“We all get virtual raises, since payroll taxes are no longer siphoned from our checks.
“The prices of consumer goods and services remain essentially the same, with the removal of the embedded taxes compensating for the added consumption tax.”
Second edition:
“We start controlling our earnings in every paycheck” (whatever that means)
“100% earnings” line is eliminated from the second edition. "virtual raises" is likewise eliminated.
“Our purchasing power for buying consumer goods and services remains essentially the same, with the removal of the embedded taxes compensating for the added consumption tax.”
This is a MAJOR difference in the Quick Review! In the first edition, they promised larger paychecks and prices remianign the same—which means a major increase in purchasing power. Of course this was a ridiculous promise. In the second edition, they say our purchasing power will be about the same.
They still left a lot of wrong and misleading verbiage throughout the book, but they addressed most of the concerns that I sent to them and removed those claims in the second book.
You're awful bossy. Do you work for the government?
The IRS is nosy enough. I'm certainly not going to discuss my taxes with you, of all people.Huh? I'm just asking if you paid any taxes, not how much? Jeez... If it makes you feel any better I paid person income taxes and payroll taxes last year. OMG, I can't believe I put that on the internet!!!
Maybe if you are entering this conversation in mid-stream, you may think that this "what I found wrong" is unimportant. But there are many, many of these threads and this discussion has meaning to many of us on both sides. It had been a bone of contention for many years and now they are giving in on one of the main tenets.
And this is not about me beating my chest, regardless of what anyone thinks, this is about finding out the truth of what the FairTax impact would be on the economy-- and wages and prices and purchasing power determine consumer behavior so I don't know how you could find a more fundamental building block.
My personal belief is that we need to reduce spending, fix the entiltlements (privatization), eliminate corporate taxes completely, continue to reduce marginal income tax rates, and eliminate death taxes. The Fair Tax is not what it claims to be.
I've got something from a Harvard grad-u-it, just like our 'friend' here:
The end of income tax, the return of economic liberty
August 19, 2002
Editor's note: The following commentary by Alan Keyes first appeared in Business Reform Magazine, a Christian business magazine applying God's word in the workplace.
Is the economic policy of the United States on, say, taxation, an economic question, a political question, or even possibly a spiritual question? This is perhaps not as easy a choice as it looks, and we should, in particular, not be too quick to rule out the third option.
Any businessperson who is also a serious citizen and Christian knows that few aspects of business can be completely cut off from the life of citizenship or of faith. Respecting the moral integrity of the people who are my business associates and customers is not just good business. It is also the crucial daily work of citizens in a free republic, and of believers seeking to respect the image of God in their brothers and sisters.
Americans are blessed to live in a regime of liberty, including economic liberty, founded in respect for the principle of equal human dignity as the gift of God, the Creator. In America, from the beginning, economic liberty, political justice, and shared friendship with God have been understood as compatible, even essentially linked, human goods.
Accordingly, Americans have a responsibility to approach economic questions in awareness of the political, even religious, implications of the choices we make. We, the people, are responsible for making decisions of economic policy that respect and confirm the equal dignity of our fellow citizens under God. Our economic debates need not, of course, be explicitly theological. But an understanding of American citizens as self-governing, rational, equal, and morally responsible agents must be the fundamental context in which our economic policies are evaluated and chosen.
In this sense, the debate over the national tax system is not a merely economic issue, but a political question of justice and of our equality as morally responsible before God. America was born in a dispute about taxes that inspired, ultimately, the great statement in the Declaration of Independence that all men are created equal. Today's simmering revolt against an oppressive and humiliating tax system is important for many of the same reasons. So let me turn now to a more detailed discussion of what is at stake for America in the issue of "tax reform."
"Fundamental" reform?
Few issues provide such an enduring occasion for political debate as the question of how to fund the activities of the federal government – the question of taxes. In recent years, we have approached national agreement that the current system is deeply and perhaps fatally flawed. Accordingly, the politicians have presented various versions of what they call "fundamental reform."
But much of the talk of fundamental reform is really an effort to tinker with the existing tax system, in order to help diffuse growing public discomfort and even outrage. Few political leaders are willing to consider the most necessary change, because it would involve removing politicians from their gatekeeper role over the income and resources of all Americans.
