There was a big rally in Orlando, Florida, on Saturday, July 29. The participants (supposedly 10-12,000) were demanding that the government make it easier to raise and collect taxes, send every American a welfare check, increase the price of everything by 30 percent, change the name of the IRS, create new taxpayers, and tax all medical procedures. Actually, they were calling for the implementation of the FairTax–but what’s the difference?
Pictures of the rally can be seen here.
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Those photos are painful to watch. Surely some of those folks do hate taxes, but are making it easier to collect them.
It is amazing to watch critics of this legislation rewrite it to criticize it. They have said that exemptions and deductions would raise the tax rate to 45%. Under the FairTax there are no exemptions and no deductions. Notice the statement that it will be easier to raise taxes. Milton Friedman and others have stated, and it has been proven that there is an inverse relationship between taxes and revenue. As one goes up the other goes down. Which one do you want to go up?
If the government is required to accurately report their spending (which they are currently prohibited from doing) and accurately report the income under the FairTax; and then they try to raise taxes to pay for something and revenue goes down. What will that prove?
Our government practices a sleight of hand by confiscating its money from the working class before they have a chance to cash their paychecks, and punishes incrementally for additional hours worked and wages earned. Both of our nation’s political parties have managed to spend our money like drunken sailors on shore leave. The federal debt has risen from 542 billion in 1975 to nearly 9 trillion dollars. To put one trillion dollars in perspective, if you were to spend one million dollars per day, every day since the day that Jesus was born, you would still have to spend a million dollars a day for another 734 years to have spent a trillion dollars. Debt as a percentage of Gross Domestic Product, once at 34.7%, is now above 60%.
For years our government has played a game with our monetary fund to trade off 3 to 4 percent inflation for 4 to 6 percent unemployment. Economic instructors will teach that there is only 4 factors the government is capable of adjusting to influence the economy. Raising or lowering the tax rate, raising or lowering spending, raising or lowering the reserve rate, or raising or lowering the interest rate, and expound upon the influence that each will have upon the economy, while our government is constantly devaluating our currency by printing more and more of it. Today’s dollar has the buying power of 4 pennies compared to the 1930′s dollar.
Todays gasoline is 3 bucks a gallon because the price of a barrel of oil is $80.00. The price of a Barrel of oil is based upon the US dollar. They have printed so many dollars that it is almost worthless.
Our government does it’s very best to make our tax code as incomprehensible as possible. Any reasonable reading of the United States Constitution would find that the ordinary citizen does not conduct activity that our forefathers defined as taxable. While we depend upon our country to provide a basic framework for us to exist within, our forefathers would roll over in their graves if they knew of the level of taxation that each citizen has been burdened with. A child born today already owes the federal government $37,000 dollars.
The FairTax is a grassroots movement to reform our nation’s tax code from an income based tax to a consumption tax. The FairTax Strips all of the embedded taxes out of the supply chain to provide consumers with a set of tax free goods and services to be levied only once, at the point of purchase on new goods and services. The simplicity of the FairTax frees Americans from our current overwhelming tax code and unshackles the U.S. economy.
As individuals we cannot control our politicians spending, The FairTax returns to the individual the power to control his or her own paycheck. It is a complete rewrite of our nation’s tax code from a 60,000 page incomprehensible behemoth to a 143 page document. It is total tax reform, not just rearranging the deck chairs on the Titanic.
It enables all workers to keep their entire paycheck without any deductions. It eliminates the IRS as we know it, all corporate taxes, capital gains taxes, alternative minimum taxes, gift taxes, and estate taxes, and strips all of the embedded taxes out of the supply chain to provide the consumer with a set of tax free goods and services to be taxed only one time by the final consumer at the cash register.
The only legitimate objection to a consumption tax; according to economic theory you can’t tax poor people. If a person earns less than the poverty level a consumption tax confiscates taxes inordinately from those who use 100% of their income just to survive. The FairTax addresses this from a libertarian point of view that there should not engage in economic interventionism, a completely level playing field. No favorites, no class envy, no deductions, and no exceptions. The FairTax treats everybody fairly, every head of household will receive a check or direct deposit every month to reimburse the family for the amount of taxes that family will pay on all spending up to the federal poverty level.
Every individual should be treated absolutely the same, no winners no losers. Regardless of your household income; if you qualify for a social security card, you will get a check based upon the number of people in your family. If you spend more than the poverty level, you are a taxpayer! For the first time our country will not tax wages but consumption. If an individual wants to work 2 or 3 jobs or work oodles of overtime, or start a chain of businesses, there is no penalty. It will release the individual to pursue their own goals.
Foster Friess, Chairman of the Board of Brandywine Associates LLC (a 15 billion dollars investment fund) spoke at the Americans for Fair Taxation meeting in Atlanta on December 12, 2005. He not only identified that passing the FairTax would be a rebate of 265 billion dollars a year to Americans businesses, but was able to accurately identify how many millions of dollars left this country every day to be invested overseas, not to return to this country, just to avoid our punitive tax code.
Would the FairTax work and would it solve our problems? The FairTax supporters spent over 22 million dollars to do the studies to identify the statically scored revenue neutral tax rate that would ensure the government receives the same revenue under the FairTax that they do under our existing tax scheme. Our government’s income would no longer be based upon confiscated wages but upon the success of its citizens and their ability to purchase.
The FairTax solves the social security crisis, pays for Medicare, pays down the national debt, and releases our nation’s individuals and businesses to become as successful and productive as they desire. Foster Friess said at the Atlanta meeting that there have been estimates that our nation’s economy would more than double. Even if it only grew by only 40%, the investment and growth in the stock market alone would resolve all of the issues with the major airlines and automobile manufacturers, and in an economy like that you would have to hide under a rock to avoid finding a great job.
…revenue neutral tax rate that would ensure the government receives the same revenue under the FairTax that they do under our existing tax scheme.
…
The FairTax solves the social security crisis, pays for Medicare, pays down the national debt, and releases our nation’s individuals and businesses to become as successful and productive as they desire.
