Posted on 09/01/2007 6:18:37 AM PDT by Man50D
The Sunday Wall Street Opinion Journal published an article (8/26/07), "Fair Tax, Flawed Tax" (link below) by former Deputy Assistant Secretary of the Treasury for Economic Policy (1988-1993). It is obvious that the Journal editors and Mr. Bartlett didn't do their homework.
Many citizens will dismiss the FairTax Plan out-of-hand by reading this distorted play on words from the pen of Mr. Bartlett. Dismissing his assertion of the FairTax being connected to the Church of Scientology — a gorgeous lie to behold — he proceeds to lambast FairTax supporters with so-called evidence that it will not work and will cost more at the cash register by tacking on a 30 percent National Sales Tax.
Mr. Bartlett's proclamation of "FairTax" facts lack the knowledge that millions of citizens know from reading the book by radio talk-show host Neal Boortz and Congressman John Linder (R.,GA), "The FairTax Book." And the fact that the IRS will disappear from our lives. Those citizens know that Bartlett is way off base on the FairTax Plan.
He gets into trouble right away by giving examples which do not represent the FairTax. Anyone familiar with how the FairTax would work knows that any product, right now, includes embedded corporate-business taxes. So much so, that we citizens don't really know for sure how many taxes we're paying on any one product and service. [Don't Rug Cleaner services and Doctors pay taxes in running their medical practice (business)? Aren't a few taxes passed on to consumers and hidden in the price of those services?]
Researchers and analysts, after years of study and exposing those taxes to the light of day, have ascertained that the estimated embedded taxes are around 22 percent. Folks, that's after withholdings from wages and before the state and local sales taxes are added to your purchase at the checkout. But you'll never know it.
What Bartlett failed to accentuate about the FairTax Plan is the fact that the hidden embedded taxes are eliminated from the price and then, only then, is the 23 percent included. He offers a weak example: retail product price tag, $1.00, adds a national sales tax of 30 percent to make it $1.30. His big Calculation Error exhibits an example unrelated to the FairTax plan at all.
The True FairTax Plan would subtract the embedded corporate tax of 22 percent and add 23 percent —
$1.00 - 22 % = $0.78 $1.00 x 23% = $0.23 + $0.78 = $1.01 OR $0.78 x 29.5 % = $0.23 + $0.78 = $1.01
Depending on how you figure the FairTax math, either way, it comes out about the same.
Another distortion by Mr. Bartlett: The prebate to "all" households is not based on amount of annual income, but on the number of people in a household.
Mr. Bartlett's warped article makes a mockery of the FairTax Plan but also exposes either his lack of knowledge or his complete and intentional distortion. Other FairTax opponents have weighed in with their own skewed versions of FairTax facts, but this article takes the cake when it comes to misrepresentation. It is a brilliant example of how to persuade people to be "anti-something without really trying," much like global warming.
The faithful to our current tax system, promoting class warfare and progressive tax exemptions, are going to fight against the FairTax Plan to the end. The present IRS tax code with its thousands of pages plus more added annually by Congress continues to obey the Second Law of Thermodynamics — order to chaos. Disorder is what we experience now. It is time to replace this monster.
A near-future "FairTax" book will respond to all the criticisms. Both Rep. Linder and Sen. Saxby Chambliss (R., GA) have introduced the FairTax bills (HR25 and S.1025) in Congress. You may see the content of the bills online at Rep. Linder's site or through the American FairTax Organization (links below).
Attacked from all sides, FairTax proponents must continue to hammer home to the public the facts versus the distortions. The mainstream media, lacking its own FairTax education, doesn't recognize the errors and distorted lies of those promoting other tax reform agendas and calling them "FairTax" as Mr. Bartlett has done.
We Americans must educate ourselves and understand this total replacement of the IRS plan so we may make informed decisions. Read the book. Explore the links below to truly understand the FairTax Plan and its simplicity. It will benefit all of us — government, citizens and the corporation-business sectors.
Bump for later read.
I’ll have to investigate this further, but just remember that there’s a long history of people who’ve “turned” on the side that they claimed to support, for purely personal reasons.
Names that come to mind off-hand include David Brock, Scott Ritter, and just about anyone formerly in the Bush Administration who’s written a book.
I’ll look into it, but as I said earlier, if he really said that the majority of the savings would come from payroll, that’s just wrong at the outset.
No matter what, my main reasons for supporting the “Fair Tax” are that a) it imposes the tax on everyone who buys new products and services at the point of retail sales. b) it takes a lot of power from our congress-critters. No more playing favorites. c) it becomes impossible for congress to hide a tax.
Mark
Hello upchuck,
yes there is obviously an enforcement arm of the nrst. Did someone tell you otherwise?
Anyway, the big differences [imo] are that the taxing authority, or whatever it’s called, does not come after private individuals - only businesses who sell at retail. This is a major advantage and improvement over the existing tax authority - who can come after anyone, anytime, for no reason.
Another reason for me is that the nrst removes the “guilty until proven innocent” tactics of the brutal IRS. This also represents an improvement over our existing tax system.
BTW, states may either contract the service of collecting, remitting, enforcing the sales tax to another state. This is unlikely given the revenues they’d be forfeiting [1/4th of a pct of revenues remitted].
Pardon me, I’m not attempting to compare the IRS with the Sales Tax Bureau.
My point is simply that under the current system enforcement and administration is done by the IRS.
And, yes, under the Fair Tax the IRS, as we know it, goes away.
But what ever tax system is put in place, it will need administration, collection and enforcement.
