The Fraudulent Tax
A close reading of the recent literature produced by the advocates of the FairTax shows that they have backpeddled on many of their most far-flug claims for the merits of the plan. But they still aren't admiting just how terrible this idea is or how it won't reduce but increase the tax burden. A true tax reform would repeal, not replace the income tax. The IRS should be gotten rid of, not renamed. Tax reform should reduce taxes, not be revenue neutral. Government theft of the wealth of its citizens should be abolished, not adjusted. And no, the fair tax plan is not a step in the right direction. Full Article.
Comments (90)
David St. Hubbins
I'll admit that I didn't read every last word of your article, but I believe that the most important thing is getting people to understand how much the government costs them. Right now, they don't. So even if the fair tax is not perfect, it is a gigantic step in the right direction. While of course I would prefer a tiny, minimalist government, I am not going to let that get in the way of people who are trying to improve things.
Boortz does understand that it is the overall size of government that matters. He is trying to get people to understand what government costs them. He routinely decries all the people who think they don't pay taxes becuase they get a refund.
Published: October 9, 2006 8:15 AM
George Gaskell
I'm sure Person will be along any minute now ...
Published: October 9, 2006 8:57 AM
Person
Yes, George, I will be along any minute now. Because I have never understood the hostility on this site toward a transition to the FairTax. Everyone here seems to forget that taxes hurt in numerous ways, and losing your money to funding stupid programs is only one of them. There is also the deadweight loss due to the shift in activities due to tax advantages, and the hassle in figuring out how much you owe. Neither of these is trivial, and you don't have to reduce the government revenues to accomplish either. Every argument (and I use that term loosely) that I've seen against the FairTax is of the form of one of the following:
1) The FairTax won't remedy injustice X of the current system.
2) Something other than the FairTax is bad.
3) [Some personal attack against anyone who doesn't want to abolish all taxes.]
To which I reply:
1) So? No one reform will fix everything.
2) Then oppose that other plan, and concede that the plan as written is a good idea, and that you're against all reform because "it'll just get watered down in committe".
3) Please.
I'd be glad to oppose it once someone gives me an actual, well-formed reason. Any takers?
Published: October 9, 2006 9:47 AM
Mark Brabson
Fairtax versus income tax arguments miss the prime issue. That being the reduction of the entire Federal Government to 3% of GDP. You can rearrange taxation all you want. The bottom line is that the income of this nation is being sucked dry and capital formation badly damaged, among many other things.
The cure is simple. Reduce spending. By any means possible. Slash, cut and destroy federal programs and agencies. Get government down to 3% of GDP. At this point, the Federal income tax could be abolished totally. No corporate income tax. No fairtax. Government at that level could be funded on tariffs, tonnages, imposts and excises and the occasional user fee.
Published: October 9, 2006 10:07 AM
George Gaskell
the plan as written is a good idea
1. The benefits of the plan as written are, at best, so trivial as to be inconsequential, and even if we were to assume that they will materialize AND that they can be measured, to tout them as (a) real and (b) significant is to perpetrate a fraud.
2. The way in which the plan is being PROPOSED is politically stupid to such a magnitude that it makes me concerned for the future of the human race.
Published: October 9, 2006 10:07 AM
Person
George, do you have a clue what you're talking about? Seriously. The benefits are trivial? So, removing all taxes on investment (capital gains and dividends) until the money is spent on consumption is "trivial"? (That would, in essence, "401k" all investment accounts, for those of you who, unlike someone here, have a clue.) Eliminating the hours of work, and the armies of preparers, is trivial? Do you not understand the sigificance of this labor opportunity cost? Do you not understand the long-term damage of capital taxation?
Please, try to be informed next time you post. Thanks.
Published: October 9, 2006 10:17 AM
Mark Brabson
I do have ONE reform that I would love to make to the current system. Eliminate withholding. Make all taxpayers pay on a quarterly basis. Make taxpaying truly painful, as taxation should always be. Writing a $2500.00 check four times a year might just communicate to the citizenry that all those government freebies are not truly free.
Published: October 9, 2006 10:33 AM
Don B
I suspect most folks who read this blog would agree with this statement from the article:
"The income tax should be repealed, not replaced. The IRS should be gotten rid of, not renamed. Tax reform should reduce taxes, not be revenue neutral. Government theft of the wealth of its citizens should be abolished, not adjusted..."
Unfortunately, those are not, as I understand it, options that are currently on the table. We should continue to fight for them, argue for them and buld the intellectual capital in our culture to achieve them--of which the Mises Institute is a critical part. But to automatically ignore or ridicule what may in fact be "less bad" public policy options seems self flagellating and martyristic rather than productive. We are a long way from the right policy solutions, or any meaningful enlightened revolution or Galt style strike. Why suffer any heavier yoke than needed in the meantime?
Published: October 9, 2006 10:41 AM
PR
I've had a similar idea. Only instead of quarterly, make it a single payment due once per year... preferrably on election day.
Published: October 9, 2006 11:00 AM
David Spellman
All we need to do is repeal two ammendments to the constitution: the 16th (income tax) and the 17th (direct election of senators). That would restore State control over the Federal government and require the Federal government to beg the states for money.
The original constitution foresaw our current dilemma and was intended to prevent it. Our great grandparents made a stupid mistake to remove the protections and the Federal government has grown wildly out of control since 1913.
Published: October 9, 2006 11:02 AM
Allen Kamrava
One should never falter in the fight to abolish all taxes ... however, one thing that always interested me about a national sales tax was that socialists/collectivists would have to answer universally to everyone for the taxes they require. That is to say, increased taxes hurt everybody across the board, not just the productive members of society. Increased taxes and thus, increased government programs should then gain a larger resistence - if the theory holds.
If they truly change maintain the status quo, but make taxation more apparent to the idiots (e.g. college students, union workers, ...) that demand their continual increases, maybe that's not such a bad thing.
I'm not an expert on this topic, at all, nor would I pretend to be ... just a thought.
Published: October 9, 2006 11:20 AM
Kel Kelly
I still have a problem calling taxation theft. It is in fact theft from those who don't want to pay it (like me). But most people implicitly vote to be taxed by voting for the same people (Democrats/Rebublicans) every time who prove that they like to tax. If it was really theft for most people, wouldn't they vote against it, or hit the streets in protest? Many even verbally state that they want to pay "their fair share" or that they don't mind paying "a little more" to help the poor, etc. We have high taxes because people think it's somehow neccessary or helpful. So the problem is not the govenrment per-se, it's the people who vote for keeping the government as it is. What has to change is the minsdset or knowledge of the people
Published: October 9, 2006 12:03 PM
George Gaskell
removing all taxes on investment ... until the money is spent on consumption is "trivial"? (That would, in essence, "401k" all investment accounts, for those of you who, unlike someone here, have a clue.) Do you not understand the long-term damage of capital taxation?
Compared to a multi-trillion dollar annual federal budget, plus all the federal money that is off-budget, plus the effects of manipulation of the money supply and credit, a shift in the mode of taxation that is otherwise revenue-neutral is trivial.
Eliminating the hours of work, and the armies of preparers, is trivial? Do you not understand the sigificance of this labor opportunity cost?
Compared to the number of people whose work is diverted into economically unproductive activities as the result of the federal government having a multi-trillion dollar annual budget, plus its off-budget expenditures, plus having the power to manipulate the money supply and credit -- which includes direct government employees, contractors, aid recipients, and private businesses that exist to take advantage of market-distorting laws and regulations -- the size of the "army" of tax preparers is trivial.
Even if you manage to prove that the deck chairs are one centimeter out of alignment, doing so doesn't change the fact that the ship is sinking.
Why suffer any heavier yoke than needed in the meantime?
It's not heavier, Don. It's revenue-neutral.
Published: October 9, 2006 12:13 PM
Mike Tennant
Kel,
Just ask yourself this question: How many of those people who say they want to pay their fair share or don't mind paying a little more would actually pay if there weren't penalties attached to nonpayment? I think it's fair to assume that the percentage would be extremely small. Therefore, while these folks may mouth nice rhetoric, in reality they're only paying because they're forced to pay, which makes it theft. Whether people have voted for the thieves or not is irrelevant.
The problem is the government per se. It produces nothing of value (i.e., that enough people would pay for willingly to keep it afloat), so all it can do is steal resources from the productive private sector.
Published: October 9, 2006 12:17 PM
Person
Alright, I want to open this up to others: Do George's comments really warrant further response, or would it be a waste of everyone's time to keep dignifying them. I'm serious. I mean, obviously, I think it would be a waste of time to keep encouraging him by wasting my time to respond to him, but I want outside opinion on this.
Published: October 9, 2006 12:20 PM
Mike Tennant
Person,
One might reasonably ask the same question about responding to your comments.
Published: October 9, 2006 12:28 PM
Person
No, one couldn't.
Published: October 9, 2006 12:35 PM
Matt
How about the fact that the sales tax is optional? If I don't have to pay taxes on the amount of money I save, I might just save more. This will reduce current consumption, starving the government of revenue. Plus, there will be ways around it, such as driving an old car longer, using up all the toothpase, etc. (I always thought there was an environmentalist angle to the FAIR Tax, because it encourages conservation and thriftiness.) But the main point is that it is voluntary. If we withold spending, the Fed's lose revenue. They can't get more except by raising the taxes- on everyone. Will that suddenly become politically popular?
Published: October 9, 2006 12:59 PM
Curt Howland
"No, one couldn't."
This "one" does, every time.
"How about the fact that the sales tax is optional?" and... "starving the government of revenue."
At which point, they change the tax.
After all, say the demigogs, capital gains and interest is income that the rich didn't even work for. Why should they get such special treatment?
Published: October 9, 2006 1:50 PM
Don B
Heorge,
it's heavier in the sense that the income tax codes is a greater economic burden than the national sales tax, revenue neutral or otherwise.
Published: October 9, 2006 2:14 PM
Tim Kern
Mr. Vance's article says, "The question is therefore not one of paying higher or lower taxes, but instead: Will I have more money remaining from my paycheck to save, invest, or spend on vacations and luxury items under the FairTax plan after I pay my bills and make my necessary purchases?"
