Flat Is the New Fair

Wall Street Journal ^ | 9/30/2011 | Stephen Moore

[New Jersey Realist]

'Suddenly, liberal Democrats are making the same argument about the tax code that I've been making for 20 years," laughs former Republican House Majority Leader Dick Armey. "Welcome to the party." Mr. Armey, who along with Steve Forbes has been the torch bearer for the flat tax since the early 1990s, believes that the latest applause line from President Obama that "billionaires should pay the same tax rate as janitors" may be the political gateway to sweeping tax reform.

Mr. Forbes sees an opening here too and says: "The flat tax is the perfect issue for these times. It fixes the economy and doesn't cost a dime." He's right. It's the teed-up GOP response to a jobless recovery and the near-universal sentiment among voters that the tax code is corrupt beyond repair.

That case is inadvertently helped as Mr. Obama and his new best friend, billionaire Warren Buffett, barnstorm the country trashing the tax system for, as the Oracle of Omaha puts it, "coddling the super rich." In truth, the system isn't nearly as skewed in favor of those at the top of the income pyramid as they allege: Today the top 1% pay 38% of the income tax. But in Washington, perception drives policy. The virtue of a flat tax with no deductions is that it provides an ironclad guarantee that the rich pay no lower a tax rate than janitors and secretaries.

[xzins]

I support the Fair Tax PROVIDED it is instituted by ONE amendment that SIMULTANEOUSLY (1) repeals the 16th amendment income tax, (2) intiates a national sales tax, and (3) prevents any other income tax being instituted by legislation

Otherwise, we are simply instituting another form of taxation, the sales tax, and trusting politicians to eventually get around to ridding us of income taxes.

I do not trust politicians.

[¢ommon ¢ents]

Marie wrote:

With the fair tax, you snag people like drug dealers, prostitutes, and people who otherwise wouldn’t pay taxes.

Really? You actually believe that?

Riddle me this:

A drug dealer and a prostitute, right? That's who you're going to collect taxes on. They avoid the income tax because they don't report their illicit income (from illicit sales of goods and services).

Do you honestly believe that the drug dealer and the prostitute will report their sales of taxable goods and services, and will collect and remit the fair tax on their sales? Do you think the drug dealer is saying, "The reason I don't report my illegal income on my yearly tax return is because I disagree with the income tax. I'll be happy to collect sales tax on my sales and send in a monthly report of my taxable sales, along with the sales tax that I collect." Do you expect me to believe that.

Black market transactions are untaxed. That's part of the definition of "black market." Drug dealers don't pay income taxes, and they don't collect and remit sales taxes. Prostitutes don't pay income taxes, and they won't collect and remit sales taxes for their services. The same transactions where taxes are evaded under the income tax will have taxes evaded under the so called "Fair Tax."

As for when they spend their money, right now, Drug dealers and prostitutes pay "embedded taxes" in the price of everything they buy. The price of everything includes the income taxes of everyone who is in the chain that brings that prodcut to market. The store pays income taxes on its profits, the wholesaler pays taxes on its profits. The manufacturer pays taxes on its profits, the raw materials suppliers pay taxes on their profits.

When you misrepresent your plan with ficticious advantages, one looks closer at the rest of the plan. The FairTax has some very nice points. I like some of the ideas. But the actual bill that implements it is scary when you read it. There's some really bad stuff in their plan as well.

[Marie]

If they buy anything new, they’ll be taxed, just like the rest of us.

If they don’t, they won’t be taxed, just like the rest of us.

[taxcontrol]

Well if we are going to get into the Fair tax then we need to look at the actual proposal.

The proposed 23% inclusive tax is really a 30% sales tax. Not the 10% that we used in our example.

The FairTax proposal assumes a 100 percent tax base on consumption. By way of contrast, most states that have sales taxes have roughly a 50 percent tax base. With the FairTax’s 100 percent base, consumers would pay taxes on a great many things that may not intuitively seem like consumption. The list would include:

•Purchases of new homes
•Rent
•Interest on credit cards, mortgages and car loans
•Doctor bills
•Utilities
•Gasoline (30 percent in addition to current taxes, which would not be repealed)
•Legal fees

Further, it will have very little impact on tax cheaters. These so called cheaters are already paying sales tax when they purchase goods. Since the consumption is on new items, many will avoid the new tax by simply buying used products.

Further, it does not address the REAL problem of SPENDING. Congress can still and would continue to borrow more money to pay for more spending. There is no “starve the beast” with the fair tax.

Lastly, the rebate under the fair tax is under the control of Congress ... so you could very well end up in the exact same situation that we are in now with 45% of Americans paying no taxes at all. The only difference being that instead of tax deductions and credits, the taxes paid at time of sale are returned via the rebate.

The fair tax is not some great fix. It is just another means of collecting taxes that sounds good but in the final analysis it will end up being the same taxes collected, on the same people, for higher amounts, different name.

[JDW11235]

FYI the 9-9-9 Plan is now the first step in a two phased transition to the fair tax, according the Cain’s updated plan on his website. I do not support the 9-9-9 plan, but can support it as a transitionary step (though would prefer we jump straight to a FairTax). Taxing labor/income is an abomination.