Your 8% is on the low side of 8-10%. I use 9% - right in the middle. That said, recall Jorgenson's opinion...
The sum of all embedded tax is appx 22%. This amount includes everything - including employee pd tax.
If the employees keep their current gross as you and I both assert, real prices decrease slightly and purchasing power grows slightly.
THe only way to "demonstrate" price increases is if you use the BEFORE income tax price and compare it to the AFTER nrst price - which is misleading at best and an outright lie at worst.
Agreed. Thanks for your reasoned thoughts.
But the flat tax proposals are not that low. Not nearly.
17% marginal on personal income plus 7.65 ee payroll [often not mentioned by the flat proponents] plus 7.65 er payroll [also usually not mentioned by flat proponents] plus business taxes which result in higher prices - like today's graduated income tax.
Ends up about 24.65% marginal [which is 32.7% exclusive] on ee side - which is withheld plus the higher prices due to business costs... about 9% of spending.
The flat tax is by definition a VAT because of how it adds tax at every stage of production. It is a subtraction method VAT.
If they could get it to 10%, i'd love it.
I’ll look into it, but as I said earlier, if he really said that the majority of the savings would come from payroll, that’s just wrong at the outset.The majority of the savings would come from payroll TAXES, which is from wages.
If you know it's wrong at the outset you must know how to show it's wrong...Maybe you could share that with the rest of us.
It was a lie then and it’s still a lie.
The effect on purchasing power is entirely dependent upon one's circumstances. Those on a fixed tax-free income was see their purchasing power plummet. Probably most people will see their purchasing power increase a bit under the fairtax. But that does not make my point misleading at all, end item prices will increase under the fairtax. A legitimate point which could have a profound impact on high dollar items such as new homes and cars. It is the one's who deny that prices will increase who are making the outright lie. I have no problems when the picture is presented honestly which it rarely is in this debate.
Actually, YOU are the one who doesn't seem to understand the concept of "embedded taxes." Embedded taxes are the taxes paid at all stages of the preparation, production, and sale of goods and services, that are passed up the chain, and become "embedded" or hidden, in the cost of the final retail product or service. So while the "employers portion" of FICA and the cost of compliance ARE defined as part of the embedded taxes, the taxes withheld from the empoyees paycheck are NOT, since that amount isn't actually a cost of production to the employer, over and above the cost of employment. In other words, THOSE funds aren't paid by the employer, they're paid by the employee.
Mark
What you think they should be defined as and what the fairtax expert who did the study defined they are are two different things. You definition is a valid definition, but that is not the definition Dr. Jorgenson used to come up with 23% embedded taxes.
So much disinformation....so little time.
“...all “embedded taxes” add up to 22%, with no definition of what those taxes include. Then it states that the Fair Tax will replace these taxes, plus the Income Tax, with a tax of 23%.”
The 22% embedded taxes and the 23% (inclusive) Fair Tax being so similar is purely coincidental. The Fair Tax rate of 23% is simply the rate required to be revenue-neutral, as determined by leading economists around the country. And, those thousands of IRS workers will have no problem finding a job among the numerous businesses that return to America, and the foreign businesses that will want to come to the tax haven of the world.
upchuck said: “Assuming the IRS is completely eliminated and it’s thousands of employees are looking for work, what mechanism exists to collect the revenue generated by the Fair Tax?”
Its called the “Teasury Dept.” at the federal level, and the state sales tax authority at the state level. And for those 5 states who do not currently have a sales tax, they have 3 easy options for collection administration.
Rc2 said: “This brings up a good point. If the Fair Tax system has to be explained as much as it is..........If people have to lie about it as much as they do, something is wrong with it. Another reason I like the Flat Tax. Send the government 10% of your income and go about your business.”
Do your homework — the flat tax would begin at 19% (for both individuals and business) then, hopefully, drop to 17%. That means your income is still being tracked, the IRS is still destroying the Bill of Rights, you’re still paying the taxes (and related costs) for all businesses, and you’re still paying taxes on every dime you earn, and every dime you spend — sounds suspiciously like what we have now. Under the Fair Tax, all that goes away.
Sherman Logan said: “Embedded taxes consist primarily of payroll taxes, do they not?”
Embedded taxes consist of the employer’s share of the employee’s payroll taxes (some studies also include the payroll tax, like Jorgenson - and weight them unfairly), the business’s income tax, and all related compliance and avoidance costs (CPAs, tax attorneys, lobbyists, huge payroll depts). There is another cost component to “embedded tax” costs that no one knows — loss of efficiency due to the fact that businesses spend 80% of their time making decisions based on how those decisision will affect their bottom line with regards to the tax code.
Under the Fair Tax — all that is GONE. Let freedrom ring!
I can understand how the critics of the fair tax, flawed that it may be, would be reluctant to at least try it. After all, our present tax system works so well. ;}
No, I haven’t read it. I doubt this bill has a snowball’s chance in hell, though, and it’s easy to imagine Title III, Section 301 being stripped from the bill as it makes its way through the legislative process.
You're wrong. The only way for this to to be shown is if you fail to consider the income tax in today's prices BUT you do include the sales tax in nrst prices.
If you say "nominal prices" will increase, you'd be right. But take home pay increases more than nominal prices increase. That's why the increase in purchasing power. Purchasing power increases are merely the result of the nrst having a larger base AND more payers.
The increase in take home pay represents the income tax paid on all goods and services under the income tax. That's the part you omit in your "analysis" of the effect of tax on prices.
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