Real reform requires abolishing the income tax and returning to the system our Founders intended, funding the federal government with tariffs, duties, and excise taxes – sales taxes – not with the privacy-destroying income tax. We should return to the original, constitutional tax system of the United States of America.
Our Founders frequently quoted a principle from Blackstone's commentaries on the laws of England: "A power over a man's resources is a power over his will." To control the resource base of a decision-maker is to control his decision. But the ultimate decision-maker in American life and politics must be the people. And the people cannot be free without a resource base of material comfort and sustenance free from government domination or control. A tax system putting government in control of the people's income irresistibly tends to put government in control of political decisions as well.
The Founders sought to avoid this path to tyranny. So they made a direct tax on the income of individuals unconstitutional.
The slavery of income tax
The reversal of that founding wisdom came during the "progressive" era, at the beginning of the twentieth century. A mentality of class warfare prevailed at the time, a first flush of socialism in American life, and the income tax movement was one of its results. With this mentality setting farmers against industrialists, urban folk against rural, and poor against rich, everyone was led to expect that an income tax would hit the other group harder. Chiefly, of course, the argument was that the rich would pay a disproportionate share. One thing they didn't tell us was that in this socialist scheme anyone with a private dollar is suspected of being too rich.
We ought to have realized that the income tax is utterly incompatible with liberty – it is actually a form of slavery. A slave is not someone with nothing, but someone denied control over the fruit of his labor. A slave is someone who has only what the master lets him have.
Under the income tax, the government takes whatever percentage of the earner's income it wants. The income tax therefore represents national surrender to the government of control over all the money we earn. There are, in principle, no restrictions to the preemptive claim of government upon our income.
No American government has seriously pressed this preemptive claim on our income to its logical conclusion, the explicit demand that all income is to be handed over to the government, and any private expenditure made subject to government approval. But we are deeply unwise to underestimate the power of the confiscatory principle in the hands of a government determined to pursue its advantage. The federal government could bankrupt the country in short order, merely by more aggressively expropriating the money we have already agreed it has the right to take.
The withholding tax system disguises this dangerous loss of control. One of the effects of withholding is that we don't even realize that government money is actually our money. Most of us think that only our net pay – our actual paycheck – is our money, and what is withheld is the government's money. We tend to think this because the government simply grabs part of the money we have earned. I once heard a caller to a talk radio show object to the proposal that taxpayers pay for the savings and loan debacle, demanding instead that the government pay for it, as though the government could pay for anything without using dollars taken from us!
The income tax threatens our liberty in many ways, but surely the most alarming and outrageous is its requirement that we surrender our privacy by exposing all the sources of our income to the government. One of the prudent protections of liberty is to treat the government that today seems to be your friend as if tomorrow it could become your enemy. No army exposes all of its lines of supply and all of its resources even to its allies, much less to its potential enemies. And while our government is not our enemy in the traditional sense, our Founders were ever mindful that liberty depends upon vigilance against the temptations of tyranny. That's why, if we mean to retain our freedom, it is our duty to maintain material resources for action that the government cannot control and manipulate. But with the income tax we surrender the ability to maintain economic associations without the knowledge of the government.
It gets even worse, particularly for Christian believers. Through government social engineering, such as bestowing a revocable 501(c)3 non-profit status on our churches, the government is able to manipulate the tax system in order to gain control over our institutions of conscience, character, and moral formation. The American Revolution itself would never have happened without the courage of such institutions, particularly our churches. The same is true of the abolitionist movement, and of all the other great movements of conscience in American history. These efforts were decisively motivated by principled private associations. The role once played by those institutions in boldly challenging us to oppose inroads against our liberty has been gutted. As a result of the income tax we have subjected the entire sector of conscience to the control and manipulation of the government, muffling what ought to be the voice of independent faith and conscientious action in our society.
We don't need to "improve" the income tax. We need to get rid of it, and return to the original design of our Founding Fathers. Theirs was the simple and clear vision of a citizenry with control over the money it worked to earn, and with the corresponding ability and independent judgment to exercise its rightful authority over government.
A national sales tax
Whether to save our money, spend it on necessities, or spend it on luxuries was to be a matter of the sovereign liberty of the citizen, who would make the first decision of what to do with every dollar. Under a national sales tax, this is exactly what would happen. Only after we decide what to do with our money can the portion used for purchases in the open marketplace be subject to tax.