(I am for the Fair Tax over an income tax.)

[JDW11235]

You’re post is spot on, K want to reiterate this point:

“Problem is people will then SEE what the hell they’ve been paying.”

The payroll tax is perhaps the largest and most cunning fleecing of a population in the history of the world. Trillions stolen before anyone ever even sees their money. If people had their money and then had to part with it (rather than being stolen before they ever saw it), they would be up in arms.

[teeman8r]

our current system started out as a flat tax...

the fair tax is the way to go.

a tax on income is evil and controlled by malcontents.

consumption gets the money out of politics.

teeman

[¢ommon ¢ents]

Marie wrote:

If they buy anything new, they’ll be taxed, just like the rest of us.

If they don’t, they won’t be taxed, just like the rest of us.

And under today's system, when they buy anything, they pay "embedded taxes," just like the rest of us.

As I said above, the "black market" or "underground economy" always is untaxed. That's a major part of what "underground economy" and "black market" mean.

[Taxman]

Have at it!

We all know the FairTax is the answer.

Let’s convince some more naysayers that the FairTax really is the answer.

[Principled]

On the flat tax or 9-9-9 ... Or a combination thereof....Herman Cain’s 9/9/9 idea is interesting.

It's interesting b/c it is supposed to lead to erasing the income tax code and repealing the 16th amendment.

It will be mighty tough to convince me to support something that invokes a national sales tax without first eliminating the income tax code. I can wait for an amendment as long as it's rolling - but I MUST have a complete deletion of the entire income tax code.

That said, I need to investigate 9-9-9. BTW why did Cain move from the fair tax nrst to 9-9-9? Why not just stick w/ the established front-runner of tax reform?

[ROCKLOBSTER]

why did Cain move from the fair tax nrst to 9-9-9?

He didn't...see his website.

[Principled]

Well everything I’ve seen or read indicated that Cain now promotes his 999 plan. It leads to the nrst but why did he change to insert the 999?

[RayChuang88]

I think for an immediate solution, the Forbes no-loophole 17% flat-rate income tax works the best for now. This will give a big boost to the economy, while giving us time do a two to three-year transition to ending the income tax altogether and replace it with something like FairTax (H.R. 25/S. 13).

[Moonman62]

The politicians will go for a flat tax just as soon as they first, figure out how to turn it into a 2000 page bill, and second, figure out how to take more money than they do know.

[ROCKLOBSTER]

He said on Boortz, and on his website, that he wants to introduce 9-9-9 first because it would be easier, then roll out the fair tax later.

[Principled]

I think for an immediate solution, the Forbes no-loophole 17% flat-rate income tax works the best for now. This will give a big boost to the economy, while giving us time do a two to three-year transition to ending the income tax altogether and replace it with something like FairTax (H.R. 25/S. 13).

I'm sooooo fearful of having BOTH an nrst and an income tax simultaneously.

Since the repeal of 16th takes time, I thing the nrst's [fairtax] approach is best - it erases the income tax code. Poof - it's gone. Although it could be re-written, it would take a long while to negotiate it all. It would take even longer with Tea Party congress critters. That would give us time to get the amendment through. Hopefully with a repub house, senate, and white house.

I still don't know why Cain deviated from the straight Fair Tax plan. I fully support the Fair tax as our least bad taxing plan.

[Cobra64]

We all know the FairTax is the answer.

Let’s convince some more naysayers that the FairTax really is the answer.

I agree.

.

.

http://fairtaxcalculator.org/

[RayChuang88]

What I do know is this: Our current tax system is corrupt, unfair, and extremely destructive to our nation and our society. The current people in Washington, and CPAs across the nation, feed and nurture this true crisis.

Let me count the ways the current income tax has become a massive impediment to the US economy:

1. You have HALF the lobbyists in Washington, DC--something like over 30,000--lobbying for "tweaks" in the Internal Revenue Code to favor or punish as little as ONE taxpayer.
2. The Federal government uses the income tax code as a political tool to favor or punish any constituency.
3. The result: a tax code of 70,000-plus pages of Internal Revenue Code plus additional rulings so complex that even the IRS can't figure out much of the code!
4. The yearly compliance and economic opportunity cost of the tax code is around US$450 BILLION per year.
5. It discourages savings and investment in the USA, since bank account interest, capital gains and stock dividend payments are counted towards adjusted gross income.
6. It encourages the export of millions of jobs, thousands of factories, and hundreds of corporate headquarters for tax avoidance reasons. This means a higher unemployment rate than necessary.
7. It results in circa US$14 TRILLION in American-owned liquid assets sitting in offshore financial centers for tax avoidance reasons, hurting the viability of banks and investment companies.
8. It also encourages illegal tax evasion on a huge scale. That's why there is a thriving underground economy with possibly as much as US$2 TRILLION involved that is beyond the reach of the IRS for the most part.

In short, complete economic insanity. I would not be surprised if Obama is defeated in 2012 by a Republican candidate, income tax reform will be of highest priority, to say the least.

[Cobra64]

The Fair Tax is a consumption tax. There is no reporting. The tax is paid at the cash register. The pimp, prostitute, drug dealer ultimately pay when they buy goods and services from a legitimate firm... dentist, corner market, Sears...