Posted on 05/06/2009 11:57:23 AM PDT by Turret Gunner A20
... and this time it's none other than Dave Ramsey. The FairTax is a bold proposal. It is only natural that people are going to try to criticize it. Is it too much to ask for these people to do at least a modicum of research so that they at least appear to know what they're talking about?
This time the culprit is Dave Ramsey. I like the guy, and I like his approach. His sermons on living debt free are right on, and no doubt he's helped millions of people to improve their financial. OK .. mighty fine. But now he's taken it upon himself to opine that the FairTax simply isn't, in his words, "fair."
Let's take this quote from Ramsey's article: "People would only pay taxes on items they buy, except for food, basic clothing and other kinds of necessities." Most of the FairTax supporters know that this is just flat-out wrong. The explanation is incomplete.
If Ramsey really was informed on the FairTax he would know that you pay taxes only on items that you buy at the retail level, and that food, basic clothing and other kinds of necessities are included. Ramsey would also know about the prebate. He would know that every household in this country --- that is, every legal household --- would get a credit or check from the Treasury Department every single month equal to the FairTax they would be expected to pay on the basic necessities of life during the following month. This FairTax prebate is so essential to the FairTax plan that to ignore it, or to be unaware of it entirely, is worse than careless.
Ramsey also writes of the FairTax "This means it's more of a burden on poor people, because they would pay a higher percentage of their overall income."
Sorry, wrong. The poor, poor pitiful poor would pay virtually nothing - zero percent of their income - to the federal government. [ALERT! Brilliant thought follows!] To pay any taxes at all to the feds the poor would have to spend above the poverty level. If they're doing that ... they're not poor. Pretty easy, isn't it?
I wonder why Dave Ramsey doesn't get it? Is there a chance he just shot from the hip here without doing any real research? The FairTax deserves better than this flippant, uninformed treatment.
Dave Ramsey could be a good proponent of the FairTax. He's very bright, and he would recognize the beauty of this plan if he just would take the time to actually study it. Knowing what you're talking about .... Is that too much to ask?
Weird, this audio clip on YouTube seems to show Ramsey supporting the FairTax. Huh. Maybe he's lost changed his mind since that was recorded.
“The ‘bias’ towards foreign producers is in effect because other nations tax far less than we do.”
No, that is incorrect again. Are you trying to set some record for most misstatements on a FR thread?
The bias against US producers is because the US, unlike almost all major economies in the world, has no mechanism to “border adjust” its taxes. Of the 30 countries in the OECD, 29 of them have a border adjustment mechanism in their tax systems. That one country which does not have such a mechanism has the largest trade deficit (on either a relative or an absolute basis) of the group; in fact, the other 29 have a net trade surplus. Does anyone think that is coincidence?
“A 3-4% reduction in the Federal budget would have the same effect as the FT and it would be sustainable since taxes are actually being lowered.”
Do you have a source to back up that statement? I’m sure you wouldn’t just make something like that up without some credible research to support it.
Would you?
Filo we know you are very slow in comprehension.
Let’s repeat it again in the hopes that you finally get it.
The Congress has the power to ‘Lay’ and ‘Collect’ taxes.
‘Lay’ means establish a law to implement and administer.
The FairTax is a law that imposes a tax on retail purchases once spending is above the poverty line.
Let’s repeat the point you are missing in CAPS:
The FairTax is a law that imposes a tax on retail purchases ONCE SPENDING IS ABOVE THE POVERTY LINE.
There is nothing unconstitutional in the above law and it remains constitutional even in the event the 16th Amendment is repealed.
So the question then comes to HOW the FairTax law can best implement and administer the portion I typed in CAPS for you.
And the answer is simple: refund the tax up to the poverty line in the form of a rebate. Because the government will not be tracking how much each individual spends, it cannot be called a refund, therefore it is called a rebate. But it is in effect a refund to every American up to poverty.
Yes. After-tax savings that exist when the FairTax is enacted will get taxed again when they are spent. I know its not fair, but nothing is perfect.
I don't see what you mean by “incorporating socialism and encouraging a two-tiered taxation system.” We already have much worse in the income tax. Personally, I'll be happy to see the Earned Income Tax Credit die, and the income tax replaced by a single rate sales tax.
The FairTax does not address spending. It addresses how taxes are collected and take them away from politicians as tool of “social policy.” Spending will have to addressed elsewhere. Its simply a means of creating a predictable tax environment for people and businesses to operate in and eliminating may of the perverse incentives created by the income tax.
If someone can solely live off the prebate, without fraud, well, God bless ‘em. I'm not going worry about it; as I said before there is already much worse in the income tax.
The current tax system is bludgeon in the hands of corrupt politicians, generates perverse incentives and an uncertain environment for business and allows enormous sums of money (mostly illegal) to escape taxation. It punishes (taxes) productivity.
The FairTax is a potential remedy to these issues. Its not perfect, but it probably is better than what currently exists.
It was not created to address spending, merely to be revenue neutral. Spending is different issue from the FairTax.
One point though:
Yes. After-tax savings that exist when the FairTax is enacted will get taxed again when they are spent. I know its not fair, but nothing is perfect.
