FAIRTAX, FLAWED TAX?

Nealz Nuze/WSB Radio ^ | August 27, 2007 | Neal Boortz

[Phantom Lord]

Most criminals are tax evaders. They do this by not reporting income. A consumption tax is applied to everything you buy, and requires one to make every purchase from alternate (illegal) sources in order to evade it. This is much harder to do

I have actually seen a FairTax oppenent claim that the FairTax will not get the blackmarket drug dealers and the such to pay taxes because they are not going to charge the tax on the crack, cocaine, heroine, etc... that they sell!

[Always Right]

So my boss couldn't pull me into his office and say, Phantom, we are reducing your salary to $80K a year starting tomorrow? That mechanism doesn't exist?

You think union thugs are gonna take the pay cut? There will be some downward pressure on wages, but that is a longer term effect. The immediate effect is an instantaneous 20% inflation spike due to the fairtax. What happens longer term is crystal ball stuff. Most likely people will just live with the new prices and keep their current wages. Seniors are then royally screwed.

[RobFromGa]

DEBUNKING THE FairTax:
A Fair Question about Fair Tax
OPEN LETTER TO BOORTZ/LINDER (FairTax)
JORGENSON EXPLODES FAIRTAX MYTH (FR Exclusive)
Fair Tax - Straightening Out Some Confusion
FAIR TAX BOOK- 2nd Ed. Revisions
A FAIRTAX PRIMER
President's Advisory Panel on Tax Reform Final Report- Nov 2005 : Chapter 9
Fair Tax, Foul Politics [NRO on FairTax]
Fair Tax, Flawed Tax (Bartlett, WSJ)

[Admin Moderator]

Knock it off!

[Always Right]

I have actually seen a FairTax oppenent claim that the FairTax will not get the blackmarket drug dealers and the such to pay taxes because they are not going to charge the tax on the crack, cocaine, heroine, etc... that they sell!

Which is a legitimate point. The Fairtax does not capture the black market in anyway shape or form. The Fairtax just taxes legal purchases, which is exactly the same situation we have today. The net gain is zero if you really understand the argument, which I will not be holding my breath on.

[xcamel]

Thank you.

[RobFromGa]

I asked Linder “What about government salaries? You control those, will they come down or stay at current gross?” His response didn’t have an answer.

[Phantom Lord]

You think union thugs are gonna take the pay cut?

Thats a little different than your claim that there is no mechanism available to do such a thing.

[Phantom Lord]

Which is a legitimate point. The Fairtax does not capture the black market in anyway shape or form. The Fairtax just taxes legal purchases, which is exactly the same situation we have today. The net gain is zero if you really understand the argument, which I will not be holding my breath on.

Gotcha. So today, Joe Drug dealer is profiting about $50,000 a month from selling coke and paying zero taxes. And Joe Drug dealer, having money and enjoying the good life just bought himself a big $100,000 Benz, then put on $20,000 aftermarket spinners. Wears $200 sneakers. Enjoys buying expensive jewelery for himself and his "lady friends". And he has paid ZERO in taxes.

However, if the FairTax is in place, he would have paid taxes on the Benz, spinners, sneakers, jewelry, etc...

And he still has to a place to live, food to eat, clothes to wear, will purchase entertainment items, gifts, luxuries, etc... But as you say, the FairTax won't get the black market money.

[xcamel]

The lifespan of just such a moron is somewhat less than 5 years, after that he pays with a dirtnap. So your point is moot, and his "value" to the tax system is less than zero.

Rather colorful strawman though...

[Always Right]

Gotcha. So today, Joe Drug dealer is profiting about $50,000 a month from selling coke and paying zero taxes. And Joe Drug dealer, having money and enjoying the good life just bought himself a big $100,000 Benz, then put on $20,000 aftermarket spinners. Wears $200 sneakers. Enjoys buying expensive jewelery for himself and his "lady friends". And he has paid ZERO in taxes.

He pays the 23% embedded taxes on his legal purchases. He avoids income taxes on illegal sales. However, if the FairTax is in place, he would have paid taxes on the Benz, spinners, sneakers, jewelry, etc...

