The Case for the 'FairTax'

Wall Street Journal Online ^ | March 7, 2005 | Laurence J. Kotlikoff

[n-tres-ted]

Our tax code is a mess for a reason. Special interests pay for special favors. And with 17,000 pages and counting, there's plenty of places for our politicians to hide the kickbacks. Meanwhile, all the exemptions, deductions, exceptions and special provisions reduce the tax base, which means higher tax rates and smaller incentives for individuals and companies to produce income. And whether the tax breaks are set in fine print or spelled out in bold type, they generally favor the rich, making our tax system less progressive than is generally believed.

No tax system is perfect, but ours is so awful that fundamental reform is the only option. Fundamental reform is not just a necessity; it's also an opportunity to stop taxing income and start taxing consumption. My colleagues and I have been studying income and consumption taxation via computer simulations for some time now. We've found that switching from taxing wage and capital income to taxing consumption can significantly improve economic efficiency and growth. What's more, it can make our tax system much more progressive and generationally equitable.

[ancient_geezer]

AG, can you please post that graph? You know...the one with the pink line? THANKS for the assist.

This one?

Under the Fair Tax Act, a family of four, for example, could spend $24,980 per year free of tax because they will have received over the course of the year a demogrant totaling $5,745. $5,745 is the amount of sales tax paid on $24,980 in expenditures. That family spending double the "poverty level" or $49,960per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

To illustrate examine the tax burden that a family of four will have at various annual expenditure levels as compared to that same family under the current tax law, (NRST Expenditure = income; 2004 individual income tax on wages plus FICA/MC taxes, standard deduction, personal exemptions,child credits, and EITC):

 

H.R.25 "The FairTax Act

[Zon]

Oh, give it up, Zon, you're wrong, 

I am not wrong. The words quoted at post 234 are your words. They speak for you. You lost all credibility on you own doing. Nor is what I wrote in post 263 wrong,  "Defending oneself from physical assault is a most basic human right and intelligent thing to do."

but nobody else on this thread cares, either way. You're wasting bandwidth.

You may be the only one that cares seeing as it is you that shot your credibility in the foot. 

[ancient_geezer]

he is, however not talking about a sales tax, more of an excise tax

Just what do you think an sales tax is, if not an excise, as peceived by those in the revolutionary & pre-civil war eras?

A LAW DICTIONARY
by John Bouvier, Revised Sixth Edition, 1856:
DUTIES. In its most enlarged sense, this word is nearly equivalent to taxes, embracing all impositions or charges levied on persons or things;

A LAW DICTIONARY
by John Bouvier, Revised Sixth Edition, 1856:
EXCISES. This word is used to signify an inland imposition, paid sometimes upon the consumption of the commodity, and frequently upon the retail sale.

"On every question of construction (of the Constitution) let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning may be squeezed out of the text, or invented against it, conform to the probable one in which it was passed."
Thomas Jefferson: letter to William Johnson, June 12, 1823, The Complete Jefferson, p 322

[rolling_stone]

....A used car bought from a dealer is a retail transaction and will be NRST'd. A used car bought from an individual will have to be registered and THEN they get you.....

Used items including used land are not taxed..you might want to read the proposed legislation, you might actually like it:

http://thomas.loc.gov/cgi-bin/query/z?c108:H.R.25:

http://www.fairtaxvolunteer.org/smart/faq-main.html#1

[Final Authority]

When Greenspan reports that the fed rates will go up and force up interest rates because of the federal deficit and the need to attract lenders unless taxes are increased, then tell me he has no authority.

[ancient_geezer]

The State of Missouri and every other state I have been in collects sales taxes from purchases but the purchaser is anonymous.

And is true under the Fair Tax legislation whenever NRST is collected by a seller in retail purchases:

 

H.R.25

Fair Tax Act of 2005 (Introduced in House)
http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.25:

---

 

`SEC. 510. TAX TO BE SEPARATELY STATED AND CHARGED.

`(a) In General- For each purchase of taxable property or services for which a tax is imposed by section 101, the seller shall charge the tax imposed by section 101 separately from the purchase. For purchase of taxable property or services for which a tax is imposed by section 101, the seller shall provide to the purchaser a receipt for each transaction that includes--

`(1) the property or services price exclusive of tax;

`(2) the amount of tax paid;

`(3) the property or service price inclusive of tax;

`(4) the tax rate (the amount of tax paid (per paragraph (2)) divided by the property or service price inclusive of tax (per paragraph (3));

`(5) the date that the good or service was sold;

`(6) the name of the vendor; and

`(7) the vendor registration number.

[groanup]

When Greenspan reports that the fed rates will go up and force up interest rates because of the federal deficit and the need to attract lenders unless taxes are increased, then tell me he has no authority.

