Oops! Bartlett forgot to mention that the embedded income tax costs in the items he mentioned will be gone.
That dramatically changes the economic model.
The fact that he would gloss over this CRITICAL fact demonstrates that his analysis is flawed poop.
Ping of interest.
Bartlett begins by saying that the FT would add a 30% tax on top of the price already paid for goods. His example states that an item that costs a dollar now would cost $1.30 under the FT. Most of the rest of his article follows from this.
He’s wrong and I can only assume he hasn’t actually read the FT book or, better, the bill. Maybe he’s working for a lobby with an interest against the FT. In any event, he’s wrong.
PING
The 30% or Whatever the rate would be is already added into everything anyway. That’s how economics works. This is a change in HOW it is collected and WHO pays the bulk of it. But nothing will cost more in actual money and likely will cost far LESS in the long run.
= )
Ping
How about No one pays taxes who makes less than 250,000.00 a year and then you pay 50%?
that ought to fix Pelosi, Heinz, Clintoons,
Edwards, and company
How does this compare to a flat tax of 17%?
Bartlett has been trashing the Fair Tax from Day One. I’m pretty sure the guy is tight with Dick Armey and is pushing for Armey’s flat INCOME tax which, like the current income tax was once a cute little monkey that grew into the monster we suffer under today.
The idea of a national sales tax has been around long before Scientolgy. Bartlett bringing this up first in the article is a scare tactic and poisons any good argument he might be making afterwards. We’re not stupid, you know.
FairTax, Flawed Commentary
August 25, 2007; Page A7 WSJ
by Bruce Bartlett (hereinafter called BB, with apologies to BB King, a true great)
Hit piece.
BB:”It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service”
Me: This seems like a scientific approach to the review of FairTax; Scientologists are kooks, the FairTax must be a kooky idea.
BB: “In reality, the FairTax rate is not 23%. Messrs. Linder and Chambliss get this figure by calculating the tax as if it were already incorporated into the price of goods and services. (This is known as the tax-inclusive rate.)”
Me: Hmmm, I wonder what income tax rates begin to look like, if calculated, “externally” - as a percentage of what’s left of taxpayers’ income? Care to tell us THAT, BB?
BB: “This is only the beginning of the deceptions in the FairTax.”
Me: Oh, like their website, FairTax.org, hasn’t already thoroughly debunked most of these “straw men” that have been floated (all, that is, except this newest Scientology angle - and I doubt that they’ll spend much time on that one - preposterous).
BB: “the federal government would have to pay taxes to itself”
Me: The idea here is to prevent government from competing with the private sector. But why even mention this, when later you say, “but its tax collection will also be ... higher.”
BB: “The FairTax rate, however, is not high enough to finance the higher spending it imposes.”
Me: Didn’t do your research: “...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. Their paper demonstrates that the 23 percent rate specified by the Fair Tax Act (HR 25) is eminently feasible and suggests what led Gale 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 .)” See also: http://snipurl.com/taxpanelrebutted + http://snipurl.com/ftgalerebuttal
BB: (Regarding the blanket 30% increase attributed in multiple places in your article, “tanks,” “newly-constructed homes,” the added amount that would be paid by “state and local governments.”)
Me: Nowhere do you point out the price efficiencies that would be gained under FairTax. Kotlikoff and associates found that these ranged from 20% - 30%, and averaged them to 22% across the economy. Thus, we’re ALREADY PAYING an embedded 22% in our retail prices. If you believe in market competition (do you?), then you must allow for the elimination of these embedded taxes - which means relative price stability (due to lower costs of doing business - for every business entity contributing at every stage of production). Thus, representing an add-on of 30% is blatant demogoguery.
BB: “Aside from the incredible complexity and intrusiveness of tracking every American’s monthly income — and creating a de facto national welfare program — the FairTax does not include the cost of this rebate in the tax rate.”
Me: The only purpose for tracking income, is for social security payouts. That “incredible complexity and intrusiveness of tracing every American’s ... income” - last time I checked - is what the current income tax system, and theIRS, are all about. FairTax bases “prebates” on family size. Prebates are sent to ALL American families to untax the necessities, thus eliminating wasteful bureaucracy,and corruption-producing tax code rules and regulations.
BB: “the FairTax does not include the cost of this rebate in the tax rate.”
Me: Somebody told ya wrong - like Prego spaghetti sauce, “It’s in deah.” That extra 5% you then introduce is the amount that Kotlikoff DEDUCTS from the 23%.
BB: “Rejecting all the tricks of FairTax supporters...”
Me: Hey, you calling me a trickster?
BB: “...professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%.”
Me: Then, why hasn’t William Gale, and the president’s Tax Panel, delivered their economic methodology (substantiating higher quoted tax rates) to Kotlikoff or FairTax.org? Hmmm?
BB: “Perhaps the biggest deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits.”
Me: Huh? What’s to deceive? Individuals do not file income tax returns. Businesses don’t either; businesses will file basically an expanded state sales tax return. Individuals would keep financial records, but not for the purposes of filing a return. And working families would not be subject to audit unless they ran a business.
BB: “the idea of making April 15 just another day, this seems to be a major selling point for their proposal”
Me: Duh. Like that’s bad to get out from under the thumb of an intrusive government that has been proven arbitrary in the manner in which it administers the current tax code?
BB: “In short, the FairTax is too good to be true, and voters should not take seriously any candidate who supports it.”
Me: Sorry, BB. Your commentary is to bad to be credible. Next time, at least familiarize yourself with the research and rebuttals to the demogoguery that is sure to assail it.
Readers should expect these assaults on FairTax to increase as this eminently workable - in fact, URGENTLY REQUIRED - tax plan gains adherents.
If you add 40% to the take-home pay I'm using to pay for it, then, yeah.
Any other questions?
I was resistant to the notion of shifting our tax burden to the "fair tax," or a national sales tax, until I heard the notion of reimbursements. It was first floated by the Cato Institute, I think, and is now part of the Fair Tax proposals.
The idea is simple: figure out how much money someone at the poverty line paid in tax, and then refund that amount. The same amount to everyone. The assumption is that everyone at the poverty line spends every thin dime on necessities -- that's what the line is supposed to mean.
If you spend a lot more, you pay a lot more, and that's part of the idea. If you pay less, you might get back more than you paid, and that's part of the idea. Works for me. Bump up prices by a big percentage, and bump up my bank balance by a bigger percentage, and I can learn to live with that.
The problem is, initially an increased sales tax will hit the retired and people on disability very hard. It will also have an effect on newer buyers on the purchase of automobiles, furniture, basic household items, etc.
The main benefit it will have is taxing individuals that hide income. However, who is going to enforce the payment of sales tax. Right off, you will end up with a huge black market of untaxed items.
Also, during the initial implementation of this program, there will be a problem of sticker shock due to the increased cost of the sales tax itself. I think people will quit buying high dollar items for at least a short period of time. I am not sure the economy could survive the transition period.
The world doesn't work that way.
Sellers would maintain prices and pocket the tax savings.
Rejecting all the Tricks of FairTax supporters and calculating the tax rate Honestly—by including the higher spending that it mandates and by being realistic about what could actually be taxed—professional revenue estimators have always concluded that a national retail sales tax would have to be Much, Much Higher than 23%.
A 2000 estimate by Congress’s Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%.
In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place.
But if evasion were high then the rate might have to rise to 49%.
If the FairTax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion).