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Nothing "fair" about the "fair tax"
Leland Tribune ^ | 1/21/2008 | Elaine Mejia

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


TOPICS: Editorial; Government
KEYWORDS: ft; opinion
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To: xcamel

http://libertyunbound.com/archive/2003_04/welber-tax.html


21 posted on 01/22/2008 4:21:24 AM PST by Daveinyork
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To: CitizenUSA

The other psychological issue that will sink the Fair Tax out of the gate is the inequity. The chap bastard down the street who makes his kids wear second hand clothes and such pays no tax while the rest of us have to choose to live like him or be saddled with the burden of supporting our military, veterans and roadways. He gets to enjoy those benefits for free while those of us supporting the economy get stuck with the tab.

It is legalized tax evasion, an the sad thing is, if you read enough of the things said by the FTers it is obvious. Look at the points they stress, keep all your money, “choice” , the prebats etc.


22 posted on 01/22/2008 4:22:02 AM PST by ejonesie22 (Mike Huckabee, Tithing via Taxation, the Christian Democrat way...)
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To: xcamel
Like Rush says... whether you like it or not... a snowball has a better chance in hell than this pipe dream. I cannot envision any Congress doing away with the IRS... aint’ ever going to happen. Some may try... but corruption is deep in DC and America grows dumber, lazier and more socialist... ain’t going to happen in our lifetimes.

LLS

23 posted on 01/22/2008 4:22:36 AM PST by LibLieSlayer (Support America, Kill terrorists, Destroy dims and vote Fred!)
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To: Rock&RollRepublican
The so-called Fair Tax would require an agency double the size of the IRS just to monitor all the zillions of little businesses and products sold all over the country, and the world.

The agencies in the states that currently collect sales tax from "all the zillions of little businessess" would collect the tax.

Would foreign products be taxed? And can we trust foreign governments to fork over 30%.

It will not be necessary to rely on a foreign government to do anything. The sales tax would be on the price of the goods sold from a foreign country.

Do we add another 30% to gasoline? That sounds swell.

The current federal gasoline tax would go away.

Under a fair tax, there would be a huge underground economy within a year.... that would put any current underground economy to shame.

Why do you think that would be the case? The sales tax is on new goods of which most are sold through normal sales channels.

----------------------

Would you rather maintain the yoke of slavery that the current income tax instills upon us all?
24 posted on 01/22/2008 4:28:15 AM PST by Misplaced Texan (I hate toll roads.)
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To: LibLieSlayer
... whether you like it or not... a snowball has a better chance in hell than this pipe dream.

Kinda' reminds me of Fred Thompson's Presidential hopes.
25 posted on 01/22/2008 4:28:57 AM PST by RangerM (Jesus was likely a very good carpenter.)
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To: ejonesie22

HAHAHAHAHA!


26 posted on 01/22/2008 4:29:37 AM PST by Turret Gunner A20
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To: Rock&RollRepublican
The so-called Fair Tax would require an agency double the size of the IRS just to monitor all the zillions of little businesses and products sold all over the country, and the world.

Wrong. The size of government will be noticeably reduced since the 140 million individual tax filers will be reduced to 20 million businesses filers.

Would foreign products be taxed? And can we trust foreign governments to fork over 30%.

Imported products will pay The fair Tax but exported products will not have to pay. That will eliminate the 17% competitive advantage for foreign products. Fair Tax FAQ #31

Do we add another 30% to gasoline? That sounds swell.

Do you make it a point to be obtuse about The Fair Tax or is it just a bad habit?

Under a fair tax, there would be a huge underground economy within a year.... that would put any current underground economy to shame.

It will be much tougher for people to evade the Fair tax as they will have to buy an overwhelming of their purchases over the counter. The reduction of the number of filers stated above will make it easier to spot those who do evade tax payment. The income tax requires only one to cheat the system. The Fair Tax will require at least two cheaters, The business owner and the consumer. People will have much less incentive to cheat when they see more money in their paychecks and don't have to file anymore tax forms.
27 posted on 01/22/2008 4:29:58 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: Turret Gunner A20

Turrent Gunner A20: “I don’t know about you, but I think that stinks.”

I never said I like taxes. I only wonder what impact an overt tax like the Fair Tax would have on the economy. It’s something that should be at least considered, since our economy is presently very dependent on consumption.

As for the crooks who keep taking more, well...we let them. Americans could rise up whenever they wanted to kick the shysters out, but I can only conclude majorities like the government we keep getting (unfortunately).


28 posted on 01/22/2008 4:30:52 AM PST by CitizenUSA
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To: Misplaced Texan
The current federal gasoline tax would go away.

No, it won't. The environmentalist whackos will make sure of that.

Not really germane to the discussion at hand. Just a point I believe worthy of note.
29 posted on 01/22/2008 4:31:42 AM PST by A Balrog of Morgoth (QMC(SW) USN........ CG21 DD988 FFG34 PC6 ARS53)
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To: Misplaced Texan

“The current federal gasoline tax would go away.”