Does it also cure cancer and stops all wars?
To reduce debts without reducing spending (FairTax does not address spending, not at all) the total tax revenues have to be increased.
debt(year+1) = debt(year) + spending – revenue
If spending and revenue are unchanged, and
spending remains to be bigger than revenue, the
debt grows.
It is as simple as that.
You just made two mutually exclusive claims and expect us to take you seriously?
Go sell the snake oil to those who are sufficiently mentally challenged to believe in your magic.
averros, why would you think that FairTax supporters don’t also wish to cut government spending? What would lead you to believe something like that? Have you found a majority of the FairTax supporters asking for more government spending or even the same government spending? I haven’t found a single one that doesn’t demand that government quit spending so insanely.
So if the FairTax supporters also want government spending to go down, what complaint do you have? Are you ignorant as to the reason why FairTax supporters would like the plan to be revenue neutral? The answer is political in nature not statist.
The government when looking for a proposal to overhaul the tax revenue system will only look at something that can raise as much money as the current one. Why would the servants of the state choose a plan that deprives them of revenue, if they don’t believe in small government? The feature of revenue neutrality is the honey to attract them. The feature to attract the small government people is the elimination of the IRS and it’s powers over people’s persons, papers, effects, and other property.
There is no reason not to support the FairTax proposal unless you simply object to all taxes period. By rejecting the FairTax you are embracing the current system, with it’s form filling, and personal audits, and time consumption, and the money that goes to H&R block and Taxcut/TurboTax. If you’d wake up to political reality, you’d see that just outright making the government a libertarian government tomorrow is impossible. This is a proposed first step.
There is no reason not to support the FairTax proposal unless you simply object to all taxes period.
Actually, many of us do object to “taxes period.” But for the sake of argument, I also have a political question for you, Black Bloke.
In light of all of these millions of dollars that have been spent tweaking the FairTax proposal, and the honey trap that has been so carefully set, and the balance of political forces that have been so carefully aligned, why is it that the FairTax proposal does not include a provision requiring the repeal of the 16th Amendment?
I realize this question may enrage “Person,” but as a political matter, is this not a major oversight? Do you not see how the FairTax, even if fully implemented in its proposed form, would replace nothing, but merely be added to income taxes?
Do you really think that politicians and statists are going to simply give up the enormous amount of power that comes from being able to decide who pays taxes? That’s the whole point of politics! That’s the whole point of the income tax!
The government doesn’t need our money — they have all of the printing presses. They can print whatever money they want. But that leads to dilution of the dollar effects everyone equally. From the politician’s perspective, this is a real problem. So, the income tax was invented to allow them to steal the same amount of money, but do so selectively, making the taxable unit the individual.
Even accepting your own premises and assumptions (which I do not, incidentally), you have to see that this proposal is simply another way to facilitate the government getting its hooks more deeply into the pockets of productive people.
GG,
That’s exactly it. The consumption tax( Fair Tax-tale) is cover to put the IRS on Both ends.
Vance, will you please, please just give up? Time and again, you’ve made the most ridiculous statements against the FairTax, such as claiming that it’s bad because a different version of it is bad, or that it’s bad because it keeps a bad part of the present system.
I’ve said it before, and I’ll say it again. Taxes are bad. Duh. Thanks for the newsflash. But some taxes can be worse than others, even if they raise the same revenue. Would you rather pay $5000 in taxes, PLUS spend 10 hours doing the accounting to come up with that number, or pay $5000 in taxes, without having to spend that time? Is a shift from the former to the latter “statist”?
Oh, I know, right, taxes SHOULD be as painful as possible, isn’t that the argument here? Because if they really were painful, people would RISE UP AND REVOLT. So what we really need, of course, is for the government to install cameras in everyone’s home and tax the time you spend at home. People would hate that, and making people suffer is good, because one day, one future day, it will make people realize how bad things are. But wait: when they switch from that tax system to an income tax, OMG THEY’RE TEH STATIZTZORZ! Because that’s also a tax and all taxes are equally bad.
I’ll ask again: does anyone have an argument against the FairTax that isn’t of the form:
1)It keeps bad part X of the present system.
2) It’s a tax.
3) A plan other than the FairTax is bad.
4) [baseless assertion that voters will do something stupid at a later date]
I will never give up writing against the FairTax. Look for a new article soon about the lies in Boortz’s book that he had to change in the new edition.
Vance, could you please explain what precisely you have against the FairTax that has led you to throw every fallacious argument you can find at it? Do you think taxes should be as painful and intrusive as possible? Do you think all changes in tax policy that retain some tax are necessarily bad? Do you have firm, well-documented reason to believe it will influence voter decisions at a later date? Do you believe that the merit of the FairTax proposal itself is dependent upon the changes you believe will be made to it (that are unsupported by its proponents) by the time it passes?
The “Fair” Tax doesn’t seem to reduce overall taxation. It’s revenue neutral. How is this a step forward or even sideways?
Manuel;
Good question.
Even worse – the “Fair Tax” will make it even harder to reduce spending. Politically, it will be a Trojan Horse, since objections can be answered by a “we reformed the tax, shut up already”.
Keith says;
“Milton Friedman and others have stated, and it has been proven that there is an inverse relationship between taxes and revenue. As one goes up the other goes down.”
Actually Arthur Laffer was the one who drew the famous “Laffer Curve” (on a cocktail napkin, equally famously). Friedman, perhaps to his credit recognized that one of the implications of the Laffer Curve was that if revenues rose after a tax cut, by definition the tax has not been cut enough. History tells us Reagan cut rates and revenue increased, and true enough. But he also eliminated many deductions, making it a non-proof of the Laffer Curve.
“Our government practices a sleight of hand by confiscating its money from the working class before they have a chance to cash their paychecks, and punishes incrementally for additional hours worked and wages earned.”
And the guy who figured out how the government could do this? Mmm hmm, Milton Friedman.
