The Fair Price of Civilization?

The American Thinker ^ | July 06, 2009 | Jon N. Hall

[raybbr]

have at it guys.

[CitizenUSA]

Problems with the Fair Tax: the prebate, requires constitutional amendment, and savings taxed twice. Advantages: true cost of government revealed, simplifies tax code (no big deal, IMHO, for business that already collect state sales taxes to also collect national sales taxes).

Personally, I'm for smaller government and changes to existing system to simplify tax code. The income tax system need not be so Byzantine. It's complex and intrusive because we elect leaders who make it so.

[Quiller]

1. The article conveniently neglects to mention that the consumer already pays hidden taxes -- every person and every business associated with consuming a service or a good pays taxes, and those taxes are a part of the price of everything a consumer purchases. The Fair Tax replaces those hidden taxes, it does not add to them.

2. The point about collecting taxes up front instead of as a continuing stream is a red herring and totally irrelevant. If the government was acting with any kind of fiscal sobriety, it might make a difference, but the government is spending tax moneys that won't be collected for decades anyway, adding a few months onto the delay would make no difference.

3. A huge advantage I see in the Fair Tax is the extent to which it takes away the federal government's power to reward contributors through manipulation of the tax code.

4. Oooooh. Repeal the 16th amendment. That should make it scary! And while we're at it, let's repeal the 17th also, and return selection of senators to the state legislators, which would return power to the states that the federal government has usurped. And while we're at it, let's make compensation of federal representatives at the discretion of the state legislatures, instead of letting the thieves vote on their own salaries. And how about adding a new transparency in funding law -- we have the internet, there's no reason any representative to the government, from TPOTUS on down, can't post EVERY contribution, gift, perq, free ticket, free dinner, speaking fee, free service, plane ride, low-interest laon -- every flipping dollar or good deal that someone has slipped into their pocket -- on line. Show me the money, you most open and transparent of governments.

[Man50D]

The FairTax treats savers badly. Under the current system, savings have already been taxed. But with the enactment of the FairTax, pre-existing savings will be taxed a second time -- when they're spent. How fair is that?

Mr. Hall fails to understand the overall tax burden will be reduced considerably with The Fair Tax. The prices of all products and services we purchase today contain embedded corporate income taxes at each stage of production. Businesses consider taxes a cost they pass onto the consumer and amount to slightly less than 23%. Add to that most people fall into the 15% tax bracket, the 7.65% payroll tax and the same rate for the employer matching. That totals more than 53%! Compare that to the Fair Tax rate of 23%. Mr. Hall also does not take into account there will no longer be any tax on capital gains or savings. Over time people will retain more of their hard earned money with a consumption tax than with a tax on productivity.

So, to replace all that revenue, the tax rate of the FairTax would need to be fairly high.

It will be fractionally higher than the total of embedded taxes we incur with the income tax and far less than the overall tax burden with the income tax.

Talk about bait-and-switch. This would be the most dramatic instance of double taxation in our history.

Let's talk about the deception of taxes purposely buried in everything we buy today so people won't be aware of how much they are actually paying in taxes.

One of the selling points of the FairTax is that it is a discretionary tax; you don't pay the tax unless you buy something. So under the FairTax, the feds will be waiting around for folks to buy something so they can get their tax revenue. What would happen to federal revenue if America again became a nation of savers?

This statement contradicts Hall's own point of The Fair Tax increasing the tax burden by taxing savings again. By his own line of thinking people will either bear a greater tax burden by being taxed again on savings thereby collecting more in taxes or save more thereby spending less in which case they will be taxed less on savings. The point couldn't be more hypocritical. This point ignores the fundamental fact the more money people have the more they tend to spend.

As the recession rages the government urges citizens to be just like government: Get out there and spend, folks. And take out more loans, too. But folks know in their bones this is imprudent. Here we get into the paradox of thrift:

Another fundamental point misunderstood. The recession exits because of Congress, not the individuals, spending beyond their means. An overwhelming majority of people know how to budget their money. The more money people have in their wallets by eliminating federal income taxes the more they will spend within their increased means. No paradox there.