Consider the price of freedom. On that count alone, it is worth a lot to me to abolish the IRS, its intrusion, its bookkeeping expenses and requirements, its ambiguities; its ability to write (interpret at will and enforce at will) its own rules, try its own cases, and make up its own punishments. I would love to see all the IRS employees turned out into the real world, stripped of their arbitrary power and forced to make an honest living doing something other than snooping and threatening -- at our expense.
If you do even a little research into the idea of "government-sponsored terrorism," you'll see that the IRS meets most criteria: arbitrariness, capriciousness, sadism, intimidation of its own "watchdogs," insulation and protection from legal retribution, torture and/or murder (illustrated by their institutional glee in inciting the occasional suicide to make their point and reassert their power) -- pick a topic, and when you realize that the IRS is a velvet-glove terror organization working on behalf of (yet largely independent of) our elected government, you, too, may wish to see a system that eliminates it.
The absolute amount of tax we pay may indeed be secondary to the methods and systems used to extract it. Consider also the ancillary benefits of not keeping books just for the IRS, of not hiring tax accountants and lawyers, of not paying for tax courts, of not paying IRS employees, of eliminating many FBI employees, of not funding tax prisons, of many fire-sale and bankruptcy expenses, etc. Trickle-down benefits would also accrue to the states.
"Fair" tax or not, if it rids this nation of the worst element of our secret police and largest source of citizen subjugation, it's certainly an improvement. (The government needs the data collection and citizen-monitoring and intimidation done by the IRS, and that is why our rulers will never get rid of it.]
[The fact that you would probably never say the things I've written (not so much because you disagree but because you fear disruption of your life and business by IRS actions or threats) merely illustrates your own understanding of the IRS, and underscores my point.]
Published: October 9, 2006 2:36 PM
Kel
Mike,
I agree with your view on government as a waste of resources - no issue there. But Government as an entity does not function without the approval of the people. If you say the problem is government per-se, then you are saying the government is a detached, self operating, self-governing entity. It is not. It could be torn down immediately, or prevented from growing as it is, were we all only to vote for (against) it.
You can try to fight the government itself, asking it to quit doing what it likes to do, but you will get nowhere unless you change the minds of those who allow the government to exist as it is - your neighbors. Asking the IRS to please go away will not work. The politicians themselves will certainly not entertain the idea, they need the IRS to collect your funds so that they can hand them over to others who want your money and thus voted for the politician to get it. You can only get rid of the IRS by convincing the people voting for the politician that THEY will be better off if they do not steal your money. It is your fellow voter who is stealing from you - it is they, who is the government.
As far as what they would do if not forced: ask yourself this? why do they only do it if forced but vote consistently for someone to force them?
Published: October 9, 2006 2:49 PM
George Gaskell
why do they only do it if forced but vote consistently for someone to force them?
Indoctrination in government-run schools that teach that voting is a civic virtue, that the nation-state is something other than a thug and a parasite.
Other than that, it's a combination of self-defense and a desire to foist costs they would otherwise bear onto others.
Published: October 9, 2006 3:18 PM
Jennifer Greer
Such criticism of the FairTax plan might be short-lived. FairTax.org is in the process of obtaining a trademark on "FairTax," meaning they'll completely control where, how, when, and IF the word gets used. Why are they doing this? Ask Genie Hayes--employee of FairTax.org--she says it's so they can yank anti-fairtax websites since the FairTax will probably be a fairly big issue in the upcoming elections. She ADMITTED OUTRIGHT that they want this trademark so that they have the legal power to squash criticism. I wish more people were aware of this fact. I've tried to spread the word, but I'm only one person. Even if you support the FairTax, you should support the First Amendment more.
Published: October 9, 2006 3:22 PM
Sasha Radeta
We already buried the “Fair Tax” (or insane 23% revenue tax- regardless of profits) proposal on this blog. No need to argue with an intellectually deceased idea.
http://blog.mises.org/archives/004428.asp
http://blog.mises.org/archives/004464.asp
http://blog.mises.org/archives/004436.asp
Published: October 9, 2006 3:45 PM
Sione Vatu
Sasha is correct.
BTW a careful examination of proposals such as FT (can't bring myself to type fair in front of that other word) that have actually been implemented in other parts of the world demonstrate the intellectual bankruptcy of the idea. The promised gains to the individual were not attained. Things got a lot worse.
FT is indeed dishonest (a fraud). It is promoted to the public at large in a dishonest way (fraud). The results of it in practice are INCREASE of coercive legalised theft as the govt and its little helpers further encroach into every business, into every home, into every individual's freedoms (it's worse than a protection racket- a crime). If you doubt it go check out what occurred here in New Zealand or Australia etc.
Something that is not often discussed; data is collected on every activity. This is information you are required to provide on your documentation to the state to show how your payment was calculated. Manipulation and data-mining of this material makes the govt far more "efficient" at spotting opportunities to squeeze yet more. The possessor of all this information is indeed gaining substantial powers of control.
FT indeed.
Sione
Published: October 9, 2006 4:25 PM
M E Hoffer
"Something that is not often discussed; data is collected on every activity." !
This is the actuality. Most in "Gov't" would rather have the Data, the fuller set, the better, than the Revenue.
It, the Data, fuels their "Intelligent Design" fantasies.
The "Consumption" Tax, as Sione rightly points out, puts the "Gov't" Everywhere and Anywhere, all the Time.
Published: October 9, 2006 4:40 PM
Mark Brabson
I would concur in comments against the term "Fair" Tax. No tax can ever be fair and in fact, all taxes are abominable. I don't think I could enunciate the term "Fair" Tax aloud without choking over it.
Again, I am not speaking to the actual merits of consumption tax versus income tax, but call the consumption tax what it is.
Better yet, lets dump the income tax altogether and force the government to survive on tariffs, tonnages, imposts, excises and user fee's like it was originally meant to.
Published: October 9, 2006 5:09 PM
Eric
What's never calculated is the effect on those just about to retire. It would amount to double taxation - a lifetime of paying on income, and now the remainder of their lives paying a second time as they spend what little was left. To be practical, it would at least have to be phased in for seniors. The statement that it would be in any way tax neutral is a joke. The ARP would have a stroke if such a swap were made. And just imagine how newly retired people would be searched leaving the country with untaxed income.
The entire idea is a big scam to get some publicity or so some politican can say he's doing something. No government this corrupt will ever change for the better - the only hope is that something radical causes the government to collape - like say a Katrina like event destroys D.C.
Published: October 9, 2006 5:41 PM
Don Lloyd
Eric,
What's never calculated is the effect on those just about to retire. It would amount to double taxation - a lifetime of paying on income, and now the remainder of their lives paying a second time as they spend what little was left....
This seems a strange criticism of a plan that would wipe out any deferred tax liability on IRA's, 401k's, unrealized capital gains and SS benefit payments, not to mention the infinite complexity of unstable marginal tax rates applied to one kind of income due to the level of other kinds of income.
Regards, Don
Published: October 9, 2006 6:07 PM
Al
"Taxation is theft."
Perhaps. If I am provided goods and services I don't want, and forced to pay for them on pain of having my life confiscated in part (my labor and its fruits) or in whole (shot down), I am being robbed.
There are things, mostly services, that I don't cheerfully want, such as protection from crime, but am willing to accept as a need and thus expect to pay for. I do benefit from paved and well-engineered roads, else I'd be landlocked or at the mercy of a landlord.
If government would restrain itself (what dog restrains itself without training?) to governing, I'd be a lot closer to happy.
What is the purpose of government? It is to take people's rights away from them. First, at the lowest level, it takes their property, which is obtained by labor. Labor is time, time from one's definitely limited life time, that has been traded for other things of value. Second, government takes people's liberty. Either it demands direct service (prohibited by the thirteenth amendment and similar provisions of state constitutions except as punishment for crime duly convicted), or it takes one's life.
Government, then, is in the business of killing, restraining and confiscating. Our problem is getting it to restrict these activities to punishing those who violate the rights of others.
How is government to be funded? I surely do not expect other persons to carry out the functions of government at their own expense. They must be supported as they devote their time to public service.
At first, the federal government was funded by imposts, customs, excises and the sale of public lands (stolen from their inhabitants). For a long time the resort to other taxes was restricted to paying for various wars. When the debt incurred by those wars was paid off, the tax was repealed.
Thomas Jefferson wrote that if he could obtain but one amendment to the constitution, it would be to take away from congress the power to borrow money. Opponents objected that it would be difficult to pay for wars. He responded that if a war was justified the people would willingly pay for it. He went on to write that wars would be reduced greatly by such an expedient as forcing congress to levy taxes to pay for any war at the time of the war, thus reducing wars by nine out of ten.
The greatest item on the to-pay list is the interest on the public debt. Now, this debt is purely fictitious, as is the "money" demanded to pay it with, but the people can obtain it only by sweat. Why does the congress not simply issue the money directly by authorizing the treasury (the government's bank) to pay the expenses of government by issues? Some might object that such is unconstitutional, but the present system of issuing the currency, then giving it to a consortium of private banks, then borrowing it back from the bank, is not only as unconstitutional as issuing bills of credit directly, but much more harmful.
If all the currency that has ever been borrowed from the federal reserve banking cartel was returned to it, the interest would remain unpaid. In fact, it is impossible to pay both interest and principal as all the federal reserve currency outstanding is borrowed.
The federal debt cannot be paid. First, it is irrelevant that some of it has been lost or destroyed. Tough. If you borrow my lawnmower and then it is stolen or you just lose it, you still owe me my lawnmower. So, the outstanding federal reserve currency cannot all be returned to the bank. Second, the accumulated interest would be left unpaid. The "debt" must be repudiated as based on fraud. Congress can simply order the treasurer to issue a single bill denominated, say, $86,498,651,907,241.88, or whatever the total outstanding debt with interest is calculated to be, give it to the chief cashier of the federal reserve bank, and suggest spending it. Cancel all the paper trash already out.
The framers of the constitution were wise to forbid the issuance of paper money. Unfortunately, their successors were not so wise.
Published: October 9, 2006 7:15 PM
Mark Brabson
Al:
If the U.S. had stuck with commodity money, we would have had a solid wall to stop government from excessive borrowing. In a non-inflationary economy, there is simply only so much commodity money available to be borrowed, at which point the government MUST stop. However, once the Federal Reserve was established and the dogs of inflation unleashed, the pit of debt became truly bottomless, as the government could simply expand credit to fill their trough.
