Posted on 01/26/2008 5:15:28 AM PST by xcamel
In a nation whose government and citizens scarcely hesitate to spend money, and whose personal debt and entitlement liabilities climb staggeringly, economic conservatives would try to encourage more saving.
One proposal many back for that purpose is the national sales tax, called the "Fair Tax" by its supporters. It has gained the enthusiastic support of free-market pundits like Robert Novak and Neal Boortz and from a presidential candidate, Republican former Arkansas Gov. Mike Huckabee.
This national sales tax would aim to promote saving by shifting the federal tax take from income to consumption. But even some of the most staunchly anti-tax economic experts believe it has its perils.
Some, like Hudson Institute scholar Diana Furchtgott-Roth, support the idea of a national retail sales tax, but fear the idea may not gain sufficient public appeal. "It's a question of: Can it be done politically?" she said.
She rejects arguments that such a tax would fall too heavily upon the poor because the government could rebate $500 or more a month to the less wealthy, who spend a great portion of their income and save very little. Meanwhile, the tax would make it easier for all taxpayers to save and invest by taking less of their pre-tax income.
"Right now we're taxing work and we're taxing investment, and we're getting less of it," she explained.
William Beach, an economic analyst with the free-market Heritage Foundation in Washington, D.C., also sees some merit in a tax system that would take money from consumption rather than savings and investment.
However, he believes the very rebate system that the fair taxers tout as helpful to the poor will engender bureaucratic rigmarole. Because such a payment to poorer citizens would come monthly, the government would need to keep monthly track of who is officially "poor."
"You're going to have to have a rebate system and you're going to have to have monthly reporting of your income to a federal official," he said. He believes, however, that some form of consumption tax could be superior to the current graduated income tax structure.
The fact that the fair taxers want to abolish the Internal Revenue Service and rely on the states to collect the revenue and direct it to the national government would compound the intricacies of the proposed system.
Grover Norquist, president of Americans for Tax Reform, pointed out that even if a national sales tax could be implemented without taking more money from low-income citizens than the current system, it would still require the elderly to pay a brand new tax on the goods and services they purchase, after paying taxes on their income their whole lives.
Another political hurdle low-tax advocates face by embracing a national sales tax, he continued, is the fact that the 16th Amendment to the Constitution provides for the levying of a national income tax. He said he could only support a retail sales tax if the amendment were repealed and another amendment enacted in its stead specifically forbidding federal taxation of income. The modern activist judiciary, he said, would likely allow the reinstitution of federal income taxes unless instructed explicitly not to do so.
Mr. Norquist offered measured admiration to the advocates of a federal sales levy for their interest in making the tax system more pro-growth.
"When Huckabee stands up and says we need a national sales tax, everybody knows what he's saying: This is a cry of anger and frustration about the income tax. I do not mean to diminish the enthusiasm that good people have for this."
Fyi
The above is the key. Without repealing the 16th, you can bet that we'll simply end up with the old taxes and a new tax.
That would be disastrous, but it would be right down the alley of big government Democrats and Republicans alike. They'd love to snooker you with the idea of one, but sucker you into getting two.
Not true...everyone gets the same rebate regardless of income. I'm still not sure I like the Fair Tax though.
Income still has to be reported for SS purposes... It’s in the bill.
Example: This is a typical, cogent argument from the pro side in a prebate:"LOL! A SQL word. Does it mean: “lost your nuts?”
Also gives new meaning to the word "dufus, doofus"
How does the SSA know how to credit your earnings? Monthly reports from your employer, unclear on the self employed. Duh!
I support the idea of a fair tax, but only if the 16th is repealed. Period.
If the 16th isn’t first repealed, then I don’t support the NRST. First the repeal, then my support.
There is no other way. And no sane person would do it otherwise.
Without the repeal, I support a 2-tier flat tax as proposed by Thompson, with the entire tax code thrown out except for deduction of mortgage interest.
I also support the recognition of ANY money paid to the government for any fee, consumption, withholding, license, etc. to be legally classified as a tax.
Seems like a fair and balanced discussion, though I think the rebate was supposed to go to everybody, so the ‘poor’ definition wouldn’t be necessary.
My problems with the FT are (a)the double taxation of savings, (b) the rather deceptive way it is evangelized, (c) the inability to kill the 16th Amendment.
"You're going to have to have a rebate system and you're going to have to have monthly reporting of your income to a federal official," he said.
Wrong, wrong, wrong. Under the FairTax all citizens and legal residents get the rebate. Bill Gates' family will get the same one as someone with the same size family who earns nothing. Thus no income tracking or reported is needed.
Kill the corporate income tax
Phase out SS - keep FICA payroll deductions until phaseout
Cut Federal Gov't spending to 50% of today in real dollars over the same period as the SS phaseout
Medicare - keep payroll tax until I figure what to do with this although some type of phase out would be good.
No deficit spending
Gov't to do regular corporate accounting. Balance sheet, income statement. Separate long term investments from short term investments from expenses (regular spending).
When the above is accomplished, eliminate the personal income tax and institute a national sales tax of no more than 7% - ever. Put it in the Constitution ilo the 16th. Issue vouchers for pre-ST AT investments to handle the transition.
Cut Congress Members pay 10% per year for every 1% inflation for the year is above 1%.
Alternate - fine 'em $100,000/Congressman for House $1,000,000/Senator for Senate for each 1% inflation for the year is >1%. No pay raises for Congress, ever. Stick it in the Constitution. If they can't pay, send then to GITMO for some water play. NO FREAKINING PREBATES.
NO EDUCATION EXEMPTION
States TBD
Make the US's motto "Live Free or Die". Set an example and kick MA out of the country and substitue Alberta, CA. If MA wants back in, let 'em beg.
That's the second draft of an outline.
No endorsement of the FT whatsoever, but anyone with a brain would just say:
“If the PB goes to everyone regardless of income, delete it, and lower the rate.”
Oops. I forgot that you still need to track income for later SS benefits.
You honestly believe the ‘FairTax’ prebate would remain the same for everyone very long?
Do you honestly believe Democrats wouldn’t turn it into a giant socialist boondoggle, running on promises of bigger prebate checks every two years and ensuring a permanent Democrat majority and a one-party Socialist State?
How long have you lived on this planet, and how many of those years have you followed American politics?
There is a difference: the rebate is a lump sum and makes the FT less regressive compared with the IT or your version.
“it would still require the elderly to pay a brand new tax on the goods and services they purchase, after paying taxes on their income their whole lives.”
Do away with taxes to anyone over 62.
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