Actually as it stands now, when after-tax savings are withdrawn and spent on retail products and services, the purchaser is paying embedded federal taxes of about 20%. This 20% in the pricing will be eliminated under the FairTax. So the purchaser will be paying an additional 23% - 20% = 3% under the FairTax. The additional 3% is necessary for the rebate provision.
Everyone I have explained the extra 3% to has cheerfully agreed to pay even more than 3% if it gets rid of the Income tax.
Another point is that the taxed portion of the Roth IRA is restricted from withdrawal without penalty unless some very tight conditions are met. No such conditions exist under the FairTax.
Yet another point, the earned growth on a Roth's principle, meaning how much the principle grows while in an account, that portion is untaxed if the rules on withdrawals are followed. And this growth portion becomes much more than principle over the life of the account (unless it was invested in today's stock market).
So beware the 'double taxation trap' argument that these minor leaguers are spewing. Most CPAs I have held discussions with have chuckled at the false premises these anti-FairTaxers throw about. They know that retirements will thrive under the FairTax, just as they did before the Income tax became a huge millstone around the necks of Americans.
Filo? Filo? You are not paying attention Filo.
Let’s try once more Filo.
“The FairTax is a law that is imposed on retail purchases ONCE SPENDING IS ABOVE THE POVERTY LINE”.
Now repeat the above Filo, repeat to yourself Filo that the above is fully constitutional even without the 16th Amendment.
Try hard Filo. We know you can do it if you want to Filo.
Good luck. Tick tick tick......
“Which is to say that other nations tax less than we do.”
No, that is NOT what I am saying. I am saying that it is the presence/absence of a border adjustment mechanism for both this country and our trading partners which is causing these economic distortions. You can have high levels of taxation with and without a border adjustment mechanism and you can have low levels of taxation with and without a border adjustment mechanism. The two have very little to do with each other.
You continue to ignore subtleties such as static vs dynamic scoring and the importance of a border adjustment mechanism in affecting the balance of trade and insist that the structure of the tax system is irrelevant. In your mind, the only variable affecting the tax system’s effect on the economy is the level of taxation, and not the structure of the system. I think that you would find that most economists would agree that even if we could reduce the overall tax burden by 25% (which would be enormous in today’s environment), the structural problems with the current tax system would still contribute to a number of adverse economic trends.
While I respect your view that tax rates are everything, I do not agree with it.
Excellent points Phil. FR is fortunate to have you commenting here.
The issue of clinging to static versus dynamic scoring is a particularly egregious one by staffers in Executive and Congress joint committees. Congress has been told, even mandated to use dynamic scoring yet the low level staffers continue to drag their feet and ignore the instructions.
Dittos also to your point out the border adjustment issue.
Now about that 16th Amendment provision....that one still needs work!
I can see all kinds of problems right off the bat with defining what foods are taxed and what aren't, what constitutes 'basic clothing', and what is a necessity and what isn't. Would caviar be taxed? Sirloin steak? Lobster? How many shirts, socks, trousers, sets of underwear, etc. am I allowed under 'basic clothing'? How will I know when I exceed the limits? Is highspeed interned a necessity? How about air conditioning? Is TV a necessity, and if so would my 42" Plasma TV be tax free? I like to read, how about books? Are my books taxed or just some of them? Is a car a necessity? If so, will a high end BMW be tax free? There are almost too many questions that would need answering before someone can take the Fairtax seriously.
Well Filo, you have an ‘interesting’ way of viewing taxation.
“The FairTax is a law that is imposed on retail purchases ONCE SPENDING IS ABOVE THE POVERTY LINE.”
I think you need to explain WHY you think the above law is unconstitutional, WHY it is ‘wealth redistribution’ especially as it is IDENTICALLY THE SAME FOR EVERY AMERICAN WITHOUT ANY CHANGES WHATSOEVER.
Let’s see how your hallucinations explain the above.
I am curious where you got the idea that the FairTax would impose a retail tax on only certain items?
FYI the FairTax NRST is applied on each and every RETAIL product and service in the USA or under its jurisdiction.
But, the FairTax abolishes all other federal taxation with exception of gas taxes and GSE taxes which are inconsequential.
By abolishing all federal taxation, the FairTax lowers the cost of all products and services by an average 20%.
So an NRST rate of 23% minus 20% costs yields an additional 3% of taxation.
Most people are overjoyed to pay an extra 3% if it means getting rid of the Income tax.
By reading the article.
Read it again. Boortz is criticizing Ramsey for not understanding the FairTax.
Specifically, Ramsey is quoted as saying:
“People would only pay taxes on items they buy, except for food, basic clothing and other kinds of necessities.”
This is blatantly false. The FairTax legislation does none of what Ramsey is saying.
Here’s the FairTax legislation:
http://www.fairtax.org/site/PageServer?pagename=about_bills
http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.25:
And study the FAQ on the FairTax website!
http://www.fairtax.org/site/PageServer?pagename=about_faq
especially Item 1:
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#1
You haven’t explained it Filo, not at all!
Let’s try again. Explain how the law:
The FairTax is a law that is imposed on retail purchases ONCE SPENDING IS ABOVE THE POVERTY LINE.
redistributes wealth in light of the fact that it is the exact same for every American?
Sorry if you feel I was encroaching, everyone knows that your primary job as a FairTax proponent is to promote lies and trash about the FairTax. That's how you attempt to sucker in more true believers... Free Lunch over here...
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