The FairTax might well dampen down consumption, resulting in less tax revenue, necessitating rate hikes, creating a nasty "negative feedback loop". How we tax and what we tax affects folks' behavior.

Hall needs to explain how having more purchasing power will dampen the economy.

But the FairTax has replacement complexities, such as the "prebate" and making the nation's retailers into tax collectors. Also, there's the little matter of repealing Amendment XVI, lest the feds hit us with both the FairTax AND the income tax.

Mr. Hall has a very loose definition of complex. Collecting the prebate will only require filling out one form. That's far less complex than the multitude of forms people fill out with their income tax returns each year or in many cases every quarter. Most businesses already collect sales tax as many states have their own sales tax. Collecting the national sales tax will require one more line on the already existing state tax form. Mr. Hall would realize The Fair Tax Act contains a provision in the bill that specifically addresses repealing the 16th amendment if he bothered to read the bill.

Fair Tax ping!

[PubliusMM]

“...pre-existing savings will be taxed a second time...”

Don’t overlook the likely decrease in prices once the markets adjust to recognize the removal of the embedded income tax burden. Lindner and Boortz posit that the offset would be roughly equal to the FairTax. The net result would be roughly equivalent total price. Assuming that to be correct, the folks spending savings would be paying roughly the same amount then as now. I recognize there is still a sore spot with this, but I don’t think its insurmountable.
There is a process outlined in the Boortz plan that requires all commercial establishments to have an accurate physical inventory on the date of changeover, to exclude finished goods on hand from the Fair Tax. Seems to me that the same could be done for savings. That is, on the date of change over, financial institutions would ‘snapshot’ savings account balances for each depositor. Those depositors, then, could claim refunds on the net spend down of those accounts over time. Of course, that assumes they want the government to know how much they have saved...
And, the way the 0bamunists are going, none of us will have any savings left, anyway...

The Fair Tax is an excellent alternative to the current morass of tax laws, loopholes, unimaginably complex legalese, and high cost bureaucracy. The Fair Tax addresses those concerns, and it puts control back into the hands of the taxpayers.

The one thing I don’t like about the idea is the Prebate. I would rather favor a smaller tax rate and no prebate. I see the prebate as the “tool for control” that the Congress likely could not avoid ‘tweaking’, much like the oozing expansion of the current model from its inception. The less the government can mess with, the more secure we will be in our freedoms.

It’s time to take back the country.

[Brass Lamp]

The income tax system need not be so Byzantine. It's complex and intrusive because we elect leaders who make it so.

This demonstrates another good reason for amending the Constitution to require both that all proposed bills receive live readings on the floor and that all bills passed by simple majority automatically sunset. It would become impossible to pass enough code to maintain the replacement rate. It would be fun to make this retroactive and watch those cretins try to read the current code into the record.

As for Fair Tax revealing the "true cost of government", this being one of Boortz's principle claims, I have to wonder at the purpose of it. If we were able to bring about such a radical change in taxation, why would we do so only to motivate ourselves towards a second chance? Why squander an opportunity to make the final shift directly? Boortz would have us rub the magic lamp and use our first wish to ask the genie for a really, really nice second wish. Sounds like more BS (Boortz sense) to me.

[Beagle8U]

“Add to that most people fall into the 15% tax bracket, the 7.65% payroll tax and the same rate for the employer matching. That totals more than 53%! Compare that to the Fair Tax rate of 23%.”

Why the BS figures to sell the fairy tax? Fully 40% pay NO income tax, only the 7.65 % in payroll tax.

The elderly retired people don't even pay the payroll tax.

The only fair tax is the flat tax!

[Beagle8U]

“Seems to me that the same could be done for savings. That is, on the date of change over, financial institutions would ‘snapshot’ savings account balances for each depositor.”

