Rep. John Linder July 23, 2008 Statement on the FairTax

Millions of jobs lost overseas is not a problem?

Not if they're replaced with other, and for the most part better, jobs.

The 1950s heavy industry economy is gone forever. It will never return without heavy-handed government intervention at something close to a command economy level.

Is that really what you want?

It won't do them any good when you impose a 30% tax at the other end of their product/service.

Yeah, right louie. Today a corporation is taxed on what it earns and then the money used to purchase that company's goods is AFTER TAX also. Then when the corp pays out a dividend to the shareholders it is also taxed.

That's supposed to be better than a one time sales tax on the finished product? Huh?

One more time. The author made claims about the performance of our system as compared to that of other countries. I am merely pointing out that other countries have their own problems competing. Most of these are considerably greater than those facing the USA. We have a pretty good system compared to other countries. -- I'm not claiming it's the best of all possible systems or that changes wouldn't improve it. -- I'm claiming that other countries have even greater problems competing. -- etc.

AND, ONE MORE TIME --- How on earth does that make REpresentative Linders statement, "The shackles of our nearly 70,000 page tax code are making us less and less able to compete in the global economy." factually untrue?

When calculating consumption taxes (i.e., sales tax) you calculate it on an inclusive basis. When calculating an income tax you calculate it on an exclusive basis.

How then would you compare two different items in terms average individuals could comprehend ... unless you speak in the same terminology.

So to compare apples to apples instead of apples to oranges you speak to tax inclusive, as folks are familiar with this for sales tax. You try to muddy the waters by attempting to explain that with the income tax you pay less is less as a percentage. Throwing percentages around and talking incessantly about the different dollar amounts calculated does one thing ... it confuses people

The income tax can actually discourage work and savings. What does the consumption tax discourage ... possibly working, but not if you want to eat. But it could and would discourage buying luxuries maybe. A consumption tax would not discourage savings.

Now an income tax with all its exemptions and exclusions and deductions further sullies the rate as it allows the rich to shelter portions of their income from taxation, something the 'Average Family' can't do (to the same extent). A flat tax doesn't cure it because it would be on earned income ... it wouldn't touch some of the investment income that the wealth have had for years (stocks, bonds, trusts).

Although the FairTax isn't perfect it is more perfect than the present IRS code and more palatable than a Flat Income Tax. Could we work together to better the FairTax instead of changing one outmoded Income Tax for another of the same. Our efforts would be better spent.

The Fair Tax is one of those great ideas that will remain just that. A great idea.

You are misreading Linder's statement to make a petty, and erroneous technical point.

Like all the great nations and societies of history the United States is rapidly coming to the end of its existence as a great and powerful country. The shackles of our nearly 70,000 page tax code are making us less and less able to compete in the global economy. Our tax on capital is cutting our businesses off at the knees. Our highest earners have half their income confiscated by the IRS. All of these taxes along with the cost of complying with nearly unfathomable tax regulations put us at a severe disadvantage as competitors in the global economy since these expenses must be added to the price of the goods and services we sell.

If we could beat our competitors by a very large margin but are only beating by a smaller margin because of these things then we are less competitive. As the taxes and regulations, plus frivolous lawsuits and onerous labor union rules, get more severe, and they are likely to, we will then be even less competitive.

Our strong and growing stronger competitors are China, India and the Indonesians where labor is so cheap as to offset many other problems they may have. I have no ideas what their taxes are but I have read many complaints that the workers are nearly as coddled and "protected" by the government, adding to costs, as ours are.

Take you strawman elsewhere.

Which version of the Flat Tax is your favorite; 1) Armey-Shelby; 2) Steve Forbes; 3) Hall and Rabushka; 4)Wyden and Emanuel; 5) Arlen Spector's; 6) Milton Friedman's Negative Income Tax; 7) The Kemp Commissions Plan; 8)Phil Graham's Plan; and there are others.

There are questions: A) Does the Flat Tax get rid of any other taxes now in existence? Say Capital Gains or AMT.; B)How 'generous' is the allowance/exclusion going to be up front?; C) What exemptions, if any are in the plan?; D) What is the rate of tax?; E) Is it a flat tax on income or on consumption?; F) Where are business in the tax, in or out?; G) The Flat Tax is a form of a Value Added Tax (VAT) - so what stops business increasing the costs?; H) Will the Flat Tax end companies participation in pension funds without a deduction?

Many many questions go unanswered because there are so many competing Flat Tax proposals.

There is confusion about the rates because we are not talking apples to apples. (Income tax to Income tax OR Sales tax to Sales tax). So we must look at things slightly differnt. It is not an attempt to bamboozel anyone.

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[Taken from http://fairtaxblog.blogspot.com/2004/09/inclusive-vs-exclusive-tax-rate.html]

Tuesday, September 28, 2004

Inclusive vs Exclusive tax rate

The FairTax is a 23% inclusive sales tax. It's important to understand what that "inclusive" means so that you understand what the rate really means. When you compute a tax on a dollar you can either compute it inclusively or exclusively.

For example, the sales tax you are used to at the cash register today is an exclusive rate. The rate is applied to the price you pay exclusive of the tax applied. So if you are used to a state sales tax rate of 8% and you purchased something that was worth a dollar you would pay $1.00 + 8% of $1.00 = $1.08.

The income tax you pay is usually computed as an inclusive rate, it is applied against the dollar you earn inclusive of the amount you are paying in taxes. So if your income tax rate is 25% and you earn $1.00 then your tax is $0.25 and you get to keep $0.75.

The FairTax 23% sales tax rate is an inclusive rate. What this means is that I hand the cashier $1.00 to pay for something then $0.77 goes to pay for the good, and $0.23 of goes is paid in taxes. This is different than the way you are used to thinking about sales taxes. The reason the FairTax rate is quoted this way is to assist in comparison with current payroll and income taxes.

If you earn $1.00 but pay 15.3% in payroll tax and 10% in income tax, but have no federal sales tax then your purchasing power per dollar earned is $0.747.

If you earn $1.00 under the FairTax but and pay 23% inclusive in sales tax for a retail purchase of a new good or service then your purchasing power per dollar earned is $0.77. Please note however that your purchasing power per dollar earned for used goods is $1.00. Also remember that for every dollar that you earn and choose to save or invest you get $1.00 worth of savings and investment.

So quoting the FairTax rate inclusively makes it easier to compare the FairTax with the existing income tax, but makes it harder to compare it with the existing sales taxes. Just to make things clear, the exclusive rate for the FairTax is 30%.

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They may be tax but all taxes are not the same. All taxes have theirown unique attributes which do not easily compare even to other taxes. So an analogy is made in order using the terms attributable to one tax to explain another.

The bottom line result is the ultimate dollar amount of tax is the same. The rate is different but the result is the same.

Our strong and growing stronger competitors are China, India and the Indonesians where labor is so cheap as to offset many other problems they may have.

Certainly US labor would be more competitive if our cost of living was lower, will the FairTax fix that?