The sales tax requires no surrender of privacy, no confession to the government of our entire economic life.
On the other hand, a sales tax would make it much harder to avoid paying legitimate federal tax without good reason. A sales tax on end user products is a more equitable system, because the incidence of taxation is more evenly distributed throughout the population. Those in criminal enterprises who have never filed a federal tax return would have to pay the national sales tax charged by the merchants who provide their goods and services. When such a person enters the marketplace to make a purchase he would pay the tax that everyone else is paying.
But under a national sales tax system, equity would not come at the price of giving up control of our money. Rather, a national sales tax would restore to American working people their control over the incidence of taxation. Only the relatively well-off have that opportunity under the present system, because they can hire lawyers and accountants to calculate the most advantageous tax strategies, and take advantage of arbitrary technicalities.
The most important goal of tax policy must be reclaiming control over the incidence of taxation – on which dollars and on how much of our income tax actually falls. Today, the incidence of taxation is entirely out of the control of most working Americans, because it is determined by politicians and bureaucrats and manipulated by clever lawyers and accountants. The liberating power of a national sales tax system is that it would end the control of these few elites. Under a sales tax system, individual citizens would again be sovereign in deciding how much of their money will be subject to the tax at any given moment, according to their particular financial circumstances. Such a system will give us back a control over our money that we have not had in generations, since the income tax was imposed.
And that control will be financially crucial to families. When times are tight, instead of praying that the politicians pass a beneficent tax cut, every American will have the power to give himself a tax cut just by changing the pattern of his own spending and saving. We already reduce our discretionary expenditures when money becomes tight, and under a sales tax system our tax burden would also become a discretionary expenditure.
Returning to liberty
Congress will pass a national sales tax only when the people insist on it. To bring this day closer, it will be necessary to turn the attention of grassroots America to the real tax debate. That debate is not only about the rate of taxation or bloated size of government. Most importantly, it is about the right to property and the preservation of our liberty. Americans must come to see that the tax reform we so urgently need is not more back room manipulation of the income tax and its ever-mutable rates, schedules, and regulations, but it is rather a total replacement with the system our Founders intended.
We must remind our fellow citizens that the income tax is less than a hundred years old, and that the nation did fine for a long time without it. A national sales tax is not a radical new proposal, but is actually a return to the sensible and consistent understanding of liberty that the Founders of America established from the beginning. Returning to a sales tax is sound conservative thinking, which restores the system of taxation that stood the test of time in its proven compatibility with liberties of our people. The Republic survived difficult trials in its early years in part because we had a tax system that left the citizenry independent enough to successfully discipline their government.
America was built by people who used rightly and nobly the control over their actions and resources that a wise political order secured to them. The income tax expropriates the independence that made possible American prosperity, American character, and ultimately American self-government. By keeping the income tax we are inexorably encouraging the moral poverty – the poverty of motivation, of discipline, and of responsibility – that we all sense has deepened in the America of recent decades.
By wisely turning back now to the wisdom of our Founders, we can renew an economic environment of wholesome motivation in which responsibility pays, and in which discipline makes a difference. Real tax reform can help us make an historic break with the servile and passive habits of recent years, and begin a new era of confident liberty. If we still believe we deserve – and have the capacity – to be free, ending the income tax is a duty to ourselves, to our posterity, and, we must not shrink from acknowledging, to the God who created us equal that we might govern ourselves in justice.
© 2002 WorldNetDaily.com
That's so close to their "logic" it's scary.
I have a theory. You are so incredibly ignorant about reality that you still sell life insurance and annuities and convince poor unsuspecting people that you are doing them something good.
Well, your lies are catching up with you aren't they?
I could be wrong, you could be a hawker of tax shelters. Another criminal enterprise that should be cut off at the knees.
Let's get it out on the table Rob. What is it that you hawk that has a tax advantage?
You just can't deal in facts, that's the problem. You think it has to be emotional because that is all you have in your corner-- a hatred of the current system and a desire to wildly change to something else regardless of whether it makes any sense.
I never claimed that any of this is about me. I happen to be one who has investigated and spent time to compose my thoughts on what I think is wrong about the FairTax. That doesn't make it about me, as much as you would like to change the topic.
Feel free to not post to me ever again, I won't mind a bit.
They don't even make 6k, much less spend that much.
