Fair Tax, Foul Politics [NRO on FairTax]

Fair Tax, Foul Politics ^ | August 16, 2007 | NRO Editors

[lewislynn]

"According to the Washington, DC-based advocacy group [ Americans for Tax Reform ], the average American had to work through July 11 this year just to pay all federal, state and local taxes, as well as regulatory costs including workers' compensation and unemployment benefits.

The Fairtax doesn't repeal government regulations, state and local taxes, workers comp or unemployment insurance...they're only trying to make you think they can.

[lucysmom]

Or to say the item is used, and not charge the tax.

Would returned items that are resold be taxed? When the item is returned for a refund, would the tax also be refunded?

[RobFromGa]

1. Abolish the IRS and ELIMINATE that portion of spending from the Federal Budget. Do not reallocate the dollars, just cut them. That alone puts a good sized dent in the deficit (about 15% of the current estimated deficit).

The IRS is no where near 15% of current deficit. And you will need a strong enforcement arm to enforce the FairTax collection. Probably zero savings here, and no less intrusive.

2. Eliminate the Prebate. Completely. It's a dumb idea, and would take a lot of work to process.

Good idea, but you just lost all the freeloaders. And they represent a sizeable chunk of the population.

3. Anything regulated by the FDA - food, drugs, etc - are exempt from the FairTax. Your basic needs - food and medicine - are not taxed.

The reduction in the taxable base frome exempting these items caused the calculated rate on everything else to go up substantially.

4. Mortgage payments are exempt from the FairTax. Your mortgage company will not charge the tax.

Do you mean exempt housing purchases from the FairTax? If a new home is $200,000, then the price will not go up to at least $260,000, is that what you are saying? Ditto answer to #4. Tax rate on everything else goes higher.

5. Cut the FairTax rate down to 27%, which would result in a 10% reduction in revenue to the Government. Give them less!

Why do we need the FairTax to do this? If we can cut the size of government in a politically tenable fashion, lets do it. In my view that IS THE ENTIRE PROBLEM.

[lewislynn]

A consumption tax makes that brutally clear as day.

Sorry to inform you, I know you'd like to have it both ways but there's no evidence of what you say when you read the high points from AFT...Who's the expert on what the tax would do, you or AFT?

[lucysmom]

Do we really want to spend 30% under the Fair Tax for government? Again, I remind the opponents today we spend 50% under the income tax on government. So, under the Fair Tax, that amounts to a 20% cut in the overall tax burden!

Do really believe the FairTax will reduce the overall tax burden by 20% and still raise the same revenue?

[RobFromGa]

Would returned items that are resold be taxed? When the item is returned for a refund, would the tax also be refunded?

We're gonna need some tamper-proof super-stickers to go on everything to prove the tax was paid. And a very strong powerful enforcement army to check out everything in our houses to make sure our papers are in order.

[Toddsterpatriot]

Math is hard. LOL!

[GladesGuru]

“A more salient question would be, “How many of the millions accountants, tax preparers and IRS employees would vote for someone who promised him or her he would eliminate his or her job?”

Perhaps salient to your perspective, but not at all responsive to my question. Nearly all who benefit from the present tax structure will vote against tax change.

What I was pointing out, eviddently not clearly enough, is that I am of the opinion that the Joe Six Packs vastly outnumber the tax beneficiaries.

[RobFromGa]

Don't forget that all state and local governments also have to pay this dandy tax on all non-education related costs. This includes employees, and their fringe benefits. That mayor's assistant making $50k a year, now they have to pay the FedGov $15k in FairTax on the salary and more on the medical insurance etc. And road construction supplies and workers, cost 30% more. And everything else they spend money on.

Does anyone have a guess where the state and local governments will get this extra revenue to pay the FairTax to the FedGov??? If you said, they will raise taxes at the state and local level, please get your gold star now.

[RobFromGa]

Nearly all who benefit from the present tax structure will vote against tax change.

Almost all sane people will vote against the FairTax once they understand it. And there is no way it can get passed without the roaches hiding inside it from being exposed to the light.

[lucysmom]

California relies on its income tax for government revenue. Every year, it keeps bringing in both record revenue and yet, it still spends more than it receives. A state sales tax would be a less volatile and more predictable revenue base for the government.