Most of the people who follow Mises’ instead of Friedman’s ideas do so because they have learned through hard experience that if you want the government to take more of your money, nobody does it better than a Chicago School government economist, har har.
Lawrence’s sometimes prickly comments on the subject aside, the Fair Tax is bad even though it is alleged to be revenue neutral (no evidence so far of that) because any tax reform worth the name must include a drastic cut in revenue. After all, isn’t that what Reagan promised us?
If that makes us extremists, then so be it.
There is no such thing as a fair tax. And to say any tax is fair is dishonest. The tax payer is forced to lose so someone else can gain. There is nothing fair about it. I suppose the only fair tax is a voluntary one, if you still want to call that a tax.
The fair tax people suffer from the delusion that government can be reformed of its thieving ways by tinkering at the margins.
Person,
Why do you persist in supporting this trojan misnamed the “Fair Tax”? You have been consistently shown that the tax takes at least the same amount of dollars from us as the current system (something you even admit), does nothing to stop the current system from continuing (unless you trust the government), is at least as invasive as the current system (and probably more if it has to replace the current system), is anti-business, is very subject to politcal games and many more things.
The basis of my dislike is the very words “Fair Tax”. It’s an oxymoron of the highest order. “Legal confiscation’ of wealth is just as bad as “Guido” extorting it from us under the guise of ‘protection’ (i.e. security/safety). The fact is, the government is running financially amuck and any corporation that operated in such a fashion wouldn’t exist in the free market. In addition, the loss of privacy under this adminstration over the past 6 years is atrocious. The fact that we (as a nation) sit by while this is happening is pathetic. We (the American population) watch these fiscally irresponsible idiots waste our money and do nothing. We should be ashamed to be called Americans.
Fair Tax? What a joke….
averros, why would you think that FairTax supporters don’t also wish to cut government spending?
I wasn’t discussing the beliefs of the supporters, but the FairTax proposal.
The proposal is not called “LessSpending” or “DownsizeGovernment” or whatever. It does not talk abour any specific reduction in spending whatsoever. It merely shifts the point in the goods-money-goods cycle where the tax is extracted – with explicit statement that the amount of this extraction is not reduced.
This, combined with the fact that its proponents make claims that it will reduce deficit, makes one worry about their honesty. Or ability to do trivial arithmetic.
Sorry, guys, you make promises you do not have any intention of fulfilling (simply because you do not explain how you intend to deliver – either because you’re lying or because you’re clueless).
Go away.
Manuel:
The “Fair” Tax doesn’t seem to reduce overall taxation. It’s revenue neutral. How is this a step forward or even sideways?
I’m sorry you chose not to read the first thing about the FairTax before learning why even the proponents want it. In short: simplify taxation, save time for taxpayers, eliminate social engineering in the tax system, remove disincentives for saving and investing, greater financial privacy.
Art_Schumer:
The basis of my dislike is the very words “Fair Tax”. It’s an oxymoron of the highest order. “Legal confiscation’ of wealth is
Okay, great, taxes = bad. Gotcha. Anything substantive to contribute about why this specific policy is a bad idea?
Glen:
Why do you persist in supporting this trojan misnamed the “Fair Tax”? You have been consistently shown that the tax takes at least the same amount of dollars from us as the current system (something you even admit),
Actually, had you read my posts rather than skimmmed them and filled in the blanks with the weakest argument you could think of, you would notice that I never said or implied such a thing. The FairTax — or many other kinds of taxes — can leave the government with the same amount of revenue while taking less from taxpayers. First, the government has much lower administrative costs, to there are fewer costs to recover before going to the budget. Second, because the tax code is greatly simplified, people need to spend far less hunting for and modifying their plans for tax advantages.
Reading people’s posts is a good thing.
averros:
The proposal is not called “LessSpending” or “DownsizeGovernment” or whatever. It does not talk abour any specific reduction in spending whatsoever.
Very true. It also doesn’t eliminate the Federal Reserve System. Or eliminate drug laws. Or pull the US out of the Middle East. Or reduce renewable fuels subsidies. Or implement pure anarcho-capitalism. Unless your point is that “all laws that fail to correct all bad policies are bad”, I don’t see the relevance.
If it makes you feel any better, call it the NoSocialEngineeringOrPrivacyViolationThroughTaxes Plan. Now do you have a different opinion of it?
If the national government eliminated all income taxes it would still be taking in way too much money, enough for a very bloated government. But the Boortz crowd doesn’t believe this.
Yes, we already have national consumption taxes, and they are too high.
This is false. Part of the FairTax plan as stated in the book (yes, I read it) is to exempt educational expenses. The rationale is that education is an investment. Ok, that’s social engineering, isn’t it? So that door is deliberately left cracked open. Now before you jump all over me, I know FairTax supporters can’t control what political hacks will do in the future. But surely they should use whatever control they have now to armor it against manipulation down the road. Now if the plan as given by its own supporters already compromises one of its fundamental principles, then what chance does it have when it meets the political reality of committees and special interests?
It’s as if none of the FairTax supporters ever stopped and asked why the current tax system got so complicated. If the income tax rate were 1%, would there be so many exemptions and deductions? Taxes are so high that people want any relief from them they can get, and if all they can get is a narrow exemption for themselves, then so be it. The FairTax, being revenue neutral, doesn’t even attempt to address the root cause.
FairTax isn’t a bad plan; it’s just not a good one either. A better name might be the TemporaryReductionInSocialEngineeringAndPrivacyViolation plan. I could accept it if FairTax supporters simply admitted this, but they act like their plan is some sort of legislative second coming.
How about New Tax? That sounds pretty accurate to me.
PR:
Part of the FairTax plan as stated in the book (yes, I read it) is to exempt educational expenses. The rationale is that education is an investment. Ok, that’s social engineering, isn’t it?
