Posted on 01/22/2008 3:43:13 AM PST by xcamel
Look up the word “fair” in Webster’s dictionary and you’ll find this definition: “Free from favoritism or self-interest or bias or deception.” Ironically, the so-called “fair tax” proposal that has been getting some attention lately is fraught with favoritism, self-interest, bias and deception.
The phrase “fair tax” is a new way to refer to the old proposal to create a national retail sales tax. Such a tax would replace essentially all federal income and payroll taxes with a national sales tax levied on all purchases. So instead of having Social Security and Medicare taxes taken out paychecks and filing those April tax returns, Americans would pay a national sales tax on every purchase they make. There are four myths about this tax proposal that must be dispelled in order to have a meaningful debate about its merits.
The first such myth is that the rate would need to be set at 23% in order to raise enough money to run the federal government. Not so fast. Under the proposal if you buy a $100 item the tax would be $30. Most of us would describe that as a 30% tax. But proponents would have us believe that the tax rate should be calculated by dividing the tax amount by the total purchase price including the tax. So divide $30 by $130 by and you get 23%. That is truly fuzzy math at its finest.
The second myth that needs to be addressed is that the IRS could be abolished because the federal government would no longer collect income and payroll taxes. That might technically be true but a new massive bureaucracy would have to be created in its place. This new agency would be in charge of sending every single American an approximately $450 check at the beginning of every month that presumably reimburses them for taxes they pay on their income up to the federal poverty level. This new agency would also be charged with making sure that anyone who sells anything is collecting the tax. So the guys who live out in the country near my home who shell the pecans that grow on my trees would have to start charging me sales tax and send that money to the federal government. And for each of these types of services that aren’t taxed or retailers that aren’t discovered, the tax rate on other purchases has to be that much higher.
This brings me to the third myth – that a 30% rate would be adequate to run the federal government. There is no way that a national retail sales tax could pay for current federal programs without setting the rate at least 45%. The allegation that a 30% rate is sufficient relies on some strange assumptions such as requiring government to tax its own spending and even taxing free services like free checking accounts and free care at veterans’ hospitals. It also assumes that every single transaction is taxed, including lots of things that aren’t taxed currently. So, imagine adding $90,000 to the purchase of a $200,000 home or adding $450 to your $1,000 monthly rent. Better yet, imagine adding $4,500 for every $10,000 paid in college tuition.
Fourth, and most importantly, it is a myth that the tax is “fair.” A deeper look at the proposal clearly shows that it would raise taxes substantially on most Americans while giving the wealthy a substantial tax cut. That’s because most Americans must spend most or all of their incomes to make ends meet, while better-off people can afford to spend a much lower share of their incomes. According to the Institute on Taxation and Economic Policy, the typical middle-income North Carolinian who earns about $34,000 per year would pay an additional $3,800 in federal taxes. The state’s wealthiest 1% of taxpayers whose average income is over $700,000 would get a tax break of around $150,000 per year.
It’s not fun to be in the role of defending the current federal tax system because it is confusing and not always fair. But ideas for replacing it need to be grounded in sound tax policy principles. An idea that relies on myths and gimmicks to get attention is not one worth considering.
Elaine Mejia is the Director of the N.C. Budget and Tax Center
The difference is that I am laughing at your seeming terror that someone dpwn the block might choose to spend less money than you -- thus "avoiding" paying taxes on something through his economy; and ending up with a dollar or so more than you. THAT is funny.
By the way -- there is a great deal of difference between tax "avoidance" and tax "evasion".
That does not terrorize me, as a responsible American it pisses me off and I wont be the only one. Ask me to adjust my life style to yours to “avoid” tax or get stuck with your tab also, no thanks. You get protected by the same military and ride the same highways, pony up bub.
Oh, avoidance and evasion, little difference, it is shirking responsibility no matter the term.
Nice to know that your feeble mind would not allow anyone to attack an article that the almighty scamel posts. You do realize that you posted an attack on the FT by a left wing writer for a left wing group don't you?
No you probably don't even realize that.
Sounds like the usual last resort of a pretty weak mind.
Well, there you go. I attack a left wing moonbat article and you defend it. Sounds like you have a one track mind and you don't care who you find to back up your illiteracy.
I can't help it if you choose for allies the enemies of conservative politics. You could at least acknowlege it from time to time.
No. the gas tax is EXTREMELY germane. Will the state and fed gas taxes be taxed by the FT?
You’re not just “wrong” on a massive scale, but most people have come to the conclusion that you’re a pretty serious bigot, too.
If politicians don't want the FT enacted, how are you going to get it enacted?
Since they are taxing gross reciepts, I would say yes the fairtax does tax add tax to state taxes and even federal excise taxes, which still exist under the fairtax. There is nothing in the bill which says you subtract anything from your gross.
Explain yourself.
No free parking would do it for me (at least until I moved to a place where there is still free parking).
The $100 item will then cost $77 and the $23(100*.23) will be the tax rate applied externally to the $77 as the tax exclusive rate of 30%. Consequently the price will remain at $100.If the Fairtax replaces both the 23% embedded taxes AND my personal income AND my payroll taxes AND sends me a government check every month, how is 23% OF reduced prices revenue neutral?
Which is the lie?
Is not.
is too.
Is not
Is too
BORING.
Doesn’t that make it just a little tougher to squeeze “23% embeded tax” out of it?
The fairtax creative accounting methods of counting things twice has been a pet peeve of mine for over 9 years. I would dare to say I was the first one anywhere to point their accounting methods out.
Did you not have a happy childhood?
Standby, he’s accumulating his “are too” response right now.
Your buttons are just too easy to push.
You need to get the advanced FT b0t v2.0 download.
You know how much it thrills me when you “argue” about the FT like that.
If you want to argue posting techniques may I suggest html sandbox?
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