A FairTax Tale

Nealznuze ^ | 5-11-07 | Neal Boortz

[Dick Bachert]

I have a little scenario I would like to paint for those of you out there who just insist on finding something wrong with the FairTax. Admittedly, the FairTax isn't perfect. No tax plan is. How, after all, can you come up with a perfect way for a government to take its operating funds from its subjects? If you know an easier and more equitable way to do it, by all means, let me know!

I'm going to ask you to crank up your imagination for a moment here ... and by "you," I mean those of you who think that this FairTax thing is a bad idea and you're not prepared to come on board.

I want you to imagine a scenario. Don't worry about whether or not this scenario is possible .. Just accept it as I present it, and then consider the alternative picture I'm going to also present. Simple as that.

Let's imagine that the FairTax is the law. We've been operating under the FairTax since the day you drew your first paycheck. It's all you know. Here is your imaginarily "reality."

On every payday you get your complete paycheck. There are no deductions. If you earn $2,000 per week, you get a check for $4,000 every two weeks. You never have to save receipts or create any records pertaining to federal taxes. You can invest money without paying any taxes on it. You don't have to pay taxes on the money you earn through your investment portfolio. You pay no taxes on any money you put in your savings account. When you die you get to leave your entire estate, everything you own, to whomever you wish. The federal government will take no taxes from your estate. Your death is not a taxable event. When you go to the store to buy an item, and the price tag says $19.99, you will had a $20 bill to the cashier and get one penny back. The price tag is the price. There are four people in your household. You, your spouse and two rug rats. At the beginning of every month you get a check or a credit to your checking or charge card account in the amount of $506.00 to compensate you for the federal sales taxes that are included in the price of everything you buy; right up to the poverty level.

All in all .. not such a bad deal. You keep all of the money you earn and you get five hundred bucks a month from the feds. Plus .. you only pay taxes when you spend money.

Now .. .here comes some politician who has a grand scheme for a new tax system. He wants to explain it to you. Here's his great idea ..... give him a listen and tell us what you think.

The plan is simple. First the federal sales tax is going to be removed from the price of everything you buy. This will mean that everything will cost 23% less than it does now. But ... he's going to levy an income tax on every single individual and business who plays any role at all in bringing those products to the marketplace. These people and companies are all going to pass the cost of these taxes down the economic line to the final consumer of the products they manufacture. These taxes will end up embedded into the prices of products in our retail marketplace, bringing those prices right up to the current level. So .. no loss, no gain.

Next your political benefactor is going to take away your $500 per month prebate from the government. In its place he's going to tax every penny you earn. It doesn't matter where the money comes from. Your salary, your investment income, winnings at the track ... whatever you earn and however you earn it, it's going to be taxed.

Wait! He's not through. He's also going to tax your wages for Social Security and Medicare. He's going to try to soften the blow by telling you that your employer is going to match the taxes he takes out of your paycheck, but you're employer has made it clear that this money is all going to come out of the money he has budgeted to hire you. You'll probably lose out on your next raise while the boss his accounting in order.

There are some more nifty ideas in your congressman's tax reform plan. When you die your family is going to have to file a complicated estate tax return. A huge amount of the wealth you have managed to build during your life is going to be sent to the government. Your survivors may well have to sell the family business in order to come up with the money to pay for these death taxes.

One more thing .. you're going to have to keep records of all of your financial transactions. Every year you're going to have to spend no less than about 30 hours or spend hundreds of dollars to hire someone to fill out tax forms for you. If mistakes are made you will be hit with a huge penalty and interest. Oh .. and the government is going to have access to all of your financial records to make sure that you are paying everything you "owe."

The question, of course, is why does this politician want to change the tax system in this way? Power, that's why. They want to be able to enact little changes to the tax code that will benefit certain constituents ... which constituents will then benefit the politicians -- with money or with votes. Under the FairTax system these politicians have no power to favor one group of voters over another for the benefit of votes. The new system would give them that power.

Your choice, my friends. If we had the FairTax now ... would you be willing to make the switch?

[Always Right]

I can see you have no desire to understand and communicate.

I understand it quite well, thank you.

[Always Right]

When the FairTax removes income, capital gains, payroll and estate and gift taxes, the pre-FairTax prices of these goods and services will fall.

Only those tax savings realized by the producers and retailers. If those savings are realized by the workers, they can't go towards decreasing prices. That is why unless workers agree to take wage reductions in the amount of their tax, price must go up. There is no way around it.

[Hostage]

I think the FairTax is going to be passed in the next few years but some people such as this poster are never going to be convinced because they rely on the Income tax.

