FAIR TAX BOOK- 2nd Ed. Revisions

self | May 5. 2006 | RobFromGa

[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.

[Mojave]

Patrick Henry, Virginia Ratifying Convention June 12, 1788: "the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people."

General retail sales taxes weren't a mode of taxation used in 18th century America, at either the state or federal levels.

[ancient_geezer]

.So under a sales tax people would horde wealth, and under income tax people would spend wealth and just work more to make more money. Spending wealth makes more wealth for society.

Investing wealth, as well as spending wealth increases the wealth of society as a whole as it its reflected in productivity as well as consumption.

One can't eat gold, or increase ones wealth in such by hiding it under one's mattress. Wealth put to work in production of goods and services grows, that which is horded offers little benefit whatsoever to its possessor.

 

"[T]he Equity of Imposition, consisteth rather in the Equality of that which is consumed, than of the riches of the persons that consume the same. For what reason is there, that he which laboureth much, and sparing the fruits of his labor, consumeth little, should be more charged, than he that living idlely, getteth little, and spendeth all he gets; seeing the one hath no more protection from the Common-wealth, than the other? "
--- Thomas Hobbes, Leviathan,

it is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income.

As was readily recognized by the founders of our constitutional republic.

Federalist #21:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

"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.

[Mojave]

As was readily recognized by the founders of our constitutional republic.

"The first state sales tax in the United States went into effect in West Virginia on July 1, 1921."

[ancient_geezer]

And General income taxation wasn't in use in the US until the 19th century.


Accommodating the convenience of the people, is the primary issue of selecting a mode of taxation as pointed out by Paterick Henry and indeed others as well. A condition woefully lacking in income taxes generally.

Going to a retail sales tax system,increases the convenience of the individual citizen in paying the tax, as he has some degree of choice in when and how he may make an expenditure to be taxed. A choice that entails considerable personal sacrifice wealth and wellbeing if applied to deferral of making a living in the case of an income tax.

A retail tax tends to empower the citizen over government much more so than a income tax where the government holds first option over one's earnings and livelihood.

[Mojave]

And General income taxation wasn't in use in the US until the 19th century.

And nobody is dishonesty attributing support for the general income tax to the Founding Fathers.

[ancient_geezer]

I notice some however do seem to dishonestly deny the application of consumption tax to retail sales taxes.

The same rules applicable to multiple specific excises applied uniformily across the nation are just as applicable a general excise of fixed rate applied to all goods at retail level.

The choice to the citizen remaining:

"The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

at the convenience and option of the citizen, as opposed to the government which has its own agenda in the imposition of income taxes.

 

 

"As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government."

. . .

"The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system."

"In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation."

- KEYES TRANSCRIPT (01/28/02)

[Mojave]

I notice some however do seem to dishonestly deny the application of consumption tax to retail sales taxes

"It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess." --Federalist #21

An excessive tax on certain articles of consumption may be avoided by recourse to untaxed substitutes. The Founding Fathers had no general sales tax on an unlimited range of articles, "fair" taxer dishonesty notwithstanding.

[EternalVigilance]

I mere point out that the FairTax does not fulfill your goal.

The FairTax meets the vast majority of my goals...which mainly have to do with restoring freedom and prosperity to my kids and grandkids.

The FairTax has more than enough REAL problem to discount it as a viable taxations scheme.

Wrong.

[RobFromGa]

you pointed me to more of your propoganda.

propoganda??? those are several threads in which most people that is here now particpated in a back-and-forth fashion that is how Free Republic works. There are many other threads that I could point you to with similar exchanges, but I don't have those names handy as there are many of them, all similar, all ending up at the same place. The FairTaxers denying reality, and calling those of who dare to question their beloved plan SQL's (Status Quo Lovers) and calling our motives into question.

In the time it took you to link all that, you should've been able to answer my question.

It took me about a minute to link those previous threads where I bet I spent over 100 hours working on the various responses. And it gives you the other side of the debate as well. If I gave you a one minute answer to your question, it would not be complete and you would have ten followups.

