Posted on 08/28/2007 4:39:18 PM PDT by Bigun
The People Must Demand The Fair Tax
By Doug Patton
August 28, 2007
Last year, during the United States Senate race in Nebraska, Republican challenger Pete Ricketts suggested that every option must be considered when looking at ways to reform our federal tax system. Among the list of alternatives Ricketts said should be on the table was a national sales tax known simply as the "Fair Tax."
The Democrat incumbent, U.S. Sen. Ben Nelson, launched an attack on his opponent that was, at best, distorted and condescending, at worst, irrational demagoguery. One would have thought that Ricketts had suggested stealing all the assets of the poor and handing them over to Warren Buffet and Bill Gates.
Recently, the panel of pundits on ABC's "This Week with George Stephanopoulos," discussing the apparent rise in popularity of former Arkansas Governor Mike Huckabee's presidential campaign message, scoffed at Huckabee's unabashed promotion of the Fair Tax.
George Will, the token "conservative" on the panel, brushed it aside with the disbelief of an elitist who cannot understand the burden of the average worker who would love to take home his or her entire paycheck, as the Fair Tax would allow him or her to do. Will opined that Huckabee's second place showing in the Iowa straw poll was even more amazing given the fact that "he supported a national sales tax of thirty percent, which means that if you buy a one million dollar house, you'll be writing a check to the government for three hundred thousand dollars." Of course, the others on the panel readily agreed.
The elites of this country, who buy those million-dollar homes, are not enamored with the Fair Tax. They would be if they took the time to understand its appeal.
The Fair Tax would replace all federal income taxes. No more federal withholding. No more Social Security withholding. No more Medicare withholding. No more stealing from the paychecks of American workers before they even see it and then pretending to give them a refund, without interest, at the end of the year. No more saving receipts for tax deductions. No more IRS audits. No more April 15th.
Instead, the Fair Tax would put us in control. All consumer items would be taxed. Business purchases would not. By allowing us to make the determination about what we buy and when we buy it, the ability of our legislators to manipulate our behavior is eliminated. That is why the elites don't like it. They can't control the public's spending habits under such a system.
The current federal tax system is broken. It cannot be fixed. Since the inception of the federal income tax with the passage of the 16th Amendment in 1913, federal corruption and control have turned it into a Frankenstein monster that torments the people and serves the special interests. A tax on a person's income is a tax on production, and as Ronald Reagan once said, "Whatever you tax, you get less of."
Because the poor are forced to spend a disproportionate percentage of their resources to cover the tax on necessities, the Fair Tax hits them the hardest. That issue can be addressed by simply issuing a "prebate" check each month to every household in the country. Unlike disingenuous tax credits, deductions, exemptions and other loopholes in the current income tax code, a prebate check is a clean, honest method of covering the sales tax on food, clothing and shelter - up to the poverty level.
Of course, removing the income tax on corporations will reduce the cost of everything we buy, since corporations don't pay taxes. They simply pass them along to consumers. The Fair Tax plan calculates that removing the corporate income tax will result in a reduction in the cost of virtually every consumer item on the market. In fact, it will just about offset the tax on those products. Imagine paying the same price for something but having your entire paycheck to buy it.
And then there are the billions of dollars that flow untaxed through our economy today: drug dealers, prostitutes, pornographers, foreign tourists. Imagine how much revenue could be raised simply by taxing the things those people consume.
There would be no more audits, no more justifying deductions, and April 15th would become just another spring day. But only if the people stand up to the elites and demand it.
For you everything involving the FairTax is a lie.
But I suppose you think there are no lies or deception with the Income Tax or revenue estimates based on it. Yes, you would believe that OTA and JCT are never wrong nor do they follow the law.
Why are you responding to me since you called me a liar? And if you think Harvard Economics is a bunch of lies why don’t you direct your accusations to them?
I have no need for your comments as they are based on nothing other than your hatred for the FairTax. Perhaps you can find another FairTax hater to commiserate with. Do it.
but the states may be allowed to administer their own income tax so long as they pay the federal government the level of taxes they have historically with year to year adjustments based on population data (apportionment).It doesn't sound like "decentralization" to me it sounds more like a lot of wishful thinking and double talk.This involves decentralization of federal government...
Price and consumption stability is why the FairTax will be tested on selected states for evaluation.The full enactment may leave individual states with a choice, pay X amount of federal taxes and we don’t care how you choose to do it as long as it is lawful (Constitutional).We?
What's the bill number?
“However, the 16th Amendment will be repealed......”
This will take 38 states to ratify will it not?
Fair Tax is a 100% scam.
It will be no different than the luxury tax. Those with means will simply buy from someplace without this bood doggle.
You are also foisting MORE paperwork and administration on small business. Business has no place being the governments slave tax collector.
Sorry, the the more people talk about this NATIONAL SALES TAX the more negatives it aquires.
A NEW TAX with a pretty name is still a NEW TAX.
“You are also foisting MORE paperwork and administration on small business. Business has no place being the governments slave tax collector.”
