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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: RangerM
My thoughts exactly

I'll stop posting that graphic when the anti's stop posting lies. Based on past history, I expect I'll get plenty more chances to post it.

81 posted on 01/22/2008 5:46:14 AM PST by Turbopilot (iumop ap!sdn w,I 'aw dlaH)
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To: xcamel

1) Same old pissin’ match about “inclusive vs exclusive rate” instead of “the government should or should not tax INCOME, the measure of what you provide to the economy”.

2) Class warfare about “the rich not paying as high of a percentage of their income as the poor”.

3) Concerns about the pre-bate. Seriously, it’s NOT THAT HARD TO UNDERSTAND!


82 posted on 01/22/2008 5:47:01 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: Daveinyork

Keep it up dave, but aim at the kleptocratic FTers and quote liberally (so to speak).


83 posted on 01/22/2008 5:47:44 AM PST by Paladin2 (Huma for co-president!)
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To: Turbopilot

I used it in another thread, but mine didn’t have the ** in it.

Guess it was acceptable.


84 posted on 01/22/2008 5:47:52 AM PST by RangerM (Jesus was likely a very good carpenter.)
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To: steve8714

Ah, the ol’ “market competition never lowers prices” argument.

No, the seller isn’t a fool, and if he can sell his product for $98 and still make a profit while his competition tries to sell it for $100, he won’t do that, now, would he? He’d maybe miss out on that 2 bucks per sale, even if he increased his sales by 50%. That wouldn’t be smart, would it?

Then his competition, knowing that he COULD sell it for $77 and still make the same profit, wouldn’t lower HIS price to $96, etc...

Is this what you’re arguing?


85 posted on 01/22/2008 5:50:44 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: sergeantdave

Oh, I think the socialist revealed herself PLENTY when she made the class warfare argument about “percentage of income paid in taxes”.


86 posted on 01/22/2008 5:51:58 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: Turbopilot
This is the correct graphic for pro-FT spam on FR...

87 posted on 01/22/2008 5:53:13 AM PST by xcamel (FDT/2008)
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To: Emperor Palpatine

True. A tax like the fair tax would at least be legitimate under the Constitution; unlike the current gamey contraption we call the “IRS”.


88 posted on 01/22/2008 5:54:52 AM PST by So Circumstanced
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To: raybbr
How will we stop a rise in the rate?

How will we stop an immigration amnesty bill?

Under the current system, there are a LOT of people who think they're GETTING MONEY FROM THE GOVERNMENT when they get their tax refund. This is because of the "pay upfront in stealth" withholding.

If you want to keep the current system, I propose we DEMAND that withholding cease, and that tax day be moved to October 31st - right before election time, you write one big check to the fedgov.

89 posted on 01/22/2008 5:55:17 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: raybbr

Sales tax now is NOT charged on items intended for resale.


90 posted on 01/22/2008 5:56:48 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: RangerM
Those on public assistance should lose their right to vote.

An economist at the University of Missouri came up with a plan whereby anyone making over a certain amount of money got more votes. Will never happen, but it's a fun idea.

91 posted on 01/22/2008 5:58:21 AM PST by the808bass
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To: raybbr

uh... dude... do you think businesses pay taxes now, or do they collect them from the

customer in higher prices
employee in lower wages
stock holders in lower dividends

Yes, the CONSUMER IS FOOTING THE ENTIRE BILL for the fedgov.

Read Boortz’ book and come back to argue from a point of knowledge instead of ignorance. That’s not an insult.


92 posted on 01/22/2008 5:58:53 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: the808bass

A simpler plan would be that only those that are tax PAYERS instead of receivers get to vote.

Bring your photo ID and your tax statement to the poll.


93 posted on 01/22/2008 6:01:22 AM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: Misplaced Texan
"The agencies in the states that currently collect sales tax from "all the zillions of little businessess" would collect the tax."

What about the states that don't have a ST?

Tax is theft.

FT is a tax.

FT is theft

94 posted on 01/22/2008 6:03:51 AM PST by Paladin2 (Huma for co-president!)
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To: MrB; raybbr
There is no dispute over the fact that "the consumer foots the bill"
the dispute is the big lie promoted by the FT hucksters over just how big that bill is..."

Try < 5%

95 posted on 01/22/2008 6:05:55 AM PST by xcamel (FDT/2008)
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To: MrB
"Sales tax now is NOT charged on items intended for resale"

I PROMISE to have my executor resell all my stuff.

96 posted on 01/22/2008 6:06:26 AM PST by Paladin2 (Huma for co-president!)
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To: xcamel

OOOOHHHHH that’s heavy duty! Tandem axles can carry quite of bit of that stuff.


97 posted on 01/22/2008 6:08:39 AM PST by Paladin2 (Huma for co-president!)
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To: PubliusMM

PubliusMM: “The FT is deserving of closer examination, and represents, IMO, the only viable alternative to the current model yet presented.”

Fair enough (pun intended). I never meant to imply the Fair Tax is a VAT. It’s similar in some ways, but it’s not a VAT.

I’m not a Fair Tax opponent. I just don’t see how it will ever happen. Like you’ve stated, it’s an obvious tax that strikes at the heart of our politicians’ power. That’s why I think it’s a pipe dream. Pipe dreams aren’t necessarily a bad thing so long as one realizes they are just that...pure fantasy. It wouldn’t break my heart to see the income tax abolished at some point, but I’m not going to hold my breath.


98 posted on 01/22/2008 6:09:51 AM PST by CitizenUSA
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To: MrB

No, we’re arguing that the price of Diesel is unlikely to decline at all (inclusive of course).


99 posted on 01/22/2008 6:10:45 AM PST by Paladin2 (Huma for co-president!)
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To: Man50D

You wrote “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.”

That is why I am opposed to this plan, the outright DECEPTION that is being employed.

“Consequently the price will remain at $100.” That is BALDERDASH.

For every dollar I get back from Income Tax Witholding, FICA witholdings AND the the money I save on reduced cost of products due to corporate taxes coming out, I MUST PAY THE SAME AMOUNT IN SALES TAXES BECAUSE BY DEFINITION, THIS IS REVENUE NEUTRAL!!!

Stop the deception.


100 posted on 01/22/2008 6:11:25 AM PST by Bryan24 (When in doubt, move to the right..........)
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