A large percentage of IRS employees are also going to be impacted by the FairTax. I think it will be close to 70% of IRS civil servants that will be reduced in force. Government unions are going to fight the FairTax passage.

In the end though as people gather an awareness, the FairTax is going to pass through Congress. The demographic trends tell me it will be in a few years, as early as 2010.

[Paperdoll]

Before we approve or disapprove of tax change, let’s allow Duncan Hunter to propose his cohesive government agency paring list, get it passed and let things settle down. THEN we will decide on if a tax change is viable or not.

[Hostage]

Your understanding is not good. Your opinion that your understanding is good indicates you not allowing youself to be persuaded by facts. You are a typical case of a closed mind.

The mystery is why do you bother to post on message boards if you have already decided you understand everything even though you don’t. The bottomline is that every year the FairTax is gathering more support and signing up more sponsors in Congress. It is only a matter of time before it is passed. Fight that as you will you will not stop what a majority of Americans will embrace. They have concerns now but they are not opposed to the need of the FairTax. The concerns will be settled by education, awareness and acceptance.

You were told the FairTax NRST will be financed in new home sales as part of the mortgage and that the increase in monthly payments will be more than made up with an increase in pay. You responded it makes no difference. That puts you into a bizarre frame of logic. It’s no longer possible to communicate with you because if someone mentions to you that you can replace something you use with something better and cheaper then you are going to say “it doesn’t matter”. Reminds me of my late aunt and her old car. She paid more every year in maintenance that it would cost her to buy a late model safer and more comfortable pre-owned car with a warranty. After she died her car was not even accepted by a salvage yard. We had to pay to have it towed and scrapped.

[MrB]

One part that all of the fairtax haters seem to miss is the

“secure in our persons and papers”

by not having to, under penalty of perjury, disclose the private information of our income and charity giving.

[RobFromGa]

another ad hominem attack by a FairTax supporter.

[snowsislander]

As all Fair Tax opponents do, you lie about the tax rate. It is a 23% inclusive rate. Not a 30% exclusive rate.

That means exactly the same thing. A 23% inclusive tax is just another name for a 29.87% exclusive tax.

The FairTax FAQ explains this pretty well in its answer to question #47:

47. I know the FairTax rate is 23 percent when compared to current income and Social Security rate quotes. What is the rate of the sales tax at the retail counter?

30 percent. This issue is often confusing, so we explain more here.

When income tax rates are quoted, economists call that a tax-inclusive quote: “I paid 23 percent last year.” For every $100 earned, $23 went to Uncle Sam. Or, “I had to make $130 to have $100 to spend.” That’s a 23-percent tax-inclusive rate.

We choose to compare the FairTax to income taxes, quoting the rate the same way, because the FairTax replaces such taxes. That rate is 23 percent.

Sales taxes, on the other hand, are generally quoted tax-exclusive: “I bought a $77 shirt and had to pay that same $23 in sales tax." This is a 30-percent sales tax. Or, “I spent a dollar, 77¢ for the product and 23¢ in tax.” This rate, when programmed into a point-of-purchase terminal, is 30 percent.

Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.

Spend that same $100 under a sales tax, you pay that same tax of $30, and the rate is quoted as 30 percent.

Perhaps the biggest difference between the two is under the income tax, controlling the amount of tax you pay is a complex nightmare. Under the FairTax, you may simply choose not to spend, or to spend less.

[Always Right]

The mystery is why do you bother to post on message boards if you have already decided you understand everything even though you don’t. The bottomline is that every year the FairTax is gathering more support and signing up more sponsors in Congress. It is only a matter of time before it is passed.

They have been saying that since 1999 on this forum. With the Dems in control of congress, the chances went from slim to none.

[Always Right]

Your understanding is not good. Your opinion that your understanding is good indicates you not allowing youself to be persuaded by facts.

No it indicates I have debated this issue 1000 times over for over 8 years and to suggest I don't understand the issue is great ignorance on your part. I have examined all facts from every angle and crunched more numbers than you can imagine. I know and understand your arguments better than you do. I also know and understand their faults, unlike you.

[Always Right]

The fact is that you said “it makes no difference” whether the FairTax NRST is financed as part of a mortgage for a new home. That fact has not been around for eight years.

What difference does it really make? If a homeowner can buy an existing house for 20-30% cheaper, why does he care if he can finance all the extra sales tax? Your 'fact' makes no difference what so ever in the buying decision.

Besides, what is it with fairtax supporters. All they do is engage in personal attack anyone who argues against them.