You don’t appear to realize that most businesses are doing much more in the way of tax collecting by handling the income tax withholding for all their employees and paying it and the SS/MC tax for both the employee and employer sides every paycheck.
And that is ALL businesses, while the FairTax only requires much simpler sales tax collection from the RETAIL businesses, a much smaller group than ALL businesses.
In 46 states, these same businesses already are collecting a local sales tax, which invariably has exemptions so they have to track which items are taxable and which are not. The FairTax applies to EVERYTHING, so it is much simpler than those local sales taxes.
As far as wealthy people go, unlike the luxury tax that can be dodged by buying something overseas and bringing it home, the FairTax is due and payable when they bring it into the country. If they fail to declare it at Customs, then they are guilty of tax evasion.
For you everything involving the FairTax is a lie.So far it is, including the 23% rate...You pretty much said so yourself.
At least three fourths of state legislatures or conventions are needed. So that would be presently 38 states.
That is why the FairTax legislation does not include legislation to repeal the 16th Amendment because it takes longer to get ratification. The legislation to repeal the 16th Amendment is separate.
But the FairTax legislation does abolish the income tax among other taxes and abolishes the IRS. The FairTax sponsors will work in tandem to repeal the 16th but they will enact the FairTax first to give people the experience of having no IRS and no income tax. It is believed that this experience will hasten the repeal of the 16th. It will be a good fight that many are looking forward to.
So you are speaking for me now?
I think I’ll just sit back and watch you tell others what I think.
The people should demand the flat tax. This is an election gimmick.
I think I’ll just sit back and watch you tell others what I think.I don't tell anyone anything, I only point out your own lies and idiocy.
Maybe you should stick with your reeducation camps for convincing women to have babies they don't want.
You are downplaying the reduction in material cost. You are also excluding significant reductions in the cost of services.
Your shoe manufacturer is likely buying leather, materials/oils for tanning/conditioning rough leather and dyes/polishes for finishing, supplies and maintenance for machinery, packing and transport services and advertising services, accounting/tax services, perhaps marketing services. Your shoe manufacturer is also required to buy insurance and pay state business fees and taxes; let's call these administrative costs. Overhead includes leases (inclusive of property taxes), utilities and depreciation reserves.
Each of the material and service providers to the shoe manufacturer will have the same opportunity to lower their costs.
In the Income tax world a price model for a moderately labor intensive shoe manufacturing business consisting of 45% payroll, 28% shoe materials and supplies, 16% services, 3% administrative costs and 8% profit can be broken down as follows:
Federal taxes as a percentage of payroll and price:
Federal taxes as a percentage of profit and price:
Federal payroll tax compliance as a percentage of services and price:
The total percentage of price thus far attributed to federal payroll and income taxes, and compliance costs is 20.1%.
Turning to materials, the material supplier of leather hides is considered to be moderately labor intensive as the animals used are considered as inventory materials to that business. Using the same percentage breakdown for material pricing as the shoe manufacturer, the total federal payroll and corporate income taxes, and compliance costs is also 20.1% of material price. Applying this percentage to the shoe manufacturer's price breakdown percentage of 28% for materials, the material supplier's payroll taxes, corporate income taxes and compliance costs form 20.1% of 28% or 5.6% of the shoe manufacturer's price.
Turning to non-federal tax services (70% of 16%), the shoe manufacturer's service providers should be considered to be very labor intensive as labor is a large percentage of those service businesses (e.g., transport, advertising, marketing). A price model for these service businesses consisting of 65% payroll, 12% supplies, 12% services, 3% administrative costs and 8% profit can be broken down to show a total percentage of service pricing attributed to federal payroll taxes, corporate income taxes and compliance costs to be 26.1%. Applying this percentage to the shoe manufacturer's price breakdown percentage of 11% for non-tax related services, the service provider's payroll taxes, corporate income taxes and compliance costs form 26.1% of 11% or 2.9% of the shoe manufacturer's price.
The total federal tax and compliance contribution from the material suppliers and service providers is actually more because they also utilize supplies and services. To analyze the complete supply chain involves what is called in mathematical parlance a system of finite difference equations. However, each variable is actually a statistical random variable, so the statistical model is based on what are called structural equations. That is one method for approaching the analysis.
For purposes of this example, we have already at least a federal burden forming 28.6% of the shoe manufacturer's pricing. Statistical analyses involving other manufacturing businesses using a full supply chain bring the total federal burden estimate to more than 32% of pricing.
In the world of the FairTax, allowing that the shoe manufacturer's employees will keep their gross income, the employer's share of FICA (7.65%) along with the other percentages of corporate income tax and compliance costs will be eliminated. For the example above, the percentage eliminated from pricing under the FairTax is 11.05% (6.9/2 + 2.8 + 4.8). Adjusting material and service burdens for elimination under the FairTax yields respective results of 3.1% and 1.4% of the shoe manufacturer's pricing and this brings the subtotal of price reduction to 15.6%.