[RobFromGa]

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.

the Fair Tax bill will set the taxation rate each year at the level required to generate the required amount of revenue. It will not, as Federalist 21 suggests, simply let the income to the treasury dry up because people didn't buy enough. It will ratchet up the rate, which of course would further reduce consumption or drive it into the black market.

After it is obvious that there is no way to willingly get us citizens to fork over enough cash to pay for the bloated mess that is government today, they will be back with the emergency income tax probably only on rich people.

Your use of Fed 21 to push this FairTax is a false comparison.

[RobFromGa]

A retail tax tends to empower the citizen over government much more so than a income tax where the government holds first option over one's earnings and livelihood.

Just because you say it doesn't make it so. The only end use for wealth is consumption. Savings and investment are vehicles to increase wealth for higher levels of eventual consumption. The government still holds "first option" over a portion of your wealth, the only thing you are exerting any control of is the timing of the exchange.

Of course we all know that the government must have its money every year and if too many people put off this spending, or find ways to get around it, what do you think that the government will do about this situation?

[AmericanDave]

Does not the elimination of witholding give the power of boycott back to the people? This is a MAJOR influence on government!

[AmericanDave]

"People with after tax savings will have to pay taxes on that money again"

You do NOW. I have money WITHELD from my check every month. I then put some in savings. I have already paid income tax on the money. I NOW get to pay income tax on the paltry amount of intrest earned on that already taxed money.

[xcamel]

The only thing that could have topped that statement would be you running around with your hands over your ears yelling "naaa naaaa naaa naaaa" and stamping your feet.

How dare you quote Regan and mumble over a marxist tax fraud with the same keyboard?

[AmericanDave]

Thanks for the post.

Does the fair tax eliminate corporate taxes?

Is there an exclusion for very large ticket items like Realestate?

[xcamel]

98% emotional, about 2% logical - why do you even post this drivel, it's all taken out of context.

[xcamel]

There are 3 things you have to do to get there via 'fairtax':

Blind faith in politicians
Blind faith in politicians, and
Blind faith in politicians.

Just how brave are you?

Google around a bit on the flat tax - now being used by budding democracies around the world. Oh, and the the inconvenient fact that Japan (no small potatoes) vetoed a 'fairtax' plan (over 85% against), in favor of a Flat Tax plan that is to begin in 2010. - but they won't tell you that.

[AmericanDave]

Thanks, but you did not answere my question.

[Your Nightmare]

To varing degrees depending on the overhead burden imposed by the particular mode of taxation. The Flat Tax, for example, has a much heavier overhead on business at all levels, as compared to a single stage retail sales tax imposed only on one level of business.

Heavy overhead? It's accounting that any business would do naturally. With the Flat Tax there would be no depreciation nor calculations for foreign sourced income (it's not taxed), which are the two items that add the most complexity to the current business tax system. It's really as simple as taking "the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers." What business doesn't figure that out as part of it's natural business accounting?

The cost of compliance of the FairTax is underestimated by it's supporter, too. The Washington State Department of Revenue did a study on the cost of collecting and remitting and determine that it was 1.42% of all the taxes collected. And it hit small business particularly hard - their costs were 6.47% of sales taxes collected (the main portion being credit card fees).

The Flat Tax also distributes it's burden across all businesses, the FairTax puts it's burden all on the retail sector. This would be a disincentive for a non-retail business to enter the retail market, which would be a distortion in the economy.


The "complicated" Flat Tax accounting:

[Always Right]

You do NOW. I have money WITHELD from my check every month. I then put some in savings. I have already paid income tax on the money. I NOW get to pay income tax on the paltry amount of intrest earned on that already taxed money.

LOL, yeah that's the same thing. So you have $100 savings and make a buck interest and pay maybe 30 cents income tax is the same as paying $23 when you try to spend that $100. Is that your best shot?