Umm - I live in California, we have a sales tax - 8.25% where I live. It is estimated that we would have to raise the sales tax by two percentage points and expand it to include goods and services that are now exempt from the sales tax to raise the same revenue. That would bring the tax at the register to over 40%.

The common wisdom is that higher tax rates, produce lower collections, what do you think a 40.25% sales tax would do to collections?

[Texas Eagle]

What I was pointing out, eviddently not clearly enough, is that I am of the opinion that the Joe Six Packs vastly outnumber the tax beneficiaries.

True dat. Numerically speaking, I would argue that the Joe Sixpacks even more vastly outnumber illegal border-crossers and welfare recipients and other groups of completely non-productive people and even talk of cutting them off can't garner a majority of sizable note.

So I don't know how anyone could expect people to vote for someone who says he or she is going to throw millions of their fellow Americans out of work.

I could be wrong. But I just don't see it happening.

[RobFromGa]

How much higher would taxes be in Cali if they had to pay 30% or more FairTax to the Federal government on every salary, benefit and purchase of goods and services (except education)? 25% higher? more?

[lucysmom]

You can't evade a consumption tax. When you spend the money, it becomes income for the government. The only way to avoid the tax is to keep it in the bank or in your investment accounts and let it grow, tax free.

Oh ye of little imagination...

[RobFromGa]

The IRS people wouldn’t be out of work, they would change uniforms to the HappyTax compliance center logos and be issued new rules and regulations to ferret out the HappyTax cheats. And they would either be just as ruthless or they would be less effective. Less effective means a higher rate for honest people to make up for the evaders... My bet is they would have to be ruthless.

Our current income system with withholding and double and triple reporting of figures has a certain non-compliance rate. The Fairtax rate caclulation assumes no evasion on any sales of goods or services, PLUS no negative effects on consumption. If either is wrong, the rate ratchets higher to generate the required revenue.

[Texas Eagle]

I just don't see it happening. I remember when Ronald Reagan promised he would eliminate the Dept. of Education.

I don't know how seriously he tried but I do know the Dept. of Education exists to this day. And it's probably ten times larger than it was back when Reagan said he would eliminate it.

If we can't get rid of one utterly useless bureaucracy, there ain't no way on God's green earth we are going to get rid of a monstrosity like the IRS.

[Maurice Tift]

   Thanks for the link. I didn't know that services were included in the tax. A tax on retail sales is simple, but including services is a nightmare! I don't like the idea of any tax system that is 'revenue neutral.' If 90% of federal spending is unconstitutional, we are already living under a lawless government. Maybe this is the real reason that socialists in government fear a Supreme Court run by strict constitutionalists.

[lewislynn]

How much higher would taxes be in Cali if they had to pay 30% or more FairTax to the Federal government on every salary, benefit and purchase of goods and services (except education)? 25% higher? more?

One thing that can't do here is raise our property taxes to pay for it.

[lewislynn]

I just don't see it happening. I remember when Ronald Reagan promised he would eliminate the Dept. of Education.

LOL! That's right and I remember when the new Republican Congress (1994?) was going to defund PBS...they couldn't even do that.

[ari-freedom]

Yawn. It’s unfortunate that there are pro-IRS people on NRO, let alone FR. And make no mistake - if you’re opposed to the FairTax and haven’t proposed an alternative that eliminates the IRS and direct taxation on income, you are pro-IRS, if only by default.

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I did. we should
1) have a very small govt with no entitlements
2) eliminate taxes. Completely. If the govt wants money it will have to earn it just like any other company by asking for ‘donations’ and delivering a real return for the money.

But in the meantime, a flat tax.

No it will not eliminate the IRS. But neither would the fairtax which would require agents in every store to ensure they get the tax from every transaction. That may be even more intrusive than the income tax! The fairtax will creep into a sales tax with different rates for different items. The government will thus be able to influence every single spending decision you make. Let’s say the govt wants a fat tax? The infrastructure will be in place with the fairtax.

Now look. We’re not exactly socialists. You’re not the only ones who hate the IRS, ok? So when we say there’s something wrong about the fairtax, perhaps you should listen carefully to what we’re saying because we all want the same thing in the end.