Exactly as it is today. In neither case does the drug dealer actually submit any tax. The only difference is under the fairtax he receives a little piece of paper showing what taxes that were paid on his purchase. On the income tax they are hidden and embedded into the price.

[Filo]

You already are double taxed. In fact, your a minimum of triple taxed on the same money today. First your income, fica, etc... taxes. Then taxes on the earnings from savings, and the embedded taxes you pay when you spend the money. So again I ask, what is different and worse with the FairTax on this issue?

Yes, the current tax system is a disaster. I'm not arguing that.

I am arguing, however, that I will lose money on my savings if the Fair Tax is implemented because I will be charged the Fair Tax on any purchases made with that savings and because that tax rate will be higher than the current "embedded rate." That is what is different and that is what is worse.

I've already paid my income, FICA and other taxes on the savings. I've already paid capital gains taxes on most or all of its appreciation. So the only thing offsetting the Fair Tax are the "embedded taxes" which are far lower than the full fair tax rate. That difference represents double-taxation above and beyond the over-taxation you’ve already mentioned.

Again, I will lose money when the Fair Tax is implemented as will everyone with any savings at all.

Hell, if the tax is implemented on January 1 then anyone paid on December 31 will be double taxed on that last paycheck unless they spent all of it before the new year!

check it out http://www.fairtax.org/PDF/TheFairTaxAndEconomicGrowth.pdf

Been there, done that. The Fair Tax clearly has advantages over the current system but I, for one, will not support it until the obvious flaws are removed. There is no reason to jump from the frying pan into the fire, even if it's a slightly cooler portion of the fire. . .

Flaws include, but are not limited to, too high of a tax rate, unacceptable taxation on pre-existing savings, the lack of a mandated repeal of the 16th prior to implementation and the almost certain chance of adulteration by the political establishment once the Fair Tax is in place.

Fix these and we have a discussion. Leave them in and the Fair Tax is doomed.

[steve8714]

Wal-Mart ownership makes their money on the real estate, not on the profit or loss of the retail op.
Also, they work the suppliers like dogs to reduce their price, and float payables 90-180 days to make extra money on their money.
This is not your typical operation.

[steve8714]

If you are goping to do this, you need to know a)where you are on the supply and demand curves for your products, and b)the exact slope of those curves, and c) how both of those might change over time.
Can you be sure of these in a quantifiable way?

[Phantom Lord]

He pays the 23% embedded taxes on his legal purchases. He avoids income taxes on illegal sales. However, if the FairTax is in place, he would have paid taxes on the Benz, spinners, sneakers, jewelry, etc...

Exactly as it is today. In neither case does the drug dealer actually submit any tax. The only difference is under the fairtax he receives a little piece of paper showing what taxes that were paid on his purchase. On the income tax they are hidden and embedded into the price.

So, are you finally admitting that 23% of current product prices is an embedded tax, which you have denied for years?

[steve8714]

My point exactly. There are more dimensions to cost than just price, and most shoppers realize this. More local coffee shops close than do Starbuck’s.

[steve8714]

You have made my point.

[steve8714]

If you think it’s difficult to make purchases from illegal (let’s say secondary) sources, you’ve never been to a swap meet or urban flea market. It’s not so easy to earn illegal money either.

[Your Nightmare]

Good lord, that comment is ignorant. By that argument there would never be ANY price competition. And yet it happens ALL THE TIME. Therefore your argument is false.

By your argument prices would continually be going down. And yet prices, in general, rise ALL THE TIME. Therefore your argument is false. Pricing isn't a race to the bottom.

[GeorgefromGeorgia]

I am nearing 60 and close to retirement. Because of that, I will be in a lower income tax bracket, and benefit from a Georgia law that exempts much of my retirement income from state income tax. However, I like the FairTax. If it is good for the country, I will support it. Think of it in another way. What more do you have to buy in your golden years. I may buy another car, perhaps two, but aside from food, utilities, I won’t be paying out bigtime on the FairTax. Also, my retirement, and accounts (IRA, 401K) will be tax free with no income tax.