You other points are valid, except that one.

Remember, the FairTax is not about money; it’s about power and influence.

Who has it (the politicians), who wants to wield it (the lobbyists), and who wants to take it back (We the People...)


30 posted on 01/22/2008 4:32:43 AM PST by RangerM (Jesus was likely a very good carpenter.)
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To: RangerM

As in the devil we know vs. the oily devil we haven’t met, yet. One real answer is to reduce the government by 30% the first year and 10% each year following and to use fair tax calculation in the cuts. Soon we would reach a point at which government was palatable and met its Constitutional roll.

I’m afraid that all of this is wishing as long as Tocqueville’s rule remains, (paraphrased) “The republic is safe until politicians learn that they can bribe you with your own money.”


31 posted on 01/22/2008 4:35:06 AM PST by Steamburg (Your wallet speaks the only language most politicians understand.)
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To: xcamel

“This brings me to the third myth – that a 30% rate would be adequate to run the federal government.”

This socialist reveals herself. What she’s really worried about is that the pig bureaucrats and thieving politicians won’t have enough money to run the criminal fascist syndicate occupying Washington.

Whenever the current Marxist applecart tax system is threatened, the socialists and others who leech off the system come out screaming.

My solution to cut taxes and business costs is simple - fire every fascist/Marxist federal bureaucrat who’s not involved in national security.


32 posted on 01/22/2008 4:36:29 AM PST by sergeantdave (The majority of Michigan voters are that stupid and the condition is incipient and growing.)
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To: Man50D
This article loses all credibility with this statement. Fair Tax opposer's are deliberately leaving out one very important fact. The Fair Tax ill eliminate the hidden/embedded 23% Corporate income taxes and associated compliance costs known as the inclusive rate. 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.

Don't fair-taxers leave out the fact that everything a corporation buys would be taxed at the mythical 23%? Wouldn't that cost be embedded in the price of everything all over again?

33 posted on 01/22/2008 4:38:07 AM PST by raybbr (You think it's bad now - wait till the anchor babies start to vote!)
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To: RangerM
Who has it (the politicians), who wants to wield it (the lobbyists), and who wants to take it back (We the People...)

Since "we the people" don'ts set the rate how would "we" be in control?

34 posted on 01/22/2008 4:41:54 AM PST by raybbr (You think it's bad now - wait till the anchor babies start to vote!)
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To: sergeantdave

Socialist my ass. She’s a realist. The Federal Gov’t doesn’t go without. It either raises taxes or deficit spends. And you seem to have forgotten that the Fair Tax mantra is supposed to include the term “revenue neutral”.


35 posted on 01/22/2008 4:44:52 AM PST by Wolfie
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To: Steamburg

“The republic is safe until politicians learn that they can bribe you with your own money.”

I’d say a significant portion of our countrymen have enthusiastically chosen to enslave themselves to the government.

“A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.”
- Alexander Tytler

Thanks to the democrats and their followers, we are well on our way there. Once the electoral college is abolished (happening right now), mob rule shall prevail.

Those on public assistance should lose their right to vote.


36 posted on 01/22/2008 4:46:19 AM PST by RangerM (Jesus was likely a very good carpenter.)
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To: snippy_about_it
FLAT TAX people. It’s the only truly FAIR tax.

The Fair Tax is a flat tax, on consumption. A flat tax on income you favor has been tried and is failing. It's called the income tax. When enacted in 1913 it taxed 1% of the first $20,000 and 7% over $500,000. So few people earned more than $500,000 that they essentially paid the former rate. In 1913 less than 5% of the population was taxed. Today more than 80% of the population pays an income tax. Another flat tax on income is only reinventing the wheel and will eventually create another oppressive, complex tax code only the cycle will happen much quicker thanks to thousands of lobbyists that didn't exist in 1913.
37 posted on 01/22/2008 4:46:49 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: raybbr

Just don’t buy anything. Of course, in a popcorn fart economy based on consumer spending, that might not be such a good thing.


38 posted on 01/22/2008 4:47:01 AM PST by Wolfie
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To: raybbr

It is much more difficult to play “class warfare” with a flat rate, especially when income is unknown.

Any alteration in the tax rate hurts all equally; rich and poor alike. No more demagoguery of the “evil rich”


39 posted on 01/22/2008 4:49:20 AM PST by RangerM (Jesus was likely a very good carpenter.)
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To: Man50D

Man50D: “I suggest you actually read the bill and visit the AFFT website before making anymore erroneous statements.”

Nothing erroneous about wondering about the impact of a consumption tax on a consumption-based economy. As I wrote, Fair Tax advocates write as though it’s all about numbers. It’s anyone’s guess what the tax would actually do. I suppose someone could analyze Europe’s VAT for clues, but who can predict? Plus, I think Fair Tax fans are extremely naive to think politicians will give up the source of their power. Even if I liked it, and some parts I do, it’s just not going to happen.


40 posted on 01/22/2008 4:49:31 AM PST by CitizenUSA
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