No, except in the trivial sense that choosing any tax is social engineering. “Hey, this tax on land doesn’t tax labor because it’s non-land. That’s social engineering, isn’t it?” “Hey, this tax on labor doesn’t tax land because it’s non-labor. That’s social engineering, isn’t it?” While lobbyists can try to redefine certain expenses, like you said, this would at least set back the clock on tax code complexity, and at least for a while give people a world in which the tax code isn’t byzantine. But apparently, this gover-reset button isn’t good enough because … you don’t like the rhetoric of FairTaxers.
It also doesn’t eliminate the Federal Reserve System. Or …
Person, you are being disingenuous, as usual. Averros made the assertion that the FairTax “is not called “LessSpending” or “DownsizeGovernment” in response to YOUR question: “why would you think that FairTax supporters don’t also wish to cut government spending?”
You seemed to have skipped over the part where Averros mentioned that the supporters are not the issue, but the proposal itself. The logical fallacy in this exchange is obviously yours, not his.
You are never so much a stickler for logical formalities than when you are defending a policy proposal that you happen to support. It therefore appears that your logical rigor is somewhat erratic.
Now, since we are being so logically rigorous and level-headed, will you answer the questions I raised the last time you raised these objections, such as they are?:
1. Will you address any of the political objections to the FairTax (as opposed to its substantive merits)? For example, how can you say that it is somehow out of bounds to object to the Fairtax proposal with regard to its probable political outcome? (I happen to think that politics and electioneering and the tactical considerations of how to build coalitions is as boring as watching paint dry, but it is a valid consideration nonetheless.)
In particular, the failure of the FairTax proposal to require the repeal of the 16th Amendment seems to be a major political deficiency. The FairTax proposal seems to at least acknowledge the high potential for abuse when it mentions that the income tax SHOULD be repealed, but nothing in the proposal seems to really expect that to happen, much less to require it as a condition precedent. How can you defend the decision to present the FairTax proposal in this manner?
2. Why do you refuse to address another major political deficiency of the FairTax proposal: it presents itself as a major overhaul of the entire tax system of the federal government, but it aims too low. If one is going to go about summoning political will, educating the public, getting the attention of millions of people on the grounds that something momentous is afoot, organizing thousands all to a single end of advocating a Major Change, shouldn’t the Major Change actually be, you know, significant?
How much more difficult would it be, assuming that millions will be mobilized and the attention of the public will be focused, to advocate for a change that actually amounts to something? It seems to the Austrian economics community believes that the FairTax is, at best, a lot of sound and fury signifying nothing. The benefits you promise are trivial, at best.
But these objections, you say, are beneath you. You attempt to brush them aside as though rigorous logical reasoning prevents you from even acknowledging them.
The FairTax is a political proposal, is it not? Political objections are therefore perfectly valid, of course.
George_Gaskell:
Person, you are being disingenuous, as usual. Averros made the assertion that the FairTax “is not called “LessSpending” or “DownsizeGovernment” in response to YOUR question: “why would you think that FairTax supporters don’t also wish to cut government spending?”
If you went through the strenuous effort of actually reading my posts, you will see I did not ask the question “why would you think that FairTax supporters don’t also wish to cut government spending?”, but I mean, it’s not like the facts really matter to people responding to me. You’re not the first person to put words in my mouth, and you won’t be the last — on this blog, anyway.
In any case, my response is still relevant. There are a lot of problems with the tax code, and the FairTax doesn’t address all of them. That doesn’t mean many of the supporters don’t want to; it means they’re accomplishing the good that they can accomplish. We can go on and on all day about what it *doesn’t* do; what about what it *does* do?
1. Will you address any of the political objections to the FairTax (as opposed to its substantive merits)? For example, how can you say that it is somehow out of bounds to object to the Fairtax proposal with regard to its probable political outcome? (I happen to think that politics and electioneering and the tactical considerations of how to build coalitions is as boring as watching paint dry, but it is a valid consideration nonetheless.)
Because that’s not an argument against the FairTax proposal. It’s at best an argument against supporting a poorly-modified version when it’s up for a vote. You need to be able to logically distinguish the questions of:
1) Would policy change X be a good idea?
2) Would agitating for policy X lead to an unstoppable bill to pass policy Y which is bad?
Unfortunately, opponents of the FairTax drift carelessly between these separate issues, thinking that arguments on one apply to the other. If you want to criticize “the FairTax”, criticize “the FairTax”. If you want to criticize “supporting the FairTax because of what it might lead to”, you need to specifically say that that’s your basis, show (for the first time) why you believe this to be the case, and stop pretending there’s something objectionable about the plan as written. But I’m skeptical of your ability to segregate these issues.
In particular, the failure of the FairTax proposal to require the repeal of the 16th Amendment seems to be a major political deficiency. The FairTax proposal seems to at least acknowledge the high potential for abuse when it mentions that the income tax SHOULD be repealed, but nothing in the proposal seems to really expect that to happen, much less to require it as a condition precedent. How can you defend the decision to present the FairTax proposal in this manner?
Er, I guess the same way I support it despite it not having provisions about the Federal Reserve …
2. Why do you refuse to address another major political deficiency of the FairTax proposal: it presents itself as a major overhaul of the entire tax system of the federal government, but it aims too low. If one is going to go about summoning political will, educating the public, getting the attention of millions of people on the grounds that something momentous is afoot, organizing thousands all to a single end of advocating a Major Change, shouldn’t the Major Change actually be, you know, significant?
Again, Federal Reserve.
Second, eliminating the corporate tax, the income tax, the dividend tax, and the capital gains tax are HUGE. Those taxes are uniquely harmful due to their high negative impact on economic growth. Do you want me to go over the reasons why, or can I assume we’re on the same page on this one? And you’re probably familiar with the further problems of the income tax, and tax system’s immense complexity. (Or can I assume that much?)
If you went through the strenuous effort of actually reading my posts, you will see I did not ask the question “why would you think that FairTax supporters don’t also wish to cut government spending?”, but I mean, it’s not like the facts really matter to people responding to me. You’re not the first person to put words in my mouth, and you won’t be the last — on this blog, anyway.