Which illustrates another point that MUST go hand in hand with any tax retrenchment. The Federal Reserve must be abolished and a solid market monetary system allowed to evolve, with 100% reserve banking. It won't help one bit to retrench on taxation, if the Federal Government can simply drink from the teat of credit expansion.
Published: October 9, 2006 7:39 PM
iceberg
George and Person,
Can't we all learn to disagree when it comes to strategizing towards a [Austrio-] libertarian society? The constant bickering over policy should be left to people who think politics is a virtue and not just a pretty facade for the coercive violence inherent in the system.
Nitpicking over the economics is what we are here for anyway.
Vance,
You wrote "And what about the prices of imported goods? They would have no reason to drop at all."
I can think of several reasons why it would be subject to the same price drops- the corporate taxes paid by the following entities would dis-contribute towards the price: the cargo ship transport company, the loading docks company, the trucking industry, the fuel and energy industries powering those vehicles and equipment.
Wait, there are more: the corporate taxes of the importers and distributors buying the foreign goods, and the taxes for the retail store too. All those lower costs of production (remember, Mises also says that tranportation is a part of production) will ultimately allow the price of goods to be lowered, even when imported.
Published: October 9, 2006 8:01 PM
Eric
Don,
Most people about to retire have expectations of a tax liability based on current law. If the system were pulled out from under, many would suffer. I'm not saying that some won't be able "play" the new system, but most people ready to retire who even have all these tax deferred accounts were expecting to pay little or no income tax upon retirement - by withdrawing smaller amounts in retirement.
For example, I am 60 and I own my house, so I don't have to pay huge amounts for interest mortgage, nor will I need an expensive auto to commute to a job, nor pay high insurance rates. Also, I don't have kids to support etc. My point is that after years of planning, I would have to completely re-figure how to live with a government that has turned into a criminal gang, as Rothbard correctly calls them. But I'm not worried about changes to the tax system as discussed - what is much more likely is that we will have both an income tax AND a sales tax. And if that isn't enough, we are surely going to have the inflation tax - and that does worry me, as I don't know that I can overcome that if DC keeps going like it is now.
But at any rate, can you see the political fights that would occur. Besides, the system works great for the politicians the way it is now. And the IRS would probably fight any attempt to close them down anyway. Like the drug war and the DEA, these parasites won't let up.
Published: October 9, 2006 8:48 PM
M E Hoffer
Who honestly believes, after the USGovt has built up unfunded liabilities of ~U$D 56 Trillion, the vast majority of which, on their watch, that "they" have actually earned any "retirement", whatsoever? (That's just the Financial side of the equation)
Published: October 9, 2006 8:56 PM
George Gaskell
There are things, mostly services, that I don't cheerfully want, such as protection from crime, but am willing to accept as a need and thus expect to pay for.
Then, in the final analysis, you do, in fact, want them. Your ambivalence is not significant in an economic sense.
I do benefit from paved and well-engineered roads, else I'd be landlocked or at the mercy of a landlord.
The question is not whether you are basically satisfied with the current roads, but whether the existing government roads are better than the roads we would have in a free market.
In any event, you wouldn't be landlocked or at the mercy of a landlord, any more than people were in the many centuries before the modern nation-state took over the transportation-construction industry in the mid 1800s.
What is the purpose of government?
To benefit itself. To do so at its current level, it has learned to convince its victims that they are not victims, but beneficiaries.
Our problem is getting it to restrict these activities to punishing those who violate the rights of others.
But even if it is so limited, it violates the rights of others by funding itself through taxation, which you have already concluded is a criminal act that must be punished.
How is government to be funded?
Out of its own pocket (of rightfully acquired assets), or by charging fees to voluntary customers. In other words, to cease to exist as the modern nation-state.
I surely do not expect other persons to carry out the functions of government at their own expense.
Even as recently as the 17th century in England, prior to the disastrous affair with that Cromwell fellow, the crown was expected to run the ordinary expenses of government out of its own pocket. As bad as that was in many ways, it was better than what we have today.
I recommend this article: http://mises.org/journals/scholar/jewell.pdf
Published: October 9, 2006 9:22 PM
George Gaskell
Can't we all learn to disagree when it comes to strategizing towards a [Austrio-] libertarian society? The constant bickering over policy should be left to people who think politics is a virtue and not just a pretty facade for the coercive violence inherent in the system. Nitpicking over the economics is what we are here for anyway.
That's my point -- that getting drawn into a petty political debate over such trivial matters as the mode of federal taxation is to misunderstand the magnitude of the crime that is being perpetrated right in front of us via a multi-trillion-dollar budget (that doesn't even count a great many expenditures), not to mention the Federal Reserve and other credit-manipulating mechanisms.
Published: October 9, 2006 9:27 PM
Ken Howe
Dear Mr. Vance;
The FairTax is not perfect, there are no perfecct tax plans. What the fairtax does is very good for all of us.
1. IT reduces the lobbying effects of special interests who try to game our tax code.
2. It is a gradual change from slavery (of the inciome tax)to freedom as the tax on consumption is voluntary.
3. It makes transparent the cost of government.
4. Can you imagine the hell a politician would go through by proposing an increase in taxes when those costs are visible and open? That can be best described as political suicide.
5. It eliminates political arguement of class envy.
Overall it is the best plan I have encountered in twenty years of looking. If I am elected I will co-sponsor the bill.
Kenneth Howe
Libertarian Candidate
Michigan"s Sixth district.
Published: October 9, 2006 9:40 PM
eric
Kenneth,
1. Since the law won’t be written and passed as you would write it, you can’t predict what new lobbying effects would occur. Every group will loby for it’s own exemptions. Food for example, will be lobbied to be tax free, then every other special interest will loby their case. It’s naïve to think you can design a law like you would design a computer program, for example.
2. No tax is voluntary. Unless you’re dead, you require trade to stay alive. A tax on trade can become as onerous as one on income. You are again assuming that only things that YOU believe to be voluntary would be taxed. But if they can’t raise the money they want, they’ll tax whatever they want, even what you think won’t be taxed.
3. It makes transparent how much poorer you are perhaps.
4. The income tax began at 2% and once hit 92%, yes I can imagine. It’s just a number.
5. The poor will loby to tax luxeries at a higher rate. They will then get suckered, as usual (since the rich are smarter) as the rich use the laws to harm their competitors. Oil will want taxes on nuclear etc. The poor will pay higher prices to support what would amount to internal tarrifs.
And most of all, whatever name you give your law, you can be assured that once the 100,000 pages of it are written (and you never read it natch) and it's voted on, the civil servants will make it do what they want it to do. Give it up. Unless you're a politician. Then go ahead and get your piece of the pie.
Published: October 9, 2006 11:48 PM
Chris Marshall
FairTax will not eliminate the huge army of enforcers that presently enforce the US Tax Code, it will merely turn that army into a conscript army.
Every businessman will have to collect tax, and keep and submit the records of his business to the government for this to work. These will go to whatever the IRS replacement is called, the regular "cadre" that back the conscripts.
All of this will mean vast amounts of unproductive effort for businesses, and it will drive smaller, marginal operators out of business, because large firms have economies of scale in administration.
As for this notion that it will lighten the burden, no revenue neutral plan lightens the burden. A revenue neutral plan by definition rules out lightening the burden, it merely alters the burden.
Lightening the burden means reducing taxes, nothing more, nothing less
Published: October 10, 2006 2:44 AM
Chris Marshall
As to transition costs, these will be massive, more so for small business.
The principle reason is that business software, forms, and documents will have to be changed over.
An instructive example can be found in Britain's compulsory change over to the use of metric units for selling goods.
Everyone had to get new scales calibrated in metric, and staff had to be retrained to recognise metric. It is OK for most to convert Imperial to Metric, but shop staff serving customers have to recognise weights.
Easy enough for the big retailers. On the other end of the scale, small shops and market stall operators had the choice of breaking the law, or going out of business.
The so-called "Fair-Tax" will have exactly the same effect. Wal-Mart will be able to move over quickly. Mum and Dad's Grocery will close down.
And for all of this, taxes will not be reduced (revenue neutrality).
Anyone who doesn't think the unFair Tax will create a huge transitional burden for small business is advised to look at Australia and the introduction of the GST.
Published: October 10, 2006 4:43 AM
Dan Coleman
Person,
You wrote:
I'd be glad to oppose it once someone gives me an actual, well-formed reason. Any takers?
Here are a few:
* The FT does not touch state tax rates, nor does it give provisions to stop the sales tax from being raised very high (90%+ isn't unthinkable). There is reason to think that it will continue to allow great injustice. You may say "so?", but, while no reform can cure all ills, I fail to see exactly what the FT is solving. (Boortz's strongest original points have, in my opinion, been dealt with in the last 2 articles by Vance. 1. It's really a 30% tax rate, which is as much as income taxes take away currently; 2. Boortz double-counted when dealing with wages.)
* Boortz says: Since producers would no longer pay taxes on profits or other forms of capital income under the NRST and workers would no longer pay taxes on wages, prices received by producers, shown in the sixth chart, would fall by an average of twenty percent.
But Mises says: The ultimate source of the determination of prices is the value judgments of the consumers. Each individual, in buying or not buying and in selling or not selling, contributes his share to the formation of market prices. But the larger the market is, the smaller is the weight of each individual's contribution. Thus the structure of market prices appears to the individual as a datum to which he must adjust his own conduct. What is called a price is always a relationship within an integrated system which is the composite effect of human relations.
Prices are determined between extremely narrow margins; the valuations on the one hand of the marginal buyer and those of the marginal offerer who abstains from selling, and the valuations on the other hand of the marginal seller and those of the marginal potential buyer who abstains from buying.
The contradictions between Boortz and economic thinking are very fishy. How many central planners have, like Boortz, assumed that producers would do x? It reminds me of Krugman, who always insists that universal health care would cost only as much as the current system--and probably less(!).