OK, he has not authority to tax. I don't know what the rest of your post means if indeed it has any meaning. Greenspan and the Fed watch the personal income deflator and manage only short term interest rates and reserves to keep that indicator in line. You won't see the Fed raising interest rates (or lowering them for that matter) unless the system of taxation affects the personal income deflator or the economy is thrown into a recession (in which case they'll only lower interest rates).

[rolling_stone]

My position on a NRST is that it will be a financial disaster to the country, rich and poor, smart and dumb, attractive and ugly, old and young. Even you.

My position on posts coming from posters who apparently haven't read, much less understood the subject of discussion carry little weight in the debate...anyone can make a general statement that I think something is good or bad, but based on what? That manufacturers raw material will be taxed when in fact they aren't? That retailers won't be reimbursed for collecrion when they are? Kinda like passing judgement on whether a person is guilty of a crime or not based on one or two news articles that contain few facts.....

[expatpat]

Thanks fo the info, and for refraining from adding some kind of minor abuse.

[ancient_geezer]

Rent payments already include tax and tax costs that amount to 20-25% of the rent. Rent payments, like other prices, will remain stable under the nrst.

In fact any business property held for business purpose such as sale within two years after the implementation date of the NRST would receive a transitional inventory credit equal to the amount of NRST on the cost basis or market value of the property to the business.

Other credit available to business to assure grandfathered property and property on which NRST has already paid is not hit with the NRST a second time are the Business/Mixed use conversion credits available for any non-business(i.e. personal or residential) property converted to business use in a product, resale or rental assures that property carried over from pre NRST into the implementation of the NRST are free of prior taxes when applied to business use, or rental.

[groanup]

I beg your pardon! I don't have to answer these questions! These are questions I don't respond to on the Internet or outside of my accountants office. As a conservative, I am both surprised and offended that you have the nerve to ask.

Methinks thou doeth protest too much.

[rolling_stone]

LOL...

[Conservative Goddess]

The price of a house will drop for the following reasons:

1. The embedded cost of entity level taxation will be removed from the building materials.

2. Land is exempt from the FairTax. It's considered a used good.

3. The employer portion of FICA and Medicare will no longer be extracted from the general contractor, representing a 7.65% reduction in the cost of labor.

[Final Authority]

I just used my last reply to demonstrate that Greenspan does indeed have clout over the financial sector and hence, the congress. I agree with your assessment specifically with the example you raised but I think the last report or two indicates to me that Greenspan and the Feds job is becoming more complex with the falling dollar, budget deficit, and growing trade deficits. I think he implied that tax policy is part of the stabilizing force and that major changes in the way we are taxed is essentially out of the question now but a small increase in overall tax revenue is not and it could be achieved by way of a low sales tax.

I have been writing for over five years now that we will have a sales tax but we will still be taxed on income. The government needs our money, liberals need even more of it, but they will not allow a system that does not soak the "rich" or provide for progressivity. They will however, that is the liberals, vote for a tax that provides a "rebate" to the lazy, the weak, the stupid, and the useless. That is the main selling point to the lefties where they want tax cuts, really credits, for those who have a minimal income now. There are socialists who see the so-called "fairTax" as the vehicle to establish a BIG or Basic Income Guarantee in the USA and further the destruction of our republic and speed the path to communism.

Do you want to be part of this?

BTW, if you are in favor of a tax that is fair can you please identify a legal definition of "fair" or "fairness".

[Conservative Goddess]

THANKS AG! That's the one I was thinking of.......

[expatpat]

What is 'entity level taxation', and is its removal a special clause in the legislation, for building materials?

[Conservative Goddess]

"...We cannot hope to shape public policy by failing to consider the valid opinions and effects upon others in different situations...."

Agreed. But I assure you that if we continue to punish success with ever higher taxes, we'll get less success. If we continue to reward sloth with the Earned Income Tax Credit and other entitlements, we'll get more sloth. If we re-establish the firm connection between risk and reward, effort and gain we will encourage real economic growth.

The international implications of the FairTax are likewise impressive and far reaching. The FairTax is the only system which completely removes the burden of taxation from our exports. As you may be aware, the World Trade Organization has engaged in a Jihad against American goods but repeatedly authorizing retaliatory tariffs on our goods. MORE when I plug into shore power.......losing battery......

[Bigun]

Actually, global tax harmonization requires a complex tracking and reporting mechanism.

Geez! You expect Willie to grasp THAT??? The poor fellow can't get his mind around the fact that businesses pass their costs along to their CUSTOMERS and you think he can follow THAT! Shame on you!

[Bigun]

Actually, global tax harmonization requires a complex tracking and reporting mechanism.

Geez! You expect Willie to grasp THAT??? The poor fellow can't get his mind around the fact that businesses pass their costs along to their CUSTOMERS and you think he can follow THAT! Shame on you!

[Principled]

Business to business purhases are not taxed - only the final consumer pays the tax. So building materials are exempt from tax. Yeah, it's in the legislation.

Why don't you look at it by entering "hr 25" without the quotes.