Posted on 08/16/2007 6:10:39 PM PDT by RobFromGa
Fair Tax, Foul Politics
By The Editors
Advocates of a national sales tax to replace the income tax have built an impressive grassroots army. They have given their idea an appealing, if somewhat gimmicky, name: the Fair Tax. And they have managed to get five Republican presidential candidates to suggest that they would sign a sales-tax bill if it reached their desk. Some observers credit the enthusiasm of the Fair Taxers for Gov. Mike Huckabee’s surprisingly strong showing in the Iowa straw poll. Huckabee is the candidate most committed to the Fair Tax.
Former senator Fred Thompson is, however, backing away from the idea. Fair Tax advocates have released a video in which Thompson, asked about the proposal, appears to say he would “absolutely” sign it if elected. On August 10, however, Thompson wrote those advocates a letter that said merely that the Fair Tax was a good starting point in thinking about tax reform. Mitt Romney’s campaign says that the Fair Tax has some attractive elements, but that the candidate would need to see details before making any pledges. Rudolph Giuliani has said that he does not think he would sign any such legislation.
The leading candidates are right to be wary. The tax code needs major reform to become fairer, simpler, and more efficient. The Fair Tax is one instantiation of those goals, but its political impracticality makes it fatally flawed. If conservatives force a choice between a Fair Tax and no tax reform at all, the latter is what they are likely to get.
There is widespread confusion about what the Fair Tax would entail. If you bought $100 of clothing and paid a $30 tax on it, you would probably think you had paid a 30 percent tax. The Fair Taxers say that you paid a 23 percent tax: $30 is 23 percent of the $130 you paid in total. When they say they want a 23 percent tax, that’s what they mean.
Since there would be no more income tax in this system, there would also be no more standard exemption to make sure that the basic necessities of life went untaxed. The Fair Taxers would solve this problem by sending out monthly “prebate” checks to all Americans.
The great, undeniably attractive selling point of the Fair Tax is that it would allow the country to dispense with the IRS. But the sad truth is that if the federal government is going to collect as much money as it currently does—which the Fair Taxers say their system would—its methods of tax collection will inevitably be intrusive. The real difference between the current system and this proposal is that the primary brunt of tax collection will be borne by a smaller group of people: business owners.
Over time, then, enforcement measures could become more draconian than they are today: especially since a massive retail sales tax would create a massive incentive to evade it. That’s why every country that has ever tried to impose retail sales taxes this high has quickly moved to a Value Added Tax levied at every stage of production. Consumers rarely see or keep track of these taxes, and they seem to be fairly easy for governments to raise.
These pitfalls are beside the point, however, since a national sales tax is not going to become law. No presidential candidate could be elected on a sales-tax platform, and no Congress would enact one if he were.
A candidate who ran on the national sales tax would be able to run on nothing else. He would have to spend all of his time defending the idea. Off the top of our heads, we can think of three devastating lines of attack an opponent could use in television ads. One ad could argue that getting rid of the mortgage deduction would send home prices into free fall (something that voters are going to find especially worrisome now). Another could ask why senior citizens, having paid taxes all their lives as they made income, should have to spend their retirements paying taxes on everything they use that money to buy. A third could simply ask voters if they look forward to paying a brand new tax.
There are answers to each attack. But no Republican candidate, especially in the daunting environment of 2008, is going to want to have to make them. Republicans cannot win a national election without the tax issue. If they ran on the national sales tax, Republicans would be taking one of their natural strengths and making it into a liability. Which is why we expect them to say nice things about the Fair Taxers’ passion, and move on.
they eliminated AFDC. That was big. people collected that for generations and using it on drugs and whatnot.
When the item is returned for a refund, would the tax also be refunded?Probably, but it wouldn't take much time or paperwork (compliance) to convince the state turned federal tax collector to authorize the credit.< /sarcasm >
BTW, at what point does a state worker administering a federal tax not become a federal employee?...Does the Fairtax eliminate federal employee unions too?
I like your tagline, I hadn’t thought of the similarity between the pseudo-science of Global Warming and the pseudo-economics and pseudo-psychology of the FairTax cult.
they eliminated AFDC.Though I know what AFDC is I'm not up to speed on welfare. But I'm pretty sure welfare is not eliminated...renamed maybe, reformed maybe, but not eliminated.
I know Reagan tried hard early in his forst term to get rid of the Department of Energy which Carter created in 1977. He had no luck with that campaign promise.
Thompson wrote those advocates a letter that said merely that the Fair Tax was a good starting point in thinking about tax reform.He's the only honest one in the bunch on that subject.
I agree. If there is going to be a "Fair Tax," then make the rate between 10%-15% with NO deductions or gimmicks.
Until then, push for a strict flat tax.
Not to mention what the FairTax would do to the price of a half a million dollar California starter home.
An elderly friend is moving from her home into assisted living, the FairTax would make that unaffordable. When the FairTax burned through her money, would the state have to assume the cost? She is the last in her family.
people used to be legally entitled to cash even if they didn’t work. We had a whole culture of generation after generation collecting their welfare check. Now we have temporary cash assistance that must be followed by work.
There are other entitlements such as medicaid and foodstamps but it’s not the same as giving free cash for people to spend as they please.
if there are no deductions, the fairtax would tax the poor. Nobody wants that.
On the other hand, since part of the goal of fairtax is elimination of the IRS, they can’t distinguish between poor and rich since they are unable to determine income. Therefore, everyone, including Bill Gates, gets a prebate. I think that’s a bit wacky.
Income is still reported to the SS bureau under Fairtax. Since collection of FICA tax is unrelated to income, not sure why they need to know though except to automatically reset the FICA part of the FairTax rate every single year without a vote to generate 15.3% of the total income.
