hehehehe...
Posted on 08/16/2007 6:10:39 PM PDT by RobFromGa
Fair Tax, Foul Politics
By The Editors
Advocates of a national sales tax to replace the income tax have built an impressive grassroots army. They have given their idea an appealing, if somewhat gimmicky, name: the Fair Tax. And they have managed to get five Republican presidential candidates to suggest that they would sign a sales-tax bill if it reached their desk. Some observers credit the enthusiasm of the Fair Taxers for Gov. Mike Huckabee’s surprisingly strong showing in the Iowa straw poll. Huckabee is the candidate most committed to the Fair Tax.
Former senator Fred Thompson is, however, backing away from the idea. Fair Tax advocates have released a video in which Thompson, asked about the proposal, appears to say he would “absolutely” sign it if elected. On August 10, however, Thompson wrote those advocates a letter that said merely that the Fair Tax was a good starting point in thinking about tax reform. Mitt Romney’s campaign says that the Fair Tax has some attractive elements, but that the candidate would need to see details before making any pledges. Rudolph Giuliani has said that he does not think he would sign any such legislation.
The leading candidates are right to be wary. The tax code needs major reform to become fairer, simpler, and more efficient. The Fair Tax is one instantiation of those goals, but its political impracticality makes it fatally flawed. If conservatives force a choice between a Fair Tax and no tax reform at all, the latter is what they are likely to get.
There is widespread confusion about what the Fair Tax would entail. If you bought $100 of clothing and paid a $30 tax on it, you would probably think you had paid a 30 percent tax. The Fair Taxers say that you paid a 23 percent tax: $30 is 23 percent of the $130 you paid in total. When they say they want a 23 percent tax, that’s what they mean.
Since there would be no more income tax in this system, there would also be no more standard exemption to make sure that the basic necessities of life went untaxed. The Fair Taxers would solve this problem by sending out monthly “prebate” checks to all Americans.
The great, undeniably attractive selling point of the Fair Tax is that it would allow the country to dispense with the IRS. But the sad truth is that if the federal government is going to collect as much money as it currently does—which the Fair Taxers say their system would—its methods of tax collection will inevitably be intrusive. The real difference between the current system and this proposal is that the primary brunt of tax collection will be borne by a smaller group of people: business owners.
Over time, then, enforcement measures could become more draconian than they are today: especially since a massive retail sales tax would create a massive incentive to evade it. That’s why every country that has ever tried to impose retail sales taxes this high has quickly moved to a Value Added Tax levied at every stage of production. Consumers rarely see or keep track of these taxes, and they seem to be fairly easy for governments to raise.
These pitfalls are beside the point, however, since a national sales tax is not going to become law. No presidential candidate could be elected on a sales-tax platform, and no Congress would enact one if he were.
A candidate who ran on the national sales tax would be able to run on nothing else. He would have to spend all of his time defending the idea. Off the top of our heads, we can think of three devastating lines of attack an opponent could use in television ads. One ad could argue that getting rid of the mortgage deduction would send home prices into free fall (something that voters are going to find especially worrisome now). Another could ask why senior citizens, having paid taxes all their lives as they made income, should have to spend their retirements paying taxes on everything they use that money to buy. A third could simply ask voters if they look forward to paying a brand new tax.
There are answers to each attack. But no Republican candidate, especially in the daunting environment of 2008, is going to want to have to make them. Republicans cannot win a national election without the tax issue. If they ran on the national sales tax, Republicans would be taking one of their natural strengths and making it into a liability. Which is why we expect them to say nice things about the Fair Taxers’ passion, and move on.
If direct taxes upon the wages of labour have not always occasioned a proportionable rise in those wages, it is because they have generally occasioned a considerable fall in the demand for labour. The declension of industry, the decrease of employment for the poor, the diminuation of the annual produce of the land and labour of the country, have generally been the effect of such taxes.... Absurd and destructive as such taxes are, however, they take place in many countries.
Adam Smith, The Wealth of Nations, 1776.
The wrestling metaphor is something along the lines of “you’ll just get yourself dirty and the pig enjoys it.” Basically the same point.
That's why I don't play here much anymore as I have a bill to get passed!
we have never tried anything like this? How about the various state sales taxes...how about the excise taxes...come on, I think alot of the doubters are in the tax preparing industry. And how are non profits going to be taxed? They will still have their exemptions. You never commented on the fact that the founders never included an income tax. The founders of communism did though, because they knew how to get as much money as possible and try to spread the wealth, by force, of course. Whereas if everyone keeps all of their earnings, the prosperoty in the country will be awesome. The displaced tax industry workers will have no problem finding better work. Your agruements just don’t hold water. I hope next year will be the time that Americans finally throw off the heavy burden of the income tax, finally.
Compared to the evil intentions and motives you routinely attribute to those who oppose the FairTax with no evidence, my statment was much more supported.
Why all this talk of pigs and dogs all of a sudden? :-)
But, but... I thought income taxes were Marxist
Sorry! but none of that sounds even remotely like the Fairtax to me and proves what I said earlier. Thay you guys don't want to talk about the Fairtax but something else entirely!From a consumer's standpoint (that's what xcamel was talking about) a credit/invoice VAT is no different than a NRST.
We all do! W're not gonna let the pro-IRS folks dominate the debate in the 2008 elections.
No state has a 30% plus sales tax on every single good and service. Florida tried to put a sales tax on services and abandoned it as unworkable.
If you are going to push the plan, then you need to consider that people might take action to avoid such a high tax, and figure out what that will do to revenue.
Since low tax revenue that will trigger an automatic hike in the tax rate, causing more evasion, I would suggest as an engineer that the feedback in this system is totally unstable.
That's why I don't play here much anymore as I have a bill to get passed!LOL! Yeah, how's that going???
Adam Smith, the father of modern economic thought, had a lot to say about taxation still great book Wealth of Nations pp. 561-64. Here is what he had to say about bad taxes:
1. A tax was bad that required a large bureaucracy for administration.
2. A tax was bad that "may obstruct the industry of the people, and discouraged them from applying to certain branches which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so."
3. A tax was bad that encouraged evasion. "The law, contrary all the ordinary principals of justice, first creates the temptation, and then punishes those who yield to it." Evasion is also bad, says Smith, because it tends to "put an end to the benefits which the community might have received from the employment of their capitals."
4. A tax is bad that put the people through "odious examinations of the tax-gatherers, and exposes them to much unnecessary trouble, vexation, and oppression...It is in one or other of these four different ways that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign"
I ask you, which of these are NOT true of our current tax system?
Better than I expected in fact!
you make mistatements in your arguements. The fairtax is proposed at 23% of goods, not over 30%. Who said services too? And you fail to mention all of the billions of spending that the underground people will be paying into the system because they will be forced to pay to by their goods.
Except that one, the credit/invoice VAT, is of necessity encumbered by government bureaucrats deciding just what "value" was added at every stage and how the "credits" will be distributed.
Sorry! No sale!
I'll take the NRST and particularly the FairTax over that any day!
The fairtax would be $.23 of each dollar spent at the point of retail sale on NEW goods and services only.
Except that one, the credit/invoice VAT, is of necessity encumbered by government bureaucrats deciding just what "value" was added at every stage and how the "credits" will be distributed.Huh? You really have no clue how a VAT works, do you?
One of us sure as heck doesn't and I STRONGLY suspect that YOU are the one!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.