You are exactly correct. I apologize for my error.
Because that’s not an argument against the FairTax proposal. It’s at best an argument against supporting a poorly-modified version when it’s up for a vote.
Of course it is an argument against the FairTax proposal. It comes from a different direction than the arguments advanced by the pro-income-tax groups, but it is a contrary argument, nonetheless.
This argument is based on the proposition that we are discussing more than the simple, narrow issue: should we ratify the FairTax? I realize that’s how you would like to frame the issue, but I reject your attempt to do so.
Instead, the better issue to be discussing is: what is the best proposal for tax-related reform we can present that has a real chance of political success? This question is far more meaningful and significant than the narrow issue you would prefer.
Unfortunately, opponents of the FairTax drift carelessly between these separate issues
Most of us are perfectly capable of distinguishing between the FairTax per se and the FairTax Proposal. It is you who seems to be intent on only addressing the former to the exclusion of the latter.
eliminating the corporate tax, the income tax, the dividend tax, and the capital gains tax are HUGE. Those taxes are uniquely harmful due to their high negative impact on economic growth. Do you want me to go over the reasons why, or can I assume we’re on the same page on this one?
Apparently, you also have the habit of failing to read closely. The mode of taxation is virtually insignificant, in terms of total economic growth, compared to total government spending.
Taxation matters very little. Spending is everything. It is, far and away, the most significant issue.
The government has only three sources of revenue: direct taxes, delayed taxes via borrowing, and printing paper. All three are taxes.
Printing paper is a tax because it dilutes the value of all pre-existing dollars. When the government reduces the value of my money by 10%, it is not significantly different than if it took 10% of the money out of my wallet.
The government’s problem with printing money as the sole means of revenue is not that it doesn’t work. The problem is that it lacks the all-important element of CONTROL. Inflation affects everyone. The effects are not easily predictible.
Direct taxes, in contrast, can be “targeted.” To use Al Gore’s special phrase, they can use taxes to be sure that “the right people” pay them. That is the essence of politics.
Thus, you are grossly overestimating the magnitide of the effect of switching the mode of taxation. I agree that a consumption tax is marginally better than an income tax, but must temper that conclusion with the caveat that the difference is virtually unmeasurable. This conclusion, however, also assumes THAT THE INCOME TAX IS ACTUALLY REPEALED AT THE CONSTITUTIONAL LEVEL AND CANNOT BE REINSTATED WITH ONLY A SIMPLE CONGRESSIONAL MAJORITY. I realize that is a base political, procedural concern and not worth your time, but forgive me if it bothers the rest of us.
Incidentally, you do realize that politicians were in the habit of manipulating transactional taxes for special political benefit long before there was an income tax, don’t you? I assume we are on the same page on this? You have heard of Lincoln and the so-called Civil War, have you not?
If not, run a Google search on “Lincoln” and “tariff” and see what you find.
I just can’t understand why anyone would support the fair tax proposal (the one thats being voted on) when it doesn’t repeal the income tax. The argument for the fairtax is that it is better and more free than the income tax. That essentially individuals would be able to keep as much of their earnings as they want by restricting consumption. But then, the actual proposal does not repeal the income tax. Thus there is no moniker more appropriate than the NewTax.
And then, to pile on this lunacy, that omission is defended by shifting attention to the fact that it also fails to repeal the Federal Reserve, and supposedly this refutes the complaint. Its true, that libertarians will call inflation the “hidden tax,” however we are not dealing with a libertarian regime. Under the current regime, these are 2 separate things: the banking system, and the tax system. If we find a better version of the latter, yet it doesn’t repeal the inferior prior version, then it does no good to the argument at all to point out that it doesnt repeal the former either.
Instead, we are adding another element to the current regime. They will have: the banking system, the income tax, the FairTax. Do you see how adding one more element, although it may be better than 1 of the other elements, makes the list worse? It must be part and parcel with any new tax system, that it ABSOLUTELY HAS TO REPEAL THE INCOME TAX. Anything less, no matter how much better it is than the income tax, falls short.
However, have it your way; another reason not to support the FairTax:
a) As other posters have mentioned: it is questionable whether or not it is actually better OVERALL (no doubt that in some areas it is much better than the current system)
b) The huge argument I believe, is that it purports to be superior, and less intrusive, however it does not repeal the current tax system
c) It does not abolish the Federal Reserve.
Want to come up with more strawmen, so I can make them cases d, e and f against the FairTax?
That the proposal is not dependent on repeal of the 16th Amendment is cause enough to reject it.
One of the major arguments for the Fair Tax is that it actually replaces the income tax and all of the accounting and regulations that go into enforcing the income tax, and replaces all of the rent-seeking and all of the special favors or exemptions granted to the politically favored classes. Any situation in which the Fair Tax only replaces part of the revenue stream of the government does not have the benefits proposed above, but only adds an additional source of revenue to the Federal Government. Only repeal of the 16th Amendment give me any comfort that that we won’t end up with both the Fair Tax and the Income Tax. And even repeal would not foreclose this possibility since demogogues would immediately set out to demonize high income individuals by claiming that they are not “consuming” enough and, thus, must have their income taxed so that they pay their “fair share”, and they would sell reintroduction of the income tax in exactly the same manner is was sold previously- by promising that it would only be levied on the very highest income earners.
A consumption tax, being the primary revenue source of the government, would mean that the entire revenue of the government would be levied at a single point along the production/consumption cycle. Evasion of the tax would be profitable and hard to stop without abolition of cash transactions, or extreme enforcement mechanisms. Now, while I don’t hold increased evasion against the Fair Tax proposal, I know that evasion would not be the end of the story.
Person,
I did not just scan your post and if you would bother to study the issue and history, you would know they are the strongest arguments against the unFair Tax because they are true.