Finally, I have one point that leads to a question: I don't think it's very fair to claim that part of the victory of the FT is to eliminate Social Security and Medicare. . .why not simply eliminate them without trying to tack on this massive (and questionable) tax reform? Let me hear the merits of the FT in its own right--why should a libertarian accept this reform, especially in light of the problems raised by Vance?
Published: October 10, 2006 7:43 AM
Dan Coleman
The Mises quote is two paragraphs, not simply the one that is italicized.
Published: October 10, 2006 7:46 AM
Buck Steele
Here's a HUGE benefit for me personally that nobody has mentioned. Last year, due to my wife's illness, I ran up some huge debts. Now, repayment of those debts would not be taxed. I could devote a much larger portion of my paycheck toward settling those debts, since I can't buy much at all at the retail level for some time.
I believe that the Fair Tax is orders of magnitude better than the current system, but I'm sympathetic ONLY to the arguments against it I read in here...principally that taxes are just Bad. Still, if we did implement this huge improvement, I DON'T believe that the rate would go up year after year; that would be policial suicide...which is part of the "political" genius of the plan. In fact, this may be the one mechanism that we could use to get the size of goverment at least down into single digit percentages of GDP.
Published: October 10, 2006 11:49 AM
Steve
People,
You are missing, thru no fault if your own, the central point about the federal income tax and that is that most Americans, engaged in private enterprise activities, are not liable to pay the tax. There is a growing body of evidence supporting this position and I urge all of you to see www.losthorizons.com for the details. Don't be misled, the NRST will void your current constitutional right of tax protection that is contained in current tax law and as is spelled out in the Internal Revenue Code. For too long, we have been mis-led, lied to, confused by gov't. and special interest propaganda about federal income taxes. See www.losthorizons.com, get the facts, see the evidence and then , and only then, make an informed decision about this important issue.
Published: October 10, 2006 2:45 PM
Steve
Need A Crash Course In The Reality Of The Income Tax?
Read What A Few Of The Experts Have To Say:
"No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."
United States Constitution, Article 1, Section 9
So, federal capitations (taxes on normal, private-sector earnings) are prohibited...
(Learn about "capitations" here-- they aren't what you probably think)
"The income tax is, therefore, not a tax on income [earnings] as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax."
F. Morse Hubbard, Treasury Department legislative draftsman. House Congressional Record March 27th 1943, page 2580
"...the requirement to pay [excise] taxes involves the exercise of privilege."
United States Supreme Court, Flint vs. Stone Tracy Co. 220 U.S. 107 (1911)
So, the tax is an excise on the exercise of privilege, not a tax on money...
"PRIVILEGE: A particular benefit or advantage enjoyed by a person, company, or class beyond the common advantages of others citizens. An exceptional or extraordinary power of exemption. A particular right, advantage, exemption, power, franchise, or immunity held by a person or class, not generally possessed by others."
Black's Law Dictionary, 6th Ed.
“The right to follow any of the common occupations of life is an inalienable right…”
“It has been well said that 'the property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his own hands, and to hinder his employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property’.”
United States Supreme Court, Butcher Union Co. v. Crescent City Co., 111 U.S. 746 (1883)
”Included in the right of personal liberty and the right of private property- partaking of the nature of each- is the right to make contracts for the acquisition of property. Chief among such contracts is that of personal employment, by which labor and other services are exchanged for money or other forms of property”
United States Supreme Court, Coppage v. Kansas, 236 U.S. 1 (1915)
So, working, earning money, being paid, etc., in the private sector are NOT privileges...
(Tell me you really didn't need a court to point that out to you...)
“We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it...”
“[Taxation of "income" is] in its nature an excise entitled to be enforced as such unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it” (That is, if the "income" tax ever comes to be administered as something other than an excise, or on something unsuited to an excise, the rule of apportionment must be applied.)
United States Supreme Court, Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916)
"The provisions of the Sixteenth Amendment conferred no new power of taxation . . ."
United States Supreme Court, Stanton v. Baltic Mining Co., 240 U.S. 103 (1916)
“The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects...”
United States Supreme Court, Peck v. Lowe, 247 U.S. 165 (1918)
The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution, quoted above. Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment and indirect taxes were still subject to the rule of uniformity."
Howard M. Zaritsky, Legislative Attorney, American Law Division of the Library of Congress, Report No. 80-19A, entitled “Some Constitutional Questions Regarding The Federal Income Tax Laws”, page CRS-5 (1979)
So, the 16th Amendment has nothin' to do with nothin' about any of the foregoing...
"We must reject… …the broad contention submitted in behalf of the government that all receipts-- everything that comes in-- are income…”
United States Supreme Court, So. Pacific v. Lowe, 247 U.S. 330, (1918)
Just so. What is called "income" in the internal revenue laws (that is, what is taxed under those laws) is NOT "money" or "receipts" or "earnings", etc.. It is the exercise of federal privilege, which is measured, for purposes of determining the tax, by the receipts brought in by that exercise. Thus, it is only receipts resulting from the exercise of federal privilege that are relevant to those laws and the related taxes.
Now Get The Book That Explains It All:
'Cracking the Code- The Fascinating Truth About Taxation In America' at www.losthorizons.com
Published: October 10, 2006 3:06 PM
Nick Bradley
As an ardent FairTax supporter in the past (and still am to a certain extent), let me say a few words:
First, there is a great reason that the 23% number is used. It is to compare a tax-inclusive rate to a tax-exclusive rate. We could compare the tax-exclusive 30% number to a tax-exclusive income tax number: How about a 39% tax rate for the 28% tax bracket. The decision was made to prevent opposition from leftists who would claim that the income tax is cheaper. Let's throw in the 15.3% we all pay in Social Security and Medicare taxes as well. So if we want to look at the exclusive rate for somebody in the 28% bracket, we're looking at 75%!
I concur that taxation is theft. But the end of taxation is NOT going to happen barring secession (even then it's highly unlikely a new state would do away with taxation). I have used the analogy that I would rather have my blood drawn with a syringe than a razor blade.
I have always diagreed with claims that goods will cost the same because the tax is already embedded in the price of goods. I don't buy it; the money has to come from somewhere. Now, I do believe that prices would come down a little bit. And I do believe that productivity would rise so dramatically that the price of goods would go down a lot.
I disagree with the FAIRTAX name. No taxes are fair. Theft is not fair. We should call it what it is: a progressive Sales tax.
Another point on the FairTax rate. Not everybody will be paying 23% (30% exclusive). Nobody will pay taxes on consumption up to the poverty line (roughly $25k for a family of four). So, if your family of four makes $50k (near the average) and you consume 100% of your income, you will pay a 11.5% (13% exclusive) rate. In addition, nobody will spend 100% of their income on taxable goods. Savings, investment, and education are not taxed. Your car payment, mortgage, loans, etc. are only partially taxed; you pay taxes on the difference between your interest rate and the overnight fed funds rate. So in reality a family of 4 making $50k would pay no FairTaxes at all if they consumed less than 50% of their income.
Now, for utilitarian arguments:
taking taxes is always better downstream than upstream. Let the investors invest and the producers produce, then the Gov't takes their money. It has more time to grow before "harvest", so to speak.
There is at least $500 Billion dollars that US Corporations are holding overseas because they do not want it to be taxed; the US is one of two countries (the US and Libya) that tax overseas profits. That money would come home.
Foreign investors would pour their money into the US. As long as they are not consuming anything while in county, they do not have to pay ANY taxes . Just look at how Ireland boomed when they slashed corporate tax rates to 10%!
Savings will be encouraged by the FairTax, promoting a lower time preference amongst the population. Other positive externalities will come from higher time preferences (see Hans Hoppe): lower crime, less out-of-wedlock births, etc. etc.
The broken Health Care system, which has grown out of the employer-provided health plan system (via the tax-deductability of providing it) will be gone. Health Care would then be purchased by individualsl no more communal policies.
To see more of my views on the FairTax, check out a paper I wrote quite some time ago on the matter:
" How the FairTax Will Renew America"
Published: October 10, 2006 7:15 PM
Paul Burgener
(sigh) Do you von Mises folks really think you can drop the federal budget in just one step? Face it. The federal budget grew gradually over the years. It'll take years and several steps to reduce it back down.
Step 1: Get the percentage of the economy that the federal government sponges, in front of every man's, woman's, and child's face, every day. Do this by printing it on each and every retail sales reciept. How can this be done, you ask? Pass HR25, the John Linder FairTax.org bill. Paul Burgener, Newport News, VA
Published: October 10, 2006 8:12 PM
Paul Burgener
(sigh) Do you von Mises folks really think you can drop the federal budget in just one step? Face it. The federal budget grew gradually over the years. It'll take years and several steps to reduce it back down.
Step 1: Get the percentage of the economy that the federal government sponges, in front of every man's, woman's, and child's face, every day. Do this by printing it on each and every retail sales reciept. How can this be done, you ask? Pass HR25, the John Linder FairTax.org bill. Paul Burgener, Newport News, VA
Published: October 10, 2006 8:12 PM
Paul Burgener
(sigh) Do you von Mises folks really think you can drop the federal budget in just one step? Face it. The federal budget grew gradually over the years. It'll take years and several steps to reduce it back down.
Step 1: Get the percentage of the economy that the federal government sponges, in front of every man's, woman's, and child's face, every day. Do this by printing it on each and every retail sales reciept. How can this be done, you ask? Pass HR25, the John Linder FairTax.org bill. Paul Burgener, Newport News, VA
Published: October 10, 2006 8:12 PM
Kevin
Kel,
"But most people implicitly vote to be taxed by voting for the same people (Democrats/Rebublicans) every time who prove that they like to tax."
I believe many of those who vote in favor of taxes are really voting for OTHERS to pay taxes. The bulk of the money appears to come from a relative few. The greater the "income gap," the more in favor of paying their "fair share" they become.
Published: October 10, 2006 8:45 PM
JD
Please excuse the tardiness of this post.
Late in September, after listening to him on his radio show, I sent the following (somewhat cleaned-up areas in parentheses) to Neal Boortz:
begin quote: A FAIR tax would eliminate the possibility of (contrived) wars like The Great War (WWI), The Good War (WWII), and the Piddling Korean Conflict, Vietnam, countless squabbles and the current asinine chase after "The Tersts".
There would be no "Tersts" if our military had stayed within 300 miles of our borders for the past 150 years. Read Smedley Darlington Butler’s short book: War is a Racket.