And that leaves MOST of a person's wealth to be taxed twice. Better figure out a way to take a ‘snapshot’ of home equity, because that is the majority of the average person's wealth.

[Man50D]

The only fair tax is the flat tax!

The Fair Tax is a flat tax but on consumption instead of productivity. One of the planks in Karl Marx's Communist Manifesto is a tax on income. He espoused taxing income because he understood such a tax could be gradually increased eventually taxing productivity to the point where people become discouraged to produce and work resulting in people turning to the state for their subsistence.

The income tax began as a flat tax when the 16th Amendment was passed in 1913. People were taxed 1% on the first $20,000 of income and 7% over $500,000 of income. It was essentially a flat tax since a very tiny percentage of income earners made more than $500,000. It is evolved into the convoluted, increasingly oppressive tax code we know today. Another flat tax on income will morph into the same destructive tax code only faster thanks to the thousands of lobbyists that didn't exist in 1913.

[RayChuang88]

Because there are no more taxes on:

Personal income from employer
Interest-bearing bank accounts
Business income
Dividend payment income
Capital gains income

This means we essentially have no more taxes on earning money under FairTax. As such, the result would be a GIGANTIC land rush of liquidity to the USA to put money in American financial institutions--an amount of liquidity I estimate could reach as high as US$20 TRILLION from a combination of money repatriated from offshore financial centers and new investments from foreigners. That much liquidity hitting our financial system would stop the economic malaise in no time flat, creating a gigantic new liquidity base for business loans and lines of credit.

[RayChuang88]

Because there are no more taxes on:

Personal income from employer
Interest-bearing bank accounts
Business income
Dividend payment income
Capital gains income

This means we essentially have no more taxes on earning money under FairTax. As such, the result would be a GIGANTIC land rush of liquidity to the USA to put money in American financial institutions--an amount of liquidity I estimate could reach as high as US$20 TRILLION from a combination of money repatriated from offshore financial centers and new investments from foreigners. That much liquidity hitting our financial system would stop the economic malaise in no time flat, creating a gigantic new liquidity base for business loans and lines of credit.

[Ex-Democrat Dean]

“Imagine all of one’s savings for retirement being effectively reduced in value by almost 30 percent, in a single day, as the result of a new “FairTax” on all purchases”
************************************

Some of the “problem” is encountered by the fact that under the current tax, the saver is hit with a tax on interest, year after year. Under Fair Tax, the saver is left alone by the tax code.

[Beagle8U]

Anyone that wants a new tax system better start looking at a way to lock in a flat tax, because the fair tax will never pass. No way, no how. There are too many problems created by it.

[Hacklehead]

You call THIS, civilization?

[Man50D]

Anyone that wants a new tax system better start looking at a way to lock in a flat tax, because the fair tax will never pass. No way, no how. There are too many problems created by it.

Any tax system supported by Communists creates far more problems than a consumption tax that restores more power and the freedom to people to choose when and how often they taxed thereby creating a more decentralized form of government as our founding fathers intended when they wrote the Constitution.

[MrB]

I’ve had discussions with a lot of leftists that claim that we absolutely HAVE to keep paying welfare payments to the lazy poor or they’ll riot.

Our “price for civilization” is bribing the underclass to keep them from turning violent.

[wintertime]

. But with the enactment of the FairTax, pre-existing savings will be taxed a second time
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

I don't see this as an insurmountable problem. Give those who have savings a rebate equal to the taxes they paid on the savings and other accumulated wealth.

[wintertime]

Ok...He has a point about consumption driving the economy. Will the Fair Tax slow the economy by causing incentives not to spend?

[Redbob]

"The FairTax treats savers badly. Under the current system, savings have already been taxed. But with the enactment of the FairTax, pre-existing savings will be taxed a second time -- when they're spent. How fair is that?"

Exactly.
And for someone nearing retirement age, with substantial savings, this a VERY BIG DEAL!

And then there's the small matter of the "Fair" Tax people being unable to properly calculate percentages...