Most of the arguments for the unFair Tax have been debunked over and over again by people much more eloquent than me. Further, I’ve presented a tax system I could support but those who argued against it only proved that taxes are a form of theft. Since we know the nature of taxes, we also should know that we CANNOT trust any implementation of “reform” that begins with taxes (“reform” that begins on the spending end, maybe). Of course, many of the best arguments against the unFair Tax are presented by those who argue for it. For instance, the basic argument for tax “reform” presented is in contradiction with the very plan that is proposed.
Until the FairTax supporters explain the concept of FairRape, FairAssault, FairTheft, & FairMurder, they will just have to call their proposal NewTax.
Are Schumpeter’s theories coming true?
Averros’ beef with the FT (at least in the post I responded to) had two parts 2 it: 1) it keeps revenue the same. 2) it doesn’t slow or lower government spending. I responded to the first part by saying that in order for the plan to not be DOA it has to be revenue neutral. In response to the second part I asked him, “why would you think that FairTax supporters don’t also wish to cut government spending?”
GG: I perfectly understand that many of you do object to “taxes period”, that’s why I made mention of it. I didn’t didn’t talk about the desire to eliminate all taxes in a derisive or dismissive manner, I spoke about it as the ultimate objection to the plan.
For all of you asking about the 16th Amendment and the FairTax, you can search around all of the relevant FairTax info places to find responses. If you have already, complain about the answers that are given.
Black Bloke – my, the way you put it, beef, with teh FairTax is that you are lying. You make claims about it which do not stand to trivial scrunity by anyone acquainted with the arcane science of arithmetics.
Hope you enjoy criticizing/question the fairtax while it lasts…AFFT will be taking that right away from you…
The Americans For Fair Taxation (fairtax.org) are on a mission to squash out any public criticism of the FairTax plan and are attempting to exploit the federal trademark system for the ADMITTED purpose of being able to shut down anti-FairTax websites during the upcoming elections. They have an open application to obtain a service mark for the word “FairTax.” Genie Hayes, the communications director for AFFT, openly admitted to both my husband and me that the goal of AFFT is to get this service mark and be able to yank any anti-FairTax websites as well as to have total control over any shirts, bumper stickers, or anything of that nature that is printed with the word FairTax. They are attempting to get the strong arm of the federal government to back them up in hindering free speech and open/honest debate.
The FairTax is promising to become a rather prominent issue in the upcoming Congressional elections–and if AFFT succeeds in obtaining this service mark, they are going to be in an excellent position to keep people from criticizing the FairTax Act.
The time for opposition to their application is fast approaching. I know that an application for a service mark can’t be opposed just because the applicant’s motive is unethical. However, I do believe that there is a very STRONG case that AFFT doesn’t meet the legal requirements for obtaining a service mark. The strongest argument is all around us–the phrase “Fairtax” is SYNONYMOUS with H.R. 25 and the Fair Tax Plan.
Unfortunately, as it stands right now, I think they’ll win their service mark and they’ll be on the road to having the power to tell people that they cannot participate in public debate regarding H.R. 25. Perhaps, at least, the public will be informed of this attempt to filter open and honest critiques.
To those of you against the “Fair Tax”, here is something to think about.
It would tax the drug dealer when he goes to buy that million yaught. Guess what, 23% of that million dollars would go to taxes. That is, $230,000 to taxes. How much do you think he is currently paying?
It would also get the tourists from around the world paying in to the system here. Twenty-three percent of everything they spend would be spent in taxes. Wow, just think they would be helping to pay for our social security, taxes, and medicare. What a concept.
And don’t forget the illegals that are currently not paying taxes and stealing services that they are not paying for that the hard working American taxpayer is paying for and not able to get the benefit of ina lot of cases. They would actually get to pay for the services they are stealing from American citizens. Amazing, isn’t it?
These costs are already embedded in everything we buy. This tax should keep prices essentially the same. The only difference being that you no longer have to pay the income tax. Also it would include more groups of people. Plus with the rebate check every month, this would virtually take the “poor” off the tax rolls. A Democrats dream!! Punish the “evil rich” for their success.
Plus, if it is so bad, why are there other countries that are researching this very idea and trying to be the first to implement it? Because it would make them in to the biggest tax haven in the world. In the Unites States, the part of the tax code that is written by the IRS is 13,458 pages long. The part written by Congress is 3,387 pages long. These combined are 16,845 pages. Leaves a lot of room for abuse. HR 25 (The Fair Tax Act of 2003) is 132 pages long when I looked at the bill as a PDF file. Thousands and thousands of pages to 132. Seems like it would leave a lot less room for abuse.
Take it or leave it, seems like this would be a boon to everybody. I think that it should be considered seriously instead of fought against because it gives individuals power over their finances instead of the government.
The government has only three sources of revenue: direct taxes, delayed taxes via borrowing, and printing paper. All three are taxes.
“It would tax the drug dealer when he goes to buy that million yaught. Guess what, 23% of that million dollars would go to taxes. That is, $230,000 to taxes. How much do you think he is currently paying?”
And why would it be good?
How would you like to pay double Income taxes and triple Social Security and Medicare taxes? If we enact the Fair Tax, we all will.
The Fair Tax Act creates a double Income taxation on all the savings of the entire population of people who worked and accumulated after-tax savings under the current tax code, then retire and spend under the Fair Tax. It is true for the Roth savers and it is true for any other after-tax accounts. This issue involves millions of people and billions of dollars potentially making the Fair Tax fair only to those who never worked or saved under the current code.
Under the current system, after-tax savings accounts have already paid Income, Social Security (SS), and Medicare tax so no additional tax is due on funds spent from those savings. No SS and Medicare tax is due on unearned income from pension and SS payments, dividends, or interest, or upon spending funds from after-tax savings accounts. Many people have planned asset accumulation requirements and committed to retirement on such a scenario.
When switching to the Fair Tax, many people have already worked for years and paid Income, SS, and Medicare taxes under the old code and on nearly all the funds in their after-tax savings accounts. Everyone in this situation will pay these taxes once again on funds spent from those savings. This is not peculiar to a Roth account, as many are quick to point out; it is true for any after-tax account such as brokerages, CDs, checking, savings bonds, money markets, mutual funds, and even money in the piggy bank on the dresser. These are all after-tax dollars that will be fully taxed for Income, SS, and Medicare for the second time at a 30% add-on rate when spent, creating double taxation for people in this situation – nearly the entire population.