Please try to convince me there has been a war involving this country, starting with the Revolution, which was not about money – who must pay for WHAT I WANT with I first being King George and his cronies and is now mega-corporatons.
Taxes needed(?) by the Federal Government should be a portion of the difference between individual and organization cash positions this year and last.
The true axis of evil -- The Sixteenth Amendment to the US Constitution and its enabler, the Federal Reserve Act as amended these many times -- should have been aborted at birth. The Federal Act was opposed by true conservatives, such as Minnesota Representative Charles Lindbergh, Sr. at the time.
Repeal the accursed Amendment.
Eliminate Central banking.
To call a single Federal Sales tax fair is to (abuse) almost everyone and (bless) the wealthy as they will certainly present their posterior for such action via proscribing the "Fair" tax on whatever it is they want to do with their money.
You can bet your bottom sphincter there will be no "Fair" tax on the purchase of stocks, bonds, etc. Why else purchase (Which is currently Tax Deductible isn’t it?) Presidents, Senators, Congressmen and State and City Governments, including the legal profession, AND not so incidentally, the media.
I did not hear all of your account of talking with IRS personnel and the idiotic ideas they have (The "Tax Expenditure" was your prime example). as I was listening on my car radio and the station became two stations as I drove so I shut it off.
I did hear you start to talk about "The Fair Tax".
In my opinion the only fair tax is to tax everyone at the same rate on consistent definition of what is to be taxed.
I say it should be what is left after all consumption, of what is earned in the taxable year. Those who earn $15,000 a year and have $650 left would be taxed on the $650 at the same rate the billionaire, who earned $800,000,000 and $650,000,000 left, would be taxed on the $650,000,000.
I must assume that some of what was left of the $650,000,000 after the tax bite would be spent on Presidents, Senators and Congressmen who would find a great deal less on which to spend public money. Such as: foreign aid to dictators, loans to Israel which are never repaid and foolish wars to extend the influence of American and International King Commerce.
BTW, with repeal of the sixteenth amendment, those who earn $15,000 per year would take it all home (and take home pay would equal pay) less the FICA, of course. I would support privatizing FICA or even eliminating it altogether if we had no Federal Reserve System to (mess) things up with inflation via making loans of money that did not exist until someone asked for it. (That’s what central banking is AND THAT IS THE CAUSE OF INFLATION.)
Churches and Foundations would be taxed on their gains. What good does money in a Church bank account do. And does anyone believe Tax Exempt Foundations do not do the bidding of those who fork over the cash?
If the wealthy do not want to pay taxes THEY AND ONLY THEY can influence how much the Federal Government says is needed to do what they want to do. It is certain the Federal Government is not concerned with what I want and I suspect the same for what you want – unless you have more money than you admit.
On the other hand, Neal, maybe you want other people's children to be in harms way in the current $800 billion war.
To begin taxing increased cash position would require an initial accounting of cash at some point in time. This would be compared with cash position one year later. If the billionaire above had Seven Billion dollars at the initial accounting and was taxed 350 million of the 650 million his new cash position would be Seven Billion three hundred million. He would not be taxed on that, nor would the $15,000 a year man be taxed on his remaining $300. I assume he had no cash at the initial accounting.
Excuse my rambling but THINK about it. end quote
To date Mr. Boortz has not responded.
Published: October 11, 2006 7:01 PM
notax
I just read your article on the "Fair Tax" from a link on Strike the Root.
What isn't touched on is the price of used goods. Since the claim is that only new purchases will be subject to this tax it would only stand to reason that the price of used goods at flea markets, garage sales, Ebay, etc. will rise. The gov in it's never ending lust for revenue and control of our lives will then seek to tax the sale of used products. With this in mind, everything you own could then be declared counterband since the tax may not have been paid on it. The "Fair Tax" opens the door for tyranny that we have yet to see the likes of.
The reason this idea is being bantered around to begin with is that millions of us are not filing income tax returns (even though the gov won't admit it).
Published: October 12, 2006 2:18 PM
M E Hoffer
when, if, the "consumption tax" comes to these shores, I'm sure a variation of this:
"Carousel fraud: How it works ... what it costs
· Carousel fraud occurs when mobile phones or computer chips are passed round a group of trading firms, in and out of EU countries, with VAT reclaimed each time the goods cross a border
· The fraud has grown rapidly in the past 12-18 months after fraudsters developed "virtual" carousels, pushing money in and out of a bank in Curaçao to create the illusion of payments being made for goods
· Official figures are not available, but losses to the British taxpayer from the fraud could have exceeded £5bn last year and may top £10bn in 2006
· The closure last month of the First Curaçao International Bank, owned by John Deuss, dented carousel fraud severely since 2,500 UK-based carousel fraudsters used accounts there
· The problem is not confined to the UK; EU tax commissioner Laszlo Kovacs told the Guardian this year that EU governments were losing an estimated €50bn (£33.7bn) to the scam"
--will follow
http://www.guardian.co.uk/crime/article/0,,1923187,00.html
Published: October 16, 2006 3:18 PM
Alan Dunn
Good article. Other economic ideologies suggest that money is tax driven and therefore governments use taxes not to directly fund spending - but to create demand for the otherwise worthless inconvertible money they are the monoplist suppliers of.
"A prince, who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind might thereby give a certain value to this paper money; even though the term of its final discharge and redemption should depend altogether on the will of the prince". (Adam Smith, 1776)
In saying that, I think taxes and fraud are synonomous. Hence the only way to reform taxes is to abolish them and let the market sort things out.
Published: October 19, 2006 10:02 PM
Dan R. Mastromarco
I submitted this piece for publication with Mises.org, but it was declined because -- as the editor stated -- "I don't really see how this would be a benefit to our readers." Hopefully, Mises.org will let a ray of sunshine in by not censoring it from the blog. The footnotes will be missing, but this article in its entirety can be read at fairtax.org
Honk if You Oppose a Fairer Tax
By Dan R. Mastromarco
[T]he task of the taxing authorities is to "so pluck the goose as to obtain the largest amount of feathers with the least amount of hissing." We the taxpayers, of course, are the geese. -- Murray Rothbard
If asked to articulate the guiding principles of tax reform, how would you respond? You may explain the destructive nature of taxes to Congressman Ron Paul. But what would you tell the other 534 Members of Congress who see taxes as a necessary evil? What would you tell one of the fathers of Austrian economics, Nobel Laureate Friedrich A. Hayek, who thought the government had to use its power of raising funds to provide those services not provided by the market? Could you articulate a framework with which to analyze the least destructive method of tax collection for the benefit of libertarian ideals?
In an October 9th Daily Article entitled “The Fraudulent Tax” Mises contributor Laurence Vance recommends responding by condemning the FairTax. Building upon last year’s diatribe, “The FairTax Fraud,” where Dr. Vance asks if “the [FairTax] cure [is] worse than the disease [the income tax]?” he answers in the affirmative. He concludes that the FairTax is a dishonest tax, no better than the income tax. Dr. Vance then recommends in descending order that the Congress repeal the income tax with no viable substitute, enact a head tax, eliminate withholding, or in the very least, roll back rates.
Libertarians may take solace in the fact there are worse things in life than political failure. No idea should be supported (or rejected) because it is deemed to be fashionable, especially by Congress. But if libertarians were to take Dr. Vance’s bad advice, they would be more than disappointed by the prospect of being marginalized – they would be betrayed by the policy outcome. Supporting ideas that have no basis in political reality may be benign folly, but squandering political capital to perpetuate one of the most intrusive, autocratic, wasteful, malignant, and invidious systems ever devised by man is quite another endeavor. And by rejecting the FairTax, libertarians pass up the opportunity to support the one plan that is least destructive of the goals of Austrian economics and libertarian ideals.
This paper does more than debunk myths Dr. Vance is spreading about the FairTax – it suggests libertarians and Austrian economists should be prepared to engage the debate over tax reform other than by irrelevant clichés. Libertarians need not accede taxes are anything less than destructive in order to develop a framework by which the relative “demerits” of viable alternative replacement schemes can be evaluated. Different plans are more or less intrusive, more or less costly, more or less burdensome, more or less economically and socially destructive, and more or less visible – and should be evaluated under the crucible of these principles. When looked upon in this way, libertarians should see the FairTax as Winston Churchill saw democracy – the worst form of government except for every other one that has been tried.
Making the Gaggle of Geese “Hissed”
Dr. Vance’s article clearly attempts to echo Murray Rothbard’s “The Consumption Tax: A Critique” which sought to temper Alan Greenspan’s rational exuberance towards a consumption tax. But anyone who has read and understood what Mr. Rothbard was saying about taxes would not recognize Dr. Vance’s opinions as a seamless datum on the continuum of Rothbard’s logic. Mr. Rothbard’s article was intended to make an important point then obscured in the debate over tax reform: Economists should concern themselves less with the form of confiscation than with the level of burden the State and privileged tax-consumers impose on economic freedoms. His point was simply that economists who support consumption taxes just to make the extraction more efficient miss this main point.
In this assertion, Mr. Rothbard was both right and wrong. He was right to identify reduction in the size of the government as a critical goal on the libertarian agenda. He was right to assert a tax system that exacts the maximum revenue most efficiently does not necessarily promote liberty. But he was wrong to assume the form of taxation has nothing to do with these goals.
American taxpayers, like the geese Mr. Rothbard referred to in his article, cannot get “hissed” unless they feel the pain of the tax system. In the immortal words Mr. Rothbard attributes to Jean-Baptiste Colbert, the more hidden the taxes, the more we can look forward to having our feathers plucked. This same sentiment was expressed in a different way by Friedrich A. Hayek, who stated, “It is probable that the whole complexity of the tax structure we have built up is largely the result of the efforts to persuade citizens to give the government more than they would knowingly consent to do.”
Today, taxes and their effect are camouflaged. By its very nature, the income tax stimulates the corruption, rent seeking, and unconstrained growth of government spending that libertarians find repugnant.
