Posted on 08/25/2007 9:11:11 PM PDT by gpapa
Does adding 30% to the price of every house sold sound like a good idea to you?
Former Arkansas Gov. Mike Huckabee's unexpectedly strong second-place showing in the recent Iowa Republican straw poll is widely attributed to his support for the FairTax.
For those who never heard about it, the FairTax is a national retail sales tax that would replace the entire current federal tax system. It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service, with which the church was then at war (at the time the IRS refused to recognize it as a legitimate religion). The Scientologists' idea was that since almost all states have sales taxes, replacing federal taxes with the same sort of tax would allow them to collect the federal government's revenue and thereby get rid of their hated enemy, the IRS.
Rep. John Linder (R., Ga.) and Sen. Saxby Chambliss (R., Ga.) have introduced legislation (H.R. 25/S. 1025) to implement the FairTax. They assert that a rate of 23% would be sufficient to replace federal individual and corporate income taxes as well as payroll and estate taxes. Mr. Linder's Web site claims that U.S. gross domestic product will rise 10.5% the first year after enactment, exports will grow by 26%, and real investment spending will increase an astonishing 76%.
(Excerpt) Read more at opinionjournal.com ...
You’re assuming that the taxes they were paying are still in place after the FT.
More to the point, Mr. Bartlett never bothered to explain why he said what he said when any fair analysis of the FT shows that what he said is flatly incorrect. You too are incorrect.
But you don’t really care about any of this. You love the IRS. How’s that job at HR Block?
True. But I see nothing in the legislation that forces companies to reduce their prices by all or even some of that amount.
The Fair Tax is supposedly revenue neutral at 23%. Is revenue neutrality based on 23% of existing GDP or 23% of GDP minus a 30% reduction in price?
For example, my state currently collects 6% in state sales tax. On a $1 item at retail, the state gets 6 cents. But if that $1 item at retail drops to 70 cents, my state only collects 4.2 cents. My state sales tax will have to increase to about 9% to collect the same revenue.
So, is the 23% based on a retail price of $1 or 70 cents?
That's assuming the manufacturer will take all the embedded costs and use that money to reduce his price 30%. When the Fair Tax is then added, the retail price remains the same. Correct?
What if the manufacturer decides to keep some or all of that embedded cost as profit? Or use it to give his employees a raise? Or to increase his dividend to his shareholders?
You may think he has to reduce his price to be competitive. Not necesarily. If his competitor is foreign, they have no embedded cost to work with. That Chinese imported good will rise 30%. If I was competing against that import, why should I cut my price 30%? I can keep 29% and cut my price 1% and still be lower than the import.
Could it be the book is flawed in its assumptions and the bill makes no such assumptions?
And what a boon to customers who will have more money in their paychecks, once taxes are removed, to spend on illegal products and services.
Gosh. In my state with a 6% sales tax, that means my state only collects half the revenue. If companies reduced their retail prices by 30%, my state would have to raise the sales tax to 9% just to break even.
I would think that 23% Fair Tax would also have to be increased, wouldn't you? (rhetorical)
Wouldn't it be fun to actually write that 23% into the legislation as fixed, never to be increased for any reason? And, of course, shutting off all other means of raising federal revenue (taxes, fees, tariffs, surcharges, etc.). If there's a war, sell War Bonds. That's how they did it before they found out how easy it was just to ... spend more.
It would never get out of committee.
The Fair Taxers are simply giving us an alternative and easier way to pay the same amount of money to the federal government -- what I call "rearranging the deck chairs on the Titanic".
Cut current spending in half and who cares how the government collects it? Constitutionally fix the Fair Tax at 10% (and eliminate all other forms of federal taxation) and even I will vote for it.
According to the Heritage Foundation, government consumes 36.4% of GDP. While that's still too much, it doesn't add to credibility to inflate the numbers.
You are correct that used items are not taxed, except when converted from business to private use such as buying a used car from Hertz, however, labor IS taxed.
The President’s Advisory Panel on Federal Tax Reform was nearly as worthless as teats on a bull. It made NO decent recommendations for reform - none!
nice Freepmail groanup. in your dreams.
Prove it.
Prove what?
“the book is flawed in its assumptions and the bill makes no such assumptions”
Life insurance and annuity sales people. Those two products are INCOME tax deferred and much easier to sell (for big commissions) while there is an income tax.
Third party administrators. The folks who maintain the record keeping and file the tax forms for various retirement plans such as 401(k)s. The need for these tax deferred plans disappears without an income tax.
Tax shelter companies. Real estate and oil/gas exploration mainly. This industry employs a lot of people and sells products which, in some cases, have no economic value other than to defray income tax liability.
Now a lot of the "status quo lovers" on this board will deny that they have any agenda. If none of these posters will admit to being dependent on the income tax for a living, then where ARE the posters who are so dependent? Anyone? Anyone?
Oh, btw. There has been much gnashing of teeth whenever I bring up the fact that there are so many professions reliant on the IRS. Let’s see who “doth protest too much”.
It should be noted that FairTax.org and Dr. Laurence Kotlikoff have rebutted the conclusions of the President’s Tax Panel. Specifically,
“Panel statement #3: The FairTax proponents’ calculations used faulty assumptions and a higher sales tax rate would be needed to be revenue neutral.
“FairTax response: The Treasury estimates for a national retail sales tax reported by the panel were not an estimate of the FairTax legislation. The panel concocted a base of their own, one apparently designed to produce the highest possible rate. Rather than follow the FairTax legislation, they apparently used a typical state sales tax base that is far, far narrower (many exemptions) than the single-rate/no exemptions FairTax.”
FairTax.org continues...
“In addition, the Treasury refused to compare rate quotes on an apples-to-apples basis. Rather than quote the rates for replacement systems in a direct comparison to the income/payroll tax rates they replace, they used ‘econospeak’ sleight of hand to compare apples to oranges. Since the ill-fated beginning of the income tax, it has been quoted by government (and taxpayers) in what economists call a ‘tax-inclusive’ manner. ‘My tax rate was 23 percent’ means if you earned $100, the government kept $23. If you talk about that rate as if it were a sales tax, which is added on to a purchase (tax exclusive), the income tax rate is 30 percent. No matter what, the government gets $23.
“... the Treasury **refuses to make public** [emphasis mine] its scoring methodology – estimating the tax base and revenues – for these plans. Providing such methodology is standard operating procedure in the academic world, yet the Treasury has ignored requests for this information from both FairTax.org and academia.
“...The Beacon Hill Institute at Suffolk University and Laurence Kotlikoff, Professor of Economics at Boston University, have teamed up to provide a sound methodology for estimating the FairTax base and computing the FairTax rate.4 Their paper demonstrates that the 23 percent rate specified by the Fair Tax Act (HR 25) is eminently feasible and suggests what led Gale5 and the President’s Advisory Panel on Federal Tax Reform6 to reach the opposite – and incorrect – conclusion. (Paper available at http://www.fairtax.org/PDF/TaxingSalesUnderFairTax.pdf .)”
Study both: http://snipurl.com/taxpanelrebutted + http://snipurl.com/ftgalerebuttal
With regard to effective percentages that different income groups would pay, as shown charted in the article, Prof.’s Kotlikoff and Rapson (10/06) have said,
“...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.
“Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax.”
Study: http://snipurl.com/kotcomparetaxrates
And, finally,
“...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there’s a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent.”
Study: http://snipurl.com/kotftmacromicro
Excellent post!
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