Not sure how you would be able to say someone doesn’t get as much Soc Sec paynent because of low earnings, when SocSec would be funded by sales tax, and not payroll tax.
I do, I think everyone should contribute. But it isn't going to happen.
Can't you step back and listen to yourself? No person should need to pray to comprehend payroll theft as tribute for government largess to the nonproductive dumbmasses. The IRS doesn't even pray to comprehend itself.
The time has long since come for us to bring our tax burden into the clear light of day so that the taxpayer will finally see through the currently hidden cost of taxation.
The greatest enemy of a conservative is socialism. Perhaps the most useful tool of socialism is legal plunder. There are two kinds of plunder: legal and illegal.
Illegal plunder, such as theft or swindling is defined by code and statute. Illegal plunderers have been fought since the beginning of the world. This kind of plunder does not systematically threaten the foundations of society. The law itself fights against the plundering thief or swindler as it always should.
Yet, sometimes the law defends plunder and participates in it. The beneficiaries are spared the shame, danger, and doubt which their acts should otherwise involve. Sometimes the law places the whole apparatus of judges, police, attorneys and prisons at the service of the plunderers, and treats the victim — when he defends himself — as a criminal. In effect, there is a legal plunder that does threaten the foundations of society and it must be stopped in spite of the uproar of the vested interests that attempt to defend it.
How can you identify legal plunder? It’s simple, when law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong, that is legal plunder. When the law benefits one citizen at the expense of another, by doing what the citizen himself cannot do without committing a crime that is legal plunder.
The person who profits from this legal protection will bitterly defend his acquired favor. He will claim that the state is obligated to protect and encourage his particular trade or endeavor; that this procedure enriches the nation because his protected industry is able to spend more and to pay higher wages to the poor workingmen.
This sophistry by vested interests has allowed legal plunder to permeate our entire system. It has been embraced by socialists attempting to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.
Legal plunder can be committed in an infinite number of ways. There are an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, , free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism.
Perhaps the most pernicious of these plans is progressive taxation through payroll deduction. The old adage, “out of sight, out of mind” is proved by our progressive withholding tax. Today the average American has funds removed from his wages before it is ever seen. If this average American is in a certain bracket he may have some the withholdings awarded back. This is, for most citizens, the first visible indication that the transaction has even occurred.
The most promising effort to thwart socialist plunder today is The Fair Tax. By implementing a regressive system that only taxes the purchase of goods or services with the individual’s volition, the socialist plunder is no longer hidden from taxpayers. By removing their most covert tool of legal plunder the socialist enemy will be exposed to accountability for its true burden on our society.
If you wish to be a strong conservative, with a desire to continue the advances against socialism begun by Goldwater and pressed magnificently by Reagan, you will join the battle to root out every particle of socialism that has been entrenched into our government. This is no light task.
No legal plunder: This is the principle of justice, peace, order, stability, harmony, and logic. End the IRS and all vested interests that hide like vermin in its bowels.
There are other entitlements such as medicaid and foodstamps but it’s not the same as giving free cash for people to spend as they please.Actually, like ethanol, food stamps are a farm subsidy, they're issued by the Dept. of Agriculture. And I'm not sure that Medicaid isn't also a subsidy.
The Fairtax does nothing to alleviate the creeping socialism in our country—
1) on the spending side it claims to be revenue neutral, and doesn’t eliminate a single transfer payment;
2) it includes a socialist prebate check for every American man, woman and child, putting everyone on the dole, and this feature can easily be tweaked in the future to perform various vote buying schemes;
3) on the collection side, it doesn’t purport to increase the tax rate on those who currently pay no taxes, nor to change the amount of tax paid by any other group of taxpayers.
And the average family will make thousands of taxable purchases each year. Adding up all the individual tax charges to get a picture of the total amount of tax spent is much more difficult and hidden than looking at your income tax return.
I am as conservative as they come, I just don’t believe in the FairTax fairytale.
Legal plunder can be committed in an infinite number of ways. There are an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, , free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism.And the Fairtax doesn't eliminate any of them.
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.
I do, I think everyone should contribute. But it isn’t going to happen.
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I don’t because it would be a tax increase.
Like I said before, it would be better if nobody had to pay taxes and people just gave money voluntarily because of 1) national duty and 2) they are getting value for the money. If the govt had to earn its keep, it would spend more efficiently and invest any extra money wisely.
Values as well as economics are important. You can’t have a country if most people couldn’t care less about its national interests. But you can’t expect people to voluntarily pay for a federal budget of trillions of dollars. You can’t justify it.
Everyone should contribute to defense. And maintaining a system of courts and law enforcement. Most of the rest is personal responsibility (health care, providing food, clothing, shelter for family, ...) or can be handled by private businesses (infrastructure, education,...).
The Federal government is involved in too many things that it cannot do efficiently. Probably at least half is waste.
And making everyone pay wouldn’t have to be a tax increase, it would allow some people’s taxes to be made more “fair”.
The time has long since come for us to bring our tax burden into the clear light of day so that the taxpayer will finally see through the currently hidden cost of taxation.Increased take home pay, prices about the same as now, a government check every month, more money for savings, easier to save for a new house will expose the hidden cost of taxation?...The Fairtax is more visible?
Which one is the lie?
1.) Although it does not eliminate transfer payments, it changes the method, closes loopholes, brings them into the clearer light of day. [please ask me if I mailed it back]
2.) The prebate is more logically applied than kick-back devices in the current tax code. A few times in my life the IRS cut a check and sent me money I never asked for.
3.) It does greatly increase the base by including those within the shadow culture who currently pay no taxes. That does vastly change the amount of tax paid by groups of currently shirking taxpayers.
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