To begin with, nearly half of the U.S. population today pays no income tax to the IRS and feels more pleasure than pain. More precisely, an estimated 43.4 million tax returns, representing 91 million individuals, will report a zero or negative income tax liability in 2006. Adding to this figure the 15 million households and individuals who will file no income tax return at all, roughly 121 million Americans – or 41 percent of the U.S. population – and will see themselves as fully unvested with the income tax, except for what the revenues can do for them. Regardless of the assumptions we draw over incidence, the portion who pay payroll taxes see these taxes as the employer’s responsibility. Even those who pay income taxes are more or less numb to the more than $270 billion in compliance costs, $307 billion in corporate taxes, the $771 billion in payroll taxes or the $26 billion in death taxes that fall back on the factors of production.
Indeed, some who endorse checks to the “I.R.S.” see the income tax as a honey pot for political entrepreneurship which further misappropriates resources. Our tax code is literally written by special interests whose job is to ensure that every industry and taxpayer is treated differently, creating a constant jockeying for competitive advantage and extraction of rents. And when these changes to the tax system are made, tax increases are largely hidden in the 10,000 pages of minutiae, creating a Tammany Hall effect where economic rents are auctioned off to the highest political bidder.
Hidden costs go well beyond the question of economic incidence versus legal incidence or the compliance burden. Every tax system distorts economic decisions, alters economic behavior, and retards economic output below that which otherwise would occur, resulting in what economists agree is the “deadweight loss” or “excess burden” of taxation. Deadweight loss is a hidden extraction cost of taxation – the machine that didn’t spin, the worker who didn’t show up – which represents a depletion in purchasing power perhaps more nefariously improvident than if the government had collected that resource. The average worker is of course completely anesthetized to the deleterious economic effects of a tax system that imposes a drag on economic growth, despite its nontrivial implications. The current system imposes such a severe relative drag on economic growth vis-à-vis the FairTax that it will reduce capital per unit of human capital is said to decline 5.0 percent over the course of the century for an 18.0 percent long-run decline in after-tax take-home pay.
The FairTax corrects these problems in ways no other viable tax replacement plan can. First, it ensures everyone – from the illegal alien to the poorest American – is vested in the tax system. The way to produce downward pressure on government is to make every participant in the economy an equal stakeholder, exposed to the true cost of the federal government on the receipt of each item they buy. Second, the FairTax makes the current hidden taxes transparent and keeps politicians honest by eliminating the ability to raise taxes on others by hidden loopholes.
And because everyone pays the FairTax, and pays it at the same rate, the visibility of the FairTax ensures a built-in downward pressure on the size of the government in the most effective way: By requiring the government to change the rate for everyone – even for a seemingly insignificant loophole. And the FairTax minimizes the economic harm caused by taxes that serve as a stealthy exaction. A shift to the FairTax raises marginal labor productivity and real wages over the course of the century by 18.9 percent and long-run output by 10.6 percent higher than it otherwise would be. It does not eliminate the drag taxes impose on the economy, but instead reduces the hidden confiscation to the maximum degree by not taxing the same income more than once with highly progressive marginal rates.
Dr. Vance understood these points when seeking elimination of withholding partly because it would restore an element of visibility and pain to the taxpayer. He criticizes the revenue-neutral rate of the FairTax for being too high, even though it is guilty of painfully exposing only the hidden cost of the government exaction today. Necessarily, Dr. Vance, by opposing the FairTax, supports continuing most of the hidden elements of the current tax system.
The tax reform “solutions” advanced by Dr. Vance, with the exception of the unviable per capita tax, do not make the hidden taxes visible, and therefore cannot exert the same downward pressure on the size of government as the FairTax. Even if the Congress were willing to unilaterally make the tax system less efficient by eliminating withholding, taxes and compliance costs would still be hidden from the taxpayer in the prices of goods and services, in the loss to economic activity, and in the fact that not all taxpayers bear the same marginal rate. Even if the Congress were temporarily successful at rolling back rates, the rates would soon multiply and rise and the base erode with each passing year special interests hammer away at policy makers.
By exposing all the hidden taxes and vesting everyone in the tax system with a uniform stake, the FairTax accomplishes the primary objective that ought to be of importance to Mr. Rothbard – it helps to ensure a smaller government. That is almost by definition an honest tax.
The FairTax Advances Libertarian Goals by Being Least Intrusive.
Dr. Vance’s article asserts the FairTax dishonestly claims it is a “voluntary tax” because even “under the present [voluntary] system, if someone doesn't work then he doesn't pay any income tax.” Dr. Vance argues the FairTax falsely claims it abolishes the IRS when simply “exchang[ing] one federal agency for another.” Dr. Vance invokes Mr. Rothbard’s characterization of a retail sales tax as a "permission-to-live" tax with the implication that it is worse than the income tax.
FairTax.org has never claimed its exaction is voluntary: That compliance is as legally optional as a charitable contribution. The FairTax, like any of the “reforms” Dr. Vance suggests, is by definition enforced by the power of the state. The relevant distinction is not whether one pays tax by his own volition or is coerced, but rather the degree to which the various plans suppress economic and civil liberties. By not taxing returns on capital or labor, savings, gifts, charitable contributions or education the FairTax impinges the least on economic freedom. Under the FairTax, taxpayers are no longer forced to choose between work or leisure, investment or consumption because the fruits of one’s labor or capital are not taxed until consumed and then taxed but once. By exempting expenditures before the poverty level from taxation, the necessities of life are untaxed. The taxpayer is given the maximum choice over legal ways to avoid and time taxation. Equally important, because the FairTax is least destructive of economic growth, it extracts a lower proportion of the return to work or savings than any competing plan.
Similarly, Dr. Vance argues FairTax supporters prevaricate by claiming the IRS would be dismantled; however, the IRS is literally eliminated. Legally, state sales tax authorities, most of which already collect state sales taxes (in the 45 states that have them), will collect the FairTax with another line on the tax return requiring only a small oversight bureau to monitor the states.
No, the FairTax would not eliminate all the practical issues that arise from the necessity of distinguishing between business and personal activities in defining consumption – no tax would unless it were to resemble the cascading turnover taxes adopted by France in the 1930’s. But asking retailers how much they sold to consumers is a lot less intrusive than requiring every person, natural or legal, to be a tax collector and tax filer. Along with the legal disestablishment of the IRS, the FairTax restores the civil liberties sacrificed for income tax enforcement, eliminating privacy intrusions and overwhelmingly reducing compliance burdens.
This past year, Americans were assessed 28,767,480 civil penalties, and paid more than $270 billion in compliance costs just to enforce a system with a net tax gap of more than $345 billion. For FY 2005, they filed 1.5 billion information returns, 131 million individual returns, 2.5 million partnerships returns, and 6 million corporation returns for a total of 224 million tax returns. The IRS made more than 4 billion contacts and sent out 8 billion forms and instructions so taxpayers could attempt to comply.
Contrast this with the FairTax, where individuals would no longer need to file returns. Retailers would be provided a credit compensating them for the costs of sales tax compliance. Even if all approximately 25 million business establishments in the U.S. were retailers, the number of returns filed would decline 86 percent.
Regardless of what Dr. Vance would have the reader believe, Mr. Murray Rothbard understood the matter was of degree. He said that:
Of the various forms of consumption tax, the sales tax surely has the great advantage … of eliminating the despotic power of the government over the life of every individual, as in the income tax, or over each business firm, as in the VAT. It would not distort the production structure as would the VAT, and it would not skew individual preferences as would specific excise taxes.
In comparing this to the income tax, he continued:
Income taxes are collected in the course of a coercive and even brutal examination of virtually every aspect of every taxpayer's life by the all-seeing, all-powerful Internal Revenue Service. Each taxpayer … is obliged by law to keep accurate records of his income and deductions, and then, painstakingly and truthfully, to fill out and submit the very forms that will tend to incriminate him into tax liability.
If Mr. Rothbard were alive today, he may have vehemently opposed the title of the “FairTax” bill on the basis of principle. However, he would have hardly reached the conclusion that the income tax is no worse.
Conclusion:
Taxes are not a good thing. In fact, the FairTax might be more aptly named the Fairer Tax so as not to offend Dr. Vance’s sensitivities. But supporters would beg to differ with Dr. Vance’s characterization of the FairTax as fraudulent. We would disagree wholly with Dr. Vance’s view that all replacements that are not either politically unviable or unenforceable are equally bad.
As much as we might despise taxes, they are a necessary evil. And as long as we suffer taxes, we should make them as painful, visible and obvious, least intrusive, least costly, least burdensome, least economically and socially destructive as possible. If all we do is rail against a system that makes them so, libertarians make themselves irrelevant.
Published: November 8, 2006 1:29 PM
jeffrey
And I'm quite certain that blog readers will appreciate a 3,000 word treatise posted as a comment!
The only complaint this blog receives that that its admins are too liberally minded. Sometimes I think this complaint is correct.
Published: November 8, 2006 3:01 PM
Dan R. Mastromarco
Well,I only did what you did to Dr. Kotlikoff when he tried to respond to Dr. Vance.
Mr. Tucker, does your personal censorship reflect official editorial policy where Daily Articles are confined to ex parte political viewpoints which pass your personal muster?
Your main point before you truncated our recent phone call was that you refused to publish my article because tax reform just simply isn't interesting to your readers. Do you think the bloggers above agree? And why then, Mr. Tucker, did (1) Dr. Vance write three highly contentious opinion pieces he knew would stimulate discussion among your readers (most likely at your invitation), (2) you dutifully spent the resources of Mises.org in publishing and editing all such pieces even though they were as redundant as advertisements, and (3) your blog is teeming with credible people wondering where the response is. Hearing no response, your readers will draw unwarranted conclusions which apparently is your and Dr. Vance's goal.
You further told me that you don't want to get in a "he said, she said" repartee, but regardless of whether you choose to deny in fair rebuttal what you so liberally grant to Dr. Vance in 9,000 words, my article was neither argumentum ad hominem nor opinion. Had you bothered to read it, you would have found it does not waste space addressing Dr. Vance's errors in seriatum. Rather, it tries to reach the heart of the critical discourse you ought to be having -- how the principles of tax reform relate to libertarian thought and Austrian economics. I wish to attack nothing other than wrong-headed arguments before they gain currency.