Funds in a 401k, Traditional IRA, or dollars in any pre-tax account were not subject to Income tax when deposited in the account, but the individual paid SS and Medicare taxes on these funds before they were deposited. People spending funds from these accounts under the Fair Tax will fairly pay Income tax included in the 30% rate as the funds are spent. They will also pay SS and Medicare taxes for the second time, but at a higher rate including both the employee and employer’s portion, thus creating, in effect, triple taxation. Again, this applies only to those folks who saved under the current plan and then spend under the Fair Tax – a fair number of folks
The double and triple taxation issue will unfairly affect only a subset of the population. The largest effect is on the retirees and Baby Boomers who are currently in or approaching retirement. It will similarly affect any younger person who has accumulated any amount of savings under the current system who then spends it under the Fair Tax system. Only the people who have no savings and have not worked before the time of transition will be unscathed by this issue.
In addition, it is important to realize that the Fair Tax imposes Income tax, SS tax, and Medicare tax on every dollar spent from pensions, SS payments, and any savings. The SS and Medicare tax on these funds is a completely new tax not currently collected. Income tax, not currently collected on a portion of SS payments and the pre-tax portion of pensions, is also a new tax. While this is an ongoing new tax under the Fair Tax plan that applies to everyone, it places a sudden and dramatic tax increase on those who enter retirement near the time of transition.
The poverty level rebate provided in the Fair Tax plan and the market related offsets, often mentioned in support of this plan, might compensate those who work, save, retire, and spend entirely under the new system since they will pay taxes only one time, when they spend. The Act does not guarantee the market offsets argued by proponents of the Act. Only the taxes are guaranteed.
In contrast, there is no provision to compensate for double and triple taxation on some or the new taxes as described above that will be imposed by enacting the Fair Tax. Millions will have worked and saved under the old plan, accumulating billions, and then will retire and spend under the new plan. They, and only they, will pay taxes multiple times.
John Higbie
Livingston, TX
Why don’t the pro Fair Tax people and the anti Fair Tax people each have a rally on the same day in the same town and we will see who has the biggest crowd? * smile* This train is only getting bigger and faster. Get onboard or get run down.
Why don’t the pro Fair Tax people and the anti Fair Tax people each have a rally on the same day in the same town and we will see who has the biggest crowd? * smile* This train is only getting bigger and faster. Get onboard or get run down.
BUMMER BUMMER BUMMER
Funds in a 401k, Traditional IRA, or dollars in any pre-tax account were not subject to Income tax when deposited in the account, but the individual paid SS and Medicare taxes on these funds before they were deposited. People spending funds from these accounts under the Fair Tax will fairly pay Income tax included in the 30% rate as the funds are spent. They will also pay SS and Medicare taxes for the second time, but at a higher rate including both the employee and employer’s portion, thus creating, in effect, triple taxation.
Though the FairTax was designed to be revenue neutral, I believe the actual result may differ. I say that because I think the AFFT has underestimated the impact of taxing the underground economy. According to this article, we will have surpluses. In that case, the tax may have to be reduced in order to be revenue neutral.
I suggest that in the case that we do start having surpluses, that we keep the tax where it is, so we can get the debt under control. With Social Security and Medicare in trouble, it seems to me it would be prudent to shore things up.
One of the reasons the FairTax works is due to fact that its tax base is twice as large as the base for the current broken income tax. As it stands, the underground economy is growing. So are the numbers of people who have quit paying the income tax. In the latter case, many of these people were in jobs that were downsized. They decided to become “independent contractors.”
With the FairTax, everybody will be paying, except for the poor who benefit from the prebate. Illegal immigrants are not eligible for the prebate, and that is a good thing.
I’ve been wondering recently, about the trillions of dollars now in offshore accounts as shelters from the income tax. Once the FairTax is enacted, there’ll be no reason for that money to remain. I read that Mr Greenspan said it would be repatriated within months. So the question is, what would the impact be, with much of that money coming back to the states?
BTW, I’ve been wondering about comments made by some people who are opposed to all taxes. “They are all bad,” they say. Well, maybe. But then how are we going to pay for roads and schools, not to mention the defense our country?
Brian, you obviously are not a regular reader of Mises.org. You probably came here from a search engine looking for blogs on the fair tax just to add your pro fair tax propaganda. However I will attempt a short answer to your question:
I’ve been wondering about comments made by some people who are opposed to all taxes. “They are all bad,” they say. Well, maybe. But then how are we going to pay for roads and schools, not to mention the defense our country?
All taxes are bad because they are extracted by the use of force. If I steal your money, I am committing a crime, even if I then spend that money on some cause that you might consider noble. The best solution is to move away from coercive taxation and instead operate in a voluntary manner in order to pay for the things in life that you think are necessary. Taxation is not needed for any of the programs you reference.
There is surely nothing more coercive nor more regressive than our income tax (especially withholding). With the FairTax, people will decide how much tax they pay by what they buy, minus embedded taxes.
I don’t share your optimism that funds would be freely offered by people to the extent that necessary items are paid for. If we can get the underground economy as well as millions of tourists to pay a tax, that would lesson the load on citizens.
For all the gusto about abolishing the IRS – can you imagine the powers of the governments Excise department?
Lots of people will be informally bartering goods and smuggling goods under this tax. You will have masses of people cracking down on ‘illegal trade’ which would mirror the Cornish smugglers and thier battles with the excise men in the 18th century.
The all invasive powers of the IRS will just be on a bigger scale!
As all spending is income, anyway, why not have a flatter simpler income tax system without all the deductions, special codes etc…?
Also – any exceptions to ensure double taxation doesn’t happen or relief is given for education etc.. or for goods moving in and out of the country in a carosel chain could end up with massive fraud operations like the VAT system in Europe is open to.