[Hostage]

The Constitution took more than 12 years to ratify. And it was ratified only on condition that it incorporate the Bill of Rights. In those days the Continental Congress was genuinely concerned with responding to the People, so they incorporated the Bill of Rights.

The FairTax will take longer because it must overcome the lobbies of corruption which are used to buy Congress. Therefore, it will take the People to force a corrupt Congress to change.

The support for the FairTax is growing. It has never shrank. It is only a matter of time.

[Hostage]

I knew you wouldn’t backup your absurd claim. To be fair you would never be able to back it up.

But now you have demonstrated that you make statements without backup.

So what’s it gonna be? Bullsh*t? or debate and discussion?

[Always Right]

I knew you wouldn’t backup your absurd claim. To be fair you would never be able to back it up.

???? Back up what? That homebuyers would perfer to spend 20-30% less? That kind of falls into the category the sky is blue.

[Hostage]

You’re absolutely right.

The reason the ‘Income’ tax was always attempted in American history is because certain extremely wealthy Americans were seen to escape taxation by living in states with small population. Taxes had to be apportioned or they had to be indirect like an excise tax or sales tax. The FairTax is an excise tax in the spirit of the Constitution.

The first successful attempt to impose an ‘Income’ tax in the USA was in the nineteenth century and it was challenged in court and ruled unconstitutional. In 1913, JP Morgan and other extremely wealthy individuals cut a deal that they would back an amendment to tax their wealth in return for a central bank concession, the Federal Reserve Act. In return for their paying income taxes they were allowed to create money out of thin air, limited only as a reserve percentage of gold stocks. With a reserve set at say 20% then if there were two billion dollars of gold the central bankers were allowed to create and circulate 10 billion dollars of currency; hence extra phantom wealth was created by them acting as central bankers and they controlled it. The Founders fought against allowing central bankers but in 1913 Congress was bribed to allow the Federal Reserve.

In 1913 the 16th Amendment somehow got ratified by dubious means and called for taxes on income from whatever source and without apportionment. The Supreme Court ruled shortly thereafter that the 16th Amendment conferred no new means of taxation. That meant if an income tax was imposed it had to be an indirect tax meaning the same percentage in each state, like a corporate income tax of say 10%. The problem was then as it is today that an excise tax such as a sales tax is just passed along. So the wealthy were not impacted by excise taxes. They could be impacted by an income tax but apportionment meant they could claim residence in a sparsely populated state and pay little tax if any.

The tax code got revised 5 times in fifty years and each time the references to Publlic Law were muddled and lost.

When the personal income tax started it was a very small percentage and it was required of only the wealthy, less than 1% of the population. It really was put into effect to calm the People that the very rich were paying their fair share.

Now it is the middle class that carries the burden.

And the biggest problem is the never ending definition of ‘income’. Income is whatever the IRS says it is.

But think for a moment about technology. It was impossible in 1913 for the government to track income but they knew who the wealthy were, and what rents they collected on the land they owned. So it was a manageable problem.

Today it is a nightmare.

But today we have technology that will allow about 3000 retailers to collect and forward a national retail sales tax (NRST) to the Treasury. That is part of the FairTax and it will bring freedom back to America by allowing the elimination of the ‘income’ tax. Technology allows it today whereas it was not possible one hundred years ago.

[Hostage]

Once again you are evading your claim. You said it makes no difference that the NRST is financed in the mortgage of a new home.

Back that up or give up.

Either way you are going to look like a fool.

It’s not my fault, you did it and are doing it to yourself.

[William Terrell]

As all Fair Tax opponents do, you lie about the tax rate. It is a 23% inclusive rate. Not a 30% exclusive rate.

I don't believe anyone cares about terms for comparing NRST and income taxes. I think people care about what actually comes out of their pockets when they purchase an item.

Tell me, if the NRST is implemented and I buy an item that costs $100, how much actually comes out of my pocket to pay for the item, about $123 or about $130?

[Phantom Lord]

There was no ad hominem, nor attack. There was no reason to pull my post. It was FACT.

I stated that Always Right is opposed to the FairTax because he fears it will hurt his business. As evidenced by his post in #70...

How can you support the idea of an ‘Income’ tax over the FairTax?

Because I see it as killing my business.

So, I repeated FACT. I guess Always Right doesn't like the fact. Owell.

And being a home builder, it is a legitimate question to ask how many illegals he employs, and/or how many the subs he hires employs.

That is a 100% fair and legitimate question. Guess Always Right doesn't like any light shown on the strong possibility he is engaging in such practices.