The problem, Mr. Tucker, is that Dr. Vance's pieces offer perfect examples of wrong-headed arguments and facts, and with the patently obvious goal of infusing opposition to a piece of legislation. For instance, in my article, I point out that (1) a visible, painful tax, that shows the full cost of the Federal government, does not tax the same income multiple times, where everyone is an equal stakeholder and taxpayer is a far better way to put downward pressure on the size of the government than (2) to hide the tax, compliance costs and loss in economic growth under other plans, such as those Dr. Vance proposes (including a simple (and clearly temporary) reduction in rates under the current system where 40 percent of Americans are unvested entirely). The main points in my article are germane to the uninformed ex parte discussion Mises Institute is now facilitating for Dr. Vance because it questions the underlying criteria by which true reform should be measured. And it did so in a way that was wholly consistent with the scholar for whom your Institution is ostensibly named.
Published: November 10, 2006 10:16 AM
Laurence M. Vance
Do I really want to waste my time replying to this? Mastromarco begins by stating:
I submitted this piece for publication with Mises.org, but it was declined because -- as the editor stated -- "I don't really see how this would be a benefit to our readers." Hopefully, Mises.org will let a ray of sunshine in by not censoring it from the blog. The footnotes will be missing, but this article in its entirety can be read at fairtax.org
Well, first of all, I looked all over fairtax.org and can't seem to find it. And second, does anyone actually think that fairtax.org would post my articles against the Fairtax? Why then is Mastromarco so upset that Mises.org would not post his article?
Published: November 10, 2006 5:44 PM
Michael
Mr. Mastromarco's article makes a lot of sense, and I highly recommend it. His main points are that -- if tax reduction is the key goal (and we have yet to define the goals) -- then the best way to get there is to make the taxes visible and painful, to make everyone a taxpayer vested in the system and to have the same rate. That way if tax increases are proposed, politicians have the entire electorate to deal with. That seems to me to be more in keeping with Mises.org theory than Dr. Vance's proposals that would further hide the tax and further unvest many taxpayers. He seems to complain about the FairTax simply because it is visible.
Published: November 13, 2006 11:41 PM
Phil_Will1
"I submitted this piece for publication with Mises.org, but it was declined because -- as the editor stated -- 'I don't really see how this would be a benefit to our readers.'"
So attacks on the FairTax are "a benefit to our readers", but thoughtful and factual rebuttals aren't? Is the editor afraid that many of its readers are pragmatic enough to understand that the FairTax advances many libertarian ideals, even if it isn't a panacea?
We certainly wouldn't want the readers to think for themselves and make up their own minds, would we? There are many libertarians who support the FairTax and who do not recognize the Von Mises' Institute's authority to impose its views on this issue on them.
Published: November 14, 2006 4:59 AM
Jimmy Walby
Nobody can apparently respond to Dr. Vance’s attacks because the Mises.org's editor is censoring rebuttals outside of the blog and trying to censor rebuttals within the blog.
Doesn't that defeat the purpose of Mises.org? Either someone on the editorial staff is denigrating the true spirit of Mises.org or for the first time we are starting to see a hidden agenda.
It is very surprising to me becasuse I was convinced that the liberal media were the only ones capable of the one-side-psudo-journalism- under-the-guise-of-the-best-interest-of-the-people style of presenting ideas. Well I was obviously wrong.
It is apparent that if Mises.org had their way they would educate all Americans that the FairTax should not pass. Ok, fine. What is their solution to the current system? Where is their bill that is going to take the yoke of the Income Tax, Estate Tax, Capital Gains Tax etc. off of the backs of Americans? Aren't these anti-freedom taxes the essence of bad economics and exactly what Mr. Mises wanted to educate people against?
I sincerely hope Mises.org will change their ways. I am certain that the members of Mises.org are inteligent people who can evaluate important economic issues for themselves, IF GIVEN THE CHANCE, by its editors.
Published: November 14, 2006 6:42 AM
banker
Income Tax, Estate Tax, Capital Gains Tax in exchange for a Sales tax?
Revenue before = Revenue after.
Spending before = Spending after.
I don't see the difference between the Fair Tax and what exists now. I can almost imagine the chicanery of assigning different tax rates to different products. Sin taxes? Taxes against eating pizza? Taxes against private school? Not worth the effort.
Instead, the first bill should be the abolishment of the Federal Reserve. Then, a couple of amendments would need to be repealed.
Published: November 14, 2006 7:03 AM
Richard B
I see a lot of comments here from people who are opposed to the FairTax. I have also seen a lot of similar comments from government officials who gain a huge benefit from the current tax system. The later I can understand, the former I don't understand. Why would a Libertarian be opposed to a tax system that brings the amount of taxes out into the light for all to see?
There is little that I would like better than for the Federal Government to be limited to spending only for those items enumerated in the U.S. Constitution. With such control of spending, there would be no need for income or consumer taxes but the majority of states have not ratified the Liberty Amendment. Therefore, we should shoot for a bill that does have a chance of passing, the FairTax. Of course if the majority of voters are unwilling or unable to truly learn about the FairTax, then we can’t expect the FairTax to pass.
Unless you have gain, as many Congressmen do, from the current tax system, learn all that you can about other tax proposals. What you will learn is that the FairTax is most like the tax proposals of our founding fathers. While it may not cure all problems, it will cure many more problems than any other tax proposal other than the Liberty Amendment.
Can the rate for the FairTax be raised? Of course it can but only within limits. If the tax on consumption becomes too high, federal revenue will drop as consumption drops. I see other comments that congress can do this or that. Yes they can but only if the voters let them do so. One way to keep the voters aware of taxes is to put the amount paid on every sales receipt.
Published: November 14, 2006 8:42 AM
PR
If the goal is really to make taxes more visible to the average American, then FairTax is worse than the current system. Today, I can simply look at my W-2 form to see how much total income tax I paid over the year. But I have no idea how much sales tax I've paid, and I'm not inclined to total up hundreds of receipts to find out.
If I had to propose a make-taxpaying-as-painful-as-possible plan, it would go in the opposite direction: Eliminate withholding, and collect taxes as one lump sum due in full on the first Monday in November (the day before election day). This has as much chance of passing as FairTax does in the form promised by its supporters.
Published: November 14, 2006 9:13 AM
JeffG
Mr. Mastromarco's paper can be found here: Honk if you Oppose a Fairer Tax.
It was linked to the "They Said WHAT?!"
I found it to be quite good and a much stronger argument then Mr. Vance presents. This is an important debate for us libertarians and I find it hard to believe that Mises editors would decline this publication. I feel let down that they would censor such important discussion on such an important topic.
Published: November 14, 2006 10:50 AM
Laurence Vance
"Censorship"? "The Von Mises' Institute's authority to impose its views on this issue on them."--Are you FairTax guys serious? Get your own institute and your own blog and your own daily articles. FairTax supporters are like a bunch of gnats.
"The FairTax advances many libertarian ideals."--like what? Fair theft?
Is it also not censorship when the FairTax website won't run my attacks on the FairTax? Why the double standard?
And by the way, I read Mastromarco's article. A man with his qualifications can certainly do better. He did not address any of the problems that I raised about the FairTax in my last article on the subject. It is always the same old nonsense about the FairTax being a step in the right direction. It is a step in the wrong direction, as my articles have shown over and over again.
Published: November 14, 2006 9:21 PM
Adela GArza
there is more fraud right now as it is. Fair Tax would be too simple I think that is the problem it is just to simple we like to complicate our lives. I for one feel if I don't want to pay taxes I just won't buy anything for that month.
Published: November 14, 2006 10:34 PM
NOINCOMETAX
Mr. Vance is a fraud himself,
After taking personal insults and cheap shots in an email exchange with Vance after his first "pro-current system" article Mr. Vance even conceded himself that the FairTax National Retail Sales Tax WOULD BE BETTER THAN WHAT WE HAVE NOW.......Talk about the perfect politician.
What a person to represent the Libertarian ideals as well as Faith. (Oh wait, he does not consider himself a Libertarian even as he also stated)
Published: November 14, 2006 10:42 PM
phil_will1
"The income tax should be repealed, not replaced. The IRS should be gotten rid of, not renamed. Tax reform should reduce taxes, not be revenue neutral. Government theft of the wealth of its citizens should be abolished, not adjusted."
Would you mind providing a bill number? I would like to look at the bill you are backing which does all these things. Also, since you are so critical of the FairTax's sponsors, I would like to see how the sponsors of your bill measure up.
Published: November 15, 2006 3:12 AM
phil_will1
Aha! I found it.
H.J.RES.14
Title: Proposing an amendment to the Constitution of the United States relative to abolishing personal income, estate, and gift taxes and prohibiting the United States Government from engaging in business in competition with its citizens.
Sponsor: Rep Paul, Ron [TX-14] (introduced 1/26/2005) Cosponsors (2)
Latest Major Action: 3/2/2005 Referred to House subcommittee. Status: Referred to the Subcommittee on the Constitution. COSPONSORS(2), ALPHABETICAL [followed by Cosponsors withdrawn]: (Sort: by date)
Rep Flake, Jeff [AZ-6] - 1/26/2005
Rep Miller, Jeff [FL-1] - 4/26/2005
Wow ... two whole co-sponsors. Since the President has stated that he would only consider any revenue neutral tax reform proposals and the Democrats have indicated that they will reinstate Paygo rules as one of their first orders of business, how do you propose getting this enacted?
It would appear that with only two co-sponsors, virtually unanimous opposition by the Democrats, as well as a majority of Republicans in congress, plus the President, this is a very challenging undertaking (to say the least).
Please share your strategy with us.
Published: November 15, 2006 4:07 AM
Edubwa
Everyone knows that the income tax system is broke. There is no debate over that fact, I hope. Now, it is important that we have serious, honest, debate on how best to fix the system instead of partisan banter. I would expect that from the far left and right but not from this crowd.
If you dislike the FairTax, please provide solutions instead of repeal this, repeal that, and repeal FairTax. That type of solution will never be accepted from our elected leaders or the lobbyist who use that leverage against us, the tax payer.
Taxes are a reality and a necessity, not only for all these crazy social programs we have instituted, as we fight a far greater adversary than any in history….the terrorist. He is a foe who hides among us and strikes after years of hiding, studying, planning, and practicing. Funding those who kill these bastards is fine by me. So replacing, instead of repealing altogether, the current system with a consumption tax on all new goods and services is a great idea. God bless those men and women (as I am one of them).