How about a VAT to replace all sales and income taxes? This would take private citizen completely out of system. The little guy working sub rosa would not come to the government’s attention unless there was a hugh spy system. Only Corporations and businesses would pay.
One catch to “fairtax” is that only new product sales are taxes. Most anything except food can be purchased used. We have not seen much new land in the last 6000 years. A person building a new house from new materials would pay full bore but no tax on a used house? No tax on used cars?
I can see a new market for leased cars with a one month contract. Person leases a car for a month and then buys it “used.”
Ginny Brown-Waite:
US House of Representatives
I wrote you yesterday about the Fair Tax and I am up at 6 am (not my bag) thinking and writing again.
I tithe to the church and on my income last year I paid 7.3% FIT.
I went into http://www.Fairtaxcalculator.org and calculated what I would pay under the Fair Tax and it came out to be 11.06%. The info reminded me that I would be saving 16% FICA+ taxes. I do not pay FICA taxes, so I do not save them. So, in reality, the 11.06% tax that is calculated to be mine is actually 27.06 after you add back the FICA that I am not saving.
This part should be looked at very closely because there are a lot of retired people just like me. I supplement my social security income by withdrawing from my IRA’s. I cannot believe I am the only one in this boat. In fact, I think that the large majority of common people on social security are in this boat.
Another thing that this web site says about retired people is that they save a lot of taxes when they sell their homes. While it is true that there won’t be an income tax on the gains, it is also true that the present tax code allows $250,000 to be exempted, which covers most retired peoples gains. I’m not sure that the Fair Tax is a real benefit to them.
Another thing that it claims is that since FICA taxes will no longer be a factor and the retail prices will come down. “When income and payroll taxes are repealed, pre-tax prices can come down 20 to 25 percent according to Dale Jorgenson, Ph.D., chairman of the Harvard University Economics Department.” I think that Prof. Dale should look at today’s world of business. If P&G or thousands like them reduce their cost of production by half the FICA taxes, 7.65%, you will be lucky to see 2% reductions of prices of products at Wal-Mart. I just won’t happen. It will either go to the bottom line or in the pockets of the exects.
There are a lot of very good points about the Fair Tax. The fact that everyone pays is good. There are so many today that do not pay income taxes. As far as doing away with the IRS and probably 50% of all accountants, I can see a large increase in the unemployment ranks.
I guess what I am concerned about is that I paid my Social Security taxes all my life and I don’t pay them now and I don’t want to pay them again. This is not true in the Fair tax. I think people collecting SS should be allowed an additional monthly refund. If, by the web site, I would pay 11.06% after receiving $4402 back each year, than that refund should be increased by at least 15.30% (rate for FICA).
If I am wrong about what I think, please correct me.
Thanks
Byron
Ginny Brown-Waite:
US House of Representatives
I wrote you yesterday about the Fair Tax and I am up at 6 am (not my bag) thinking and writing again.
I tithe to the church and on my income last year I paid 7.3% FIT.
I went into http://www.Fairtaxcalculator.org and calculated what I would pay under the Fair Tax and it came out to be 11.06%. The info reminded me that I would be saving 16% FICA+ taxes. I do not pay FICA taxes, so I do not save them. So, in reality, the 11.06% tax that is calculated to be mine is actually 27.06 after you add back the FICA that I am not saving.
This part should be looked at very closely because there are a lot of retired people just like me. I supplement my social security income by withdrawing from my IRA’s. I cannot believe I am the only one in this boat. In fact, I think that the large majority of common people on social security are in this boat.
Another thing that this web site says about retired people is that they save a lot of taxes when they sell their homes. While it is true that there won’t be an income tax on the gains, it is also true that the present tax code allows $250,000 to be exempted, which covers most retired peoples gains. I’m not sure that the Fair Tax is a real benefit to them.
Another thing that it claims is that since FICA taxes will no longer be a factor and the retail prices will come down. “When income and payroll taxes are repealed, pre-tax prices can come down 20 to 25 percent according to Dale Jorgenson, Ph.D., chairman of the Harvard University Economics Department.” I think that Prof. Dale should look at today’s world of business. If P&G or thousands like them reduce their cost of production by half the FICA taxes, 7.65%, you will be lucky to see 2% reductions of prices of products at Wal-Mart. I just won’t happen. It will either go to the bottom line or in the pockets of the exects.
There are a lot of very good points about the Fair Tax. The fact that everyone pays is good. There are so many today that do not pay income taxes. As far as doing away with the IRS and probably 50% of all accountants, I can see a large increase in the unemployment ranks.
I guess what I am concerned about is that I paid my Social Security taxes all my life and I don’t pay them now and I don’t want to pay them again. This is not true in the Fair tax. I think people collecting SS should be allowed an additional monthly refund. If, by the web site, I would pay 11.06% after receiving $4402 back each year, than that refund should be increased by at least 15.30% (rate for FICA).
If I am wrong about what I think, please correct me.
Thanks
Byron
The government’s problem with printing money as the sole means of revenue is not that it doesn’t work. The problem is that it lacks the all-important element of CONTROL. Inflation affects everyone. The effects are not easily predictible.
Not true — without an income tax everyone could avoid using the dollar and avoid the inflation tax. It’s the income tax which makes the inflation tax bite as the IRS count’s fictious “inflation gains” as income and taxes them.
Too few people understand the FairTax concept. Get ahold of one of the books. Read it and send it off to your representatives in Washington. Low cost copies at the following link:
http://shop.ebay.com/merchant/audioimagegroup_W0QQ_nkwZQQ_armrsZ1QQ_fromZQQ_ipgZ
Too few people understand the FairTax concept. Get ahold of one of the books. Read it and send it off to your representatives in Washington. Low cost copies at the following link:
http://shop.ebay.com/merchant/audioimagegroup_W0QQ_nkwZQQ_armrsZ1QQ_fromZQQ_ipgZ
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