I understand what you are saying... and I do think that it's wrong that savings would be "double taxed"... that's my biggest issue with the Fair Tax. I would like to see a solution to this.
However, the ends justify the means. Yes we can squabble about this over and over, but if they decide to leave me an inhertance.. it's taxed again. We've had to jump through legal hoops to keep that from happening.
My point is that there are a lot of people on this thread that are trying to support/defeat the Fair Tax.. but there's no REAL discussion going on about how to fix the current situation.
As far as I'm concerned, the fair tax is the closest I've seen that represents what I want. Fair and equal taxing (not progressive) along with limited government.
We can continue to spar on this, but I've yet to see enough drawbacks to change my stance on the Fair Tax. I'm open minded, so please continue to educate me on where I may be wrong.
Thanks for your replies.
I've said it before-- I'm an engineer that has my own company selling machinery to large manufacturers. I pay a lot of taxes and if everything you represent the FairTax to be were true, I'd save a fortune in taxes. Too bad it isn't true.
Uh, huh.
You just don't get it, do you? I don't care how much I paid in sales tax. I know what percentage of my spending dollar they're taking from my hide, and that gives me a gauge to judge them by, politically.
It would become much clearer if that's the only tax we had to put up with.
Why do you have this obsession with everyone having to be a stinking accountant?
I await your next profound thought with great anticipation.
Why on earth wouldn't you want to pay those taxes as you wish, as you want to?
So do you have any studies that show a producer price drop under the FairTax without a nominal wage decrease?
Are you stating there can be no producer price drop holding gross wages to the employee constant?
One hardly needs a study to infer the qualitative effect of the most likely scenarios.
All one needs to do is consider what happens to dollars business dollars released to productive application with repeal of the corporate income and payroll tax system as currently paid by employers and businesses.
Either wages increase by the amount of savings arising from production effeciencies achieved by the producer, investors and savers obtain a greater return on ther investment (raising income), or income can remain where it is and competition pushes prices down resulting in increased purchasing power.
Most likely a combination of producer price decreases and income increases will be the result.
Decreases in contracted wages are highly unlikely with unions and especially in the litiginous society we live in today. That by the way (Sticky Wages) is an effect not implemented in Dr. Jorgenson's simplified simulations. Which is why he states as a simplifying assumption that gross wages fall with repeal of income taxes. A statement for which evidence of the real world opertation of wages is quite different.
Sorry, it would only confuse you.
I have no desire to rehash the thousands of posts that I have previously typed to explain again why I think the FairTax is a bad idea. You have made up your mind already anyway so it's a waste of time. And the FairTax has zero chance of passage anyway, esp. now that they are telling a little bit of truth about it. So it isn't worth getting into it again for the sake of lurkers. If they want to find the old arguments they can find them from the Jorgenson thread I posted in #2. Both sides of the argument are there as well as in hundreds more threads.
I completely respect that, and thank you for your reply.
I'm 100% about truth, and I applaud your efforts in showing us what's going on. I am still learning.
I am in agreement about reducing spending and making the economy as best as possible. I am just worried that there are too many people trying to defeat a good idea for the sake of details.
So what if the Fair Tax is not exactly what it claims to be. We all know that good ideas can have holes shot through them. I'm about objectivity though.. it's important not to kill an idea because there are flaws. Everything has flaws, to someone.
It's about the bigger picture. Economic growth, taxing people equally and reducing government. I don't see all of those in the flat tax. I think there's a lot of people that need to put aside there ire for what may not be "a perfect idea" and focus on what is good and fair for the country.
Thanks again for your reply.
Repealing the 16th amendment is important.The Fairtax doesn't repeal the 16th amendment...maybe you already knew that.
The 100% paycheck and reduced prices was a major sales pitch for the Fairtax. The truth is it was all a lie and Robfromga did what no one at AFFT or the author's of "the book" would do, he e-mailed the economist (Dale Jorgenson) that has been quoted by the Fairtax crowd for years for clarification...It wasn't what they were saying.Give the people the power, reduce the government and tax equally no matter how much you make.
There's more entitlement money in the Fairtax than the income tax including EIT.
Don't take my word for it.
Fairtax FAQ #48:
Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending? Absolutely, as you can see in Figure 6 below – where the graph shows annual expenditures for a family of four and the corresponding FairTax effective tax rates. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the rebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.
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