So…why the FairTax? I choose this plan because:
•The FairTax eliminates the individual income tax
•The FairTax eliminates the payroll income tax
•The FairTax eliminates the estate tax and the gift tax
•The FairTax eliminates capital gains taxes
•The FairTax eliminates the alternative minimum tax
•The FairTax eliminates the self-employment tax
•The FairTax eliminates the corporate income tax
•The FairTax allows you to keep 100 percent of your paycheck, pension, and Social Security payments
•The FairTax frees up the time wasted on filling out cumbersome IRS forms
•The FairTax wipes out the income tax code and shuts down the IRS
•The FairTax makes taxation of income unconstitutional by repealing the 16th Amendment
•The FairTax exempts all taxpayers from federal taxation up to the poverty level, through a monthly rebate
•The FairTax ensures that all Americans pay their fair share of taxes (rich have more money, they spend more, and buy more new goods and services than the poor)
•The FairTax dramatically lowers tax rates for low-income and middle-income Americans (like myself)
•The FairTax enables families to save more for home ownership, education, and retirement
•The FairTax protects and ensures the funding of Social Security and Medicare
•The FairTax leaves unchanged the amount of money raised by the federal government
•The FairTax makes American products more competitive overseas
•The FairTax ensure that the 12 million plus illegal population pay some type of tax
Of course, these are but a few of the solutions the FairTax provides Americans. So, why not the FairTax? What other idea or system provides this amount of comprehensive tax reform and benefits? Actually, there are none. Until a better solution is offered, my family and I support Americans for Fair Taxation (http://fairtax.org/index.htm).
EW
Published: November 15, 2006 4:24 AM
Mike Blanchard
I have read the the comments about the fair tax on this blog and am astonished at the misrepresentation of the facts concerning the fair tax. It is obvious that the vast majority of you who are against the fair tax simply don't understand it. I would suggest that you actually read HR 25 and learn the facts before posting an opinion.
Every argument against the fair tax on this site is either a factual misrepresentation, or a pie in the sky "do away with all taxes" comment.
The benefits of the fair tax are right in front of your face if you could just take off the blinders and give the idae a chance.
While the fair tax isn't perfect, it does fix many of the problems that we currentl have in place.
Mike B
Published: November 15, 2006 6:34 AM
M E Hoffer
EW & Mike B,
Why hack at the branches, in talking about Tax Reform? Why not strike the Root? Get behind the repeal of The Federal Reserve Act of 1913.
Then, it may make some sense to dicuss the level, and the system of collection, thereby, of Taxes that should be raised.
As long as the FedRes is free to control our currency we'll never acheive any purchase, no matter if our purchases or incomes are taxed.
And, EW, with this: "That type of solution will never be accepted from our elected leaders or the lobbyist who use that leverage against us, the tax payer." kind of thinking, you may as well retire from the battlefield of Ideas, and the pursuit of Liberty.
Published: November 15, 2006 7:17 AM
Dan Coleman
To be sure, Mike Blanchard, there are certain, immediate, positive effects associated with the "Fair Tax." However, Austrians are confined to look at both what is seen and what is unseen in any economic policy.
The FairTax does not call for a reduction in the size of the Federal Government, and makes the claim that it will simply be a system that gets the same output in tax dollars as our present income taxes, etc. do. It is a shift in how taxes are collected, rather than a true, substantial reduction in the size of our government.
Of course, I would love to keep all of my paycheck, as well as enjoy some of the other benefits, but as a libertarian I cannot support this initiative for several reasons. Your reference to looking for improvements rather than a 'pie in the sky' reminds me of part of Rothbard's concluding chapter in his book "For a New Liberty":
Are We "Utopians"?
All right, we are to have education through both theory and a movement. But what then should be the content of that education? Every "radical" creed has been subjected to the charge of being "utopian," and the libertarian movement is no exception. Some libertarians themselves maintain that we should not frighten people off by being "too radical," and that therefore the full libertarian ideology and program should be kept hidden from view. These people counsel a "Fabian" program of gradualism, concentrating solely on a gradual whittling away of State power. An example would be in the field of taxation: Instead of advocating the "radical" measure of abolition of all taxation, or even of abolishing income taxation, we should confine ourselves to a call for tiny improvements; say, for a two percent cut in income tax.
In the field of strategic thinking, it behooves libertarians to heed the lessons of the Marxists, because they have been thinking about strategy for radical social change longer than any other group. Thus, the Marxists see two critically important strategic fallacies that "deviate" from the proper path: one they call "left-wing sectarianism"; the other, and opposing, deviation is "right-wing opportunism." The critics of libertarian "extremist" principles are the analog of the Marxian "right-wing opportunists." The major problem with the opportunists is that by confining themselves strictly to gradual and "practical" programs, programs that stand a good chance of immediate adoption, they are in grave danger of completely losing sight of the ultimate objective, the libertarian goal. He who confines himself to calling for a two percent reduction in taxes helps to bury the ultimate goal of abolition of taxation altogether. By concentrating on the immediate means, he helps liquidate the ultimate goal, and therefore the point of being a libertarian in the first place. If libertarians refuse to hold aloft the banner of the pure principle, of the ultimate goal, who will? The answer is no one, hence another major source of defection from the ranks in recent years has been the erroneous path of opportunism.
Recent movements among libertarians have called for a restraint on our radicalism, if only to achieve practical and immediate results for our efforts. But it is precisely this attitude that most harms liberty in the long run.
I have to ask the question: is the Fair Tax, whatever its benefits, more of a diversion or more of a help? I think, unfortunately, that it's the former, not the latter.
Published: November 15, 2006 7:21 AM
Edubwa
This is open to anyone...
If the Federal Reserve Act of 1913 was repealed 1 January 2007, what happens next? What is the plan following the repeal?
EW
Published: November 15, 2006 7:50 AM
Laurence Vance
Mr. NOINCOME TAX says that Mr. Vance is not a libertarian? That is news to me.
Edubwa utters two big fat lies about the FairTax:
1. "The FairTax makes taxation of income unconstitutional by repealing the 16th Amendment." This is a lie. Not even Neal Boortz makes this claim. If H.R. 25 were passed tomorrow, it would not repeal the 16th Amendment. And even if it did, we could still have an income tax, as I will show in an upcoming blog entry.
2. "The FairTax allows you to keep 100 percent of your paycheck, pension, and Social Security payments." This too is a lie. Boortz had to remove the nonsense about keeping "100 percent of your paycheck" from the second edition of his book. The FairTaxers have not read my analysis of this in my most recent article on the FairTax.
Mr. Edubwa also says: "If you dislike the FairTax, please provide solutions instead of repeal this, repeal that." But repeal is the only real solution. Why can't you FairTax guys get it?
Published: November 15, 2006 10:06 AM
Stephen
Much of what I see here is why I am almost a former Libertarian. The rest of what I see comes from people who have never read Boortz's book or the HR 25 bill and what they say is just wrong.
It is easy to see from a reading of Boortz's book that the Fair Tax is a step in the direction that Libertarians want to go. The main criticisms of the Fair Tax are because it won't eliminate taxes, it won't shrink the Federal government to a 1789 level, and it sends a check to every household every month. Eliminating taxes and a 1789 government are not going to happen anytime soon, and no movement in that direction will ever happen without the Fair Tax. But since the Fair Tax doesn't take us all there in one fell swoop, it is a "fraud". Give me a break.
The Libertarian Party will never be a major player on the American scene because they do not know how to win. They are not patient, they are not willing to focus on "let's get what we can now, and work on the rest later", they are not willing to compromise, they are not willing to form alliances to gain enough support to actually win. So they remain a fringe player on the national scene and will never win anything.
Libertarians pursue everything on their agenda with the same priority, and anything that doesn't give them everything they want now is of the enemy. It doesn't matter how outlandish or unsupported by the mainstream of America, it must be adopted today. A plan that only gives a little taste of what Libertarians support so Americans will want more is not good enough.
When I try to talk to folks about a smaller government, a cheaper government, I get the "So, a Libertarian, huh? Yeah, legalize drugs...cool, dude." I say, "Yeah, but that's not important. How much America has fallen prey to what the Founding Fathers tried to protect us from is what is important." But all my friend is thinking about is Libertarians and legalizing drugs.
In the 2004 election, with high negatives for both candidates, the Libertarians had a chance, for perhaps the first time, to really gain on the two major political parties. How did they do? Their rabid ant-war rhetoric, using some of the same quotes about America that Osama Bin Laden used, alienated so many that here in North Carolina Libertarians lost their ballot access. A friend of mine said they did poorly because they have grown so comfortable being out of the mainstream for so long that they didn't really want to move into the mainstream.
So the Fair Tax doesn't really mean that you get to keep 100% of your paycheck? Ok, you're right. There will still be state witholding, unless the state adopts its version of the Fair Tax. So what? Is that technicality so vitally important, or are we just pole vaulting over mouse turds while Rome burns (to really mix my metaphors)?
The Fair Tax will certainly go a lot farther in helping us to see how big government has grown, more so than anything else in existence or on the horizon. That visibility should help us to be more careful about what we let our government do to us. If we don't ("We'll end up with both a sales tax and an income tax!"), then shame on us.
The Fair Tax will energize us more in exercising care about what government does, and let us see how much government costs because it will shout at us every time we buy a loaf of bread. Will the Flat Tax do that? Will anything from the President's Commission do that? All of them keep the income tax, they keep the IRS with its Big Brother intrusions and powers, and they hide what the government costs. But let's call the Fair Tax a fraud because it doesn't eliminate taxes - what a brilliant strategy for getting where Libertarians all say they want to go.
No matter what else it does or doesn't do, it does stop the income tax. And for that alone I would pay a lot. I yearn for the day when no one in the federal government knows or cares how much I make. Bring on the Fair Tax - it's the only plan that does that.
Published: November 15, 2006 10:35 PM
Edubwa
Mr. Vance, instead of just attacking the FairTax, please provide a solution with the attacks for us to review and evaluate. You have only hit and run tatics in this blog site.
Again, if the Federal Reserve Act of 1913 was repealed 1 January 2007