Posted on 01/31/2008 4:03:19 AM PST by Man50D
EDMOND — Mickey Hepner’s op-ed regarding the FairTax is full of patently incorrect information and musings on an imagined “fairer” fair tax. Hopefully, I can correct the professor’s misimpressions.
The FairTax is a well-researched income tax replacement system designed by leading economists at well-known institutions such as Laurence Kotlikoff, chairman of the Economics Department of Boston University (people.bu.edu/kotlikoff/). Hundreds of economists nationwide have endorsed the FairTax and the FairTax Bill (HR25/S1025). We have 70 co-sponsors in the House including four representatives from Oklahoma. Both of our senators are co-sponsors, also.
Americans for Fair Taxation has been around since 1995 and has had activities in Oklahoma since about 2000. Former Arkansas Gov. Mike Huckabee, who is now a Republican presidential candidate, simply has recognized the value of the FairTax and is promoting that value.
The FairTax is a national retail sales tax of 23 percent coupled with a highly progressive “pre-bate” that protects lower-income earners from any taxation at all up to the poverty level of spending on “necessities of life.” When you take a $1 item to the register, 23 cents of the cost of that item (inclusive) would go to the federal government. This is only on new goods and services. Used items are not taxed.
The reason for including the FairTax in this manner in the cost is so that it is compared to the current system fairly. Our current system imposes an estimated 22 percent load that is included in the cost of all that we buy. When the current system is abolished, those embedded costs will be driven out by free market competition and then added back as the FairTax.
What many, including Hepner, fail to recognize is there should be no net cost of living to any income group under the FairTax. We also must realize that items that are purchased in the FairTax world are purchased with “gross” dollars since we all receive 100 percent of our paycheck. We then pay our federal taxes at the cash register. Goodbye April 15.
The FairTax pre-bate reimburses, in advance, every American family for their spending up to the poverty level. The pre-bate is formulaic and based on existing government poverty statistics. It is based only on family size and ensures that no American family ever pays the FairTax on the necessities of life. It is the pre-bate that makes the FairTax “progressive” by completely un-taxing the poor. Since the FairTax ends payroll taxes and tax on earnings from investment and savings, the poor, under the FairTax, finally would have an opportunity to climb out of poverty without the government holding their hand.
The hybrid taxation system that Hepner proposes would be a nightmare for all Americans. How would it benefit anyone to add to a complex 70,000-page IRS code that already no one understands? If any aspect of the current income tax system were to be retained alongside the FairTax, more than a million FairTax supporters immediately would go against it. FairTax supporters want simple and fair. And we want the government to be adequately funded.
The FairTax is structured to be “revenue-neutral” to the federal government. The FairTax also would dramatically expand the tax base by making illegal aliens, criminals, pimps, prostitutes, drug dealers and visitors to this country subject to the FairTax.
Hepner seems to think that compliance with the income tax is 100 percent. Even the government will admit to 30 percent to 40 percent non-compliance with the current system. We also have an estimated $1 trillion underground economy that is untaxed. At least those who participate in this hidden economy would be exposed to the FairTax.
I would ask Sun readers to consider one last point. What will happen to our economy when all corporate taxes are abolished? When the FairTax goes into effect the United States will become the tax haven of the world. More than 500 international companies polled by Princeton Economics have said they will either move their next manufacturing facility here or their corporate headquarters here if we pass the FairTax. The reason for this should be obvious.
When you remove a 20 percent to 30 percent embedded load on everything produced here by abolishing corporate taxation, suddenly American-made products are hyper-competitive in world markets. In addition, the $13 trillion in offshore accounts that is owned by American corporations would be repatriated to help our economy.
I am afraid that Hepner’s hybrid tax system is a non-starter for thinking Americans. If he believes his ideas on taxation are so good, then let him drum up grassroots support. I wish him the best of luck in that endeavor. As a grassroots volunteer coordinator in the FairTax effort, I can assure him it is not an easy path.
Fair Tax ping!
“The FairTax also would dramatically expand the tax base by making illegal aliens, criminals, pimps, prostitutes, drug dealers and visitors to this country subject to the FairTax.”
The moment we knowingly tax illegal aliens, is the moment we grant them amnesty. It would seem to be a show of approval. I know our legislators are that desperate for revenue (politicians life-blood), but are we?
No to Fair tax
Yes to Flat tax
now that Rudy is gone, Huckabee is the only one who wants a flat tax and completely change the tax code
hmmm not even Ron Paul
http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/
Spending cuts are important but doesn’t he understand the problem of all the lobbyists that live off the system? The hours and $ that people have to throw away just to file correctly? All the audits? The tremendous tax bias that favors some companies and activities over others?
I agree
yes and that is a flat tax. one rate and no special deductions
The “solutions” offered by Romney and McCain amount to rearranging the deck chairs. The system is fundamentally broken and must be completely overhauled.
Good point. Plus it removes the incentive to pay under the table since American workers will get 100% of their pay not ~55%. The same as illegals.
I wish that were true. My guess is American workers will get 100% of the 55% they currently take home.
Actually, the VAT is neither an income tax nor a consumption tax; it is a tax on incremental work-in-process, hence, a "value-added" tax.
Unless the public has the resolve to keep a close eye on our elected representatives, any tax system can be abused and morphed to their liking.
Thank you for the posting. How refreshing to see an informed article about the Fair Tax on FR for a change.
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