Yet 15.6% is a minimum as it excludes suppliers and service providers further down the supply chain. For example, if a material supplier to the shoe factory' material supplier is also able to eliminate 3.1% of the primary material supplier's 28% material cost, then the reduction in shoe pricing is an additional 1%. The further the analysis traverses down the supply chain the smaller are the reductions to the pricing of the business under investigation, in this case an example of a shoe manufacturer. However, supply chains are typically very deep. In this example, a material supplier of leather hides must buy feed for livestock. A feed supplier must buy fertilizer. Fertilizer manufacturers must buy a variety of materials, etc.
When entire supply chains are included, and business models are treated as statistical random variables with the analysis put into a statistical context, the percentage amount of pricing that is attributed to federal tax and compliance burdens is frequently estimated to be well over 20% using conservative assumptions.
The rebate is funded by an increase in consumer spending which in turn is driven by employees keeping their entire gross incomes. In effect, money is diverted away from the federal government and put into the private sector where it is used for economic growth and increased consumer spending (this has been shown in studies to actually increase revenues to the federal goverment as it acts similar to tax cuts).
When money is circulating and changing hands in the government sector, it is often observed to be government paying itself. For example, payroll taxes taken out of a federal civil service employee's gross pay are paid back into the government even though the source of the money springs mostly from the private sector. In other words, alot of private sector generated revenue that is confiscated by the government sector stays in the government sector.
Money circulating in the private sector is efficient. Money circulating in the government sector is inefficient.
Money diverted away from government to the private sector is used to create growth leading to increased consumer spending. This actually generates more revenue back to the government.
The FairTax is a system that leads to economic growth by putting more money in the hands of wage earners because they keep their entire gross income, 'all of their paycheck'.
The FairTax leads to cost and price reductions prior to imposition of its NRST. The effect is to eliminate the federal burden of the current tax system on pricing and to replace it with the FairTax NRST. Given general price stability, the only significant change noticeable to the consumer is they will see for the first time since 1913 the true level of federal taxation. The FairTax is transparent.
The transparent FairTax will remove the capability for special interests and their paid-for politicians to manipulate the tax code, the government will no longer be able to stack the deck as all its moves in the arena of taxation will 'in view'.
The FairTax is America's Glasnost moment.
I have to admit you know how to take things so far out of context that only an extreme hallucinating mind could invent and absorb such tales.
I am not a psychologist but you should seriously see one.
From the freepmail I receive frequently on FairTax threads, you are the one that lacks credibility and is viewed as full of hate. People can’t stand to read your asinine comments and they resent your interruptions when they are posting among themselves. They ignore you because you are incorrigible and your attitude stinks.
The paragraph you called out was part of a discussion with legislative analysts. It is anything but bizarre. What is bizarre is your attacks on the FairTax and your lack of attacks on the insane Income tax.
The fact is the FairTax will be tested in selected states and when the results come in there will be a transition period allowing states to collect taxes by whatever legal means they choose. The 16th Amendment is a power reserved to the federal government, not necessarily to state governments. When it is repealed, states can still choose to impose a state income tax. And as they transition to the FairTax, they may have to collect taxes in the interim for the federal government in the form of an income tax. For example, Oregon has no sales tax. It has only an income tax.
Go ahead and continue observing other’s discussions and casting your idiotic snipes at their comments. When the shoe is on the other foot, we will see how you like it punk.
So the question is, who will benefit and who will get slammed?
Drug dealers and illegal immigrants, tourists... HR Block...
Way too high. The rate may be 35%, but, "During the 1990s, corporations as a group paid an average of 25.3 percent of their profits in federal corporate income taxes, according to new Congressional Research Service estimates." 90% of all corporations that file pay no corporate taxes. Second, Nike's profit was 5% and Wall Street was ecstatic. 8% indeed.
We can argue corporate tax rates and we can argue profit percentages, but the bottom line is how much is paid. "Corporate taxes have fallen from 5 percent of gross domestic product ... in 1946 to 1.4 percent now." Half of your figure.
"Payroll service for federal compliance estimated at 30% of 16% services, or 4.8% of price."
Well that's simply insane. First of all, you're still going to have payroll costs under the Fair Tax. The only costs being saved are not having to file a corporate income tax. You're lucky if it's half that.
So, we have 7.25% (6.9/2 + 1.4 + 2.4) plus material savings of 2.03% (7.25% X 28%) for a total of 9.28%. I said before that both sides have agreed on 9%.
That's all there is, and even that's generous. The bottom line is that it ain't 23% as you said, so prices will go up approximately 18%. For domestic goods. Imports will rise 30%. Given a 50-50 split (foreign - domestic), that's an average retail price increase of 24%. Not zero, as the author says.
Myself and others have explained all this to them before but never so eloquently as you have done.
No telling how many FairTax converts there are due to his efforts alone.
Is it lawful to require states to pay federal taxes in the way Hostage suggests? (I'm not sure exactly what he is suggesting)
Historically, the central government was once supported by money contributed by the states, however it was truly voluntary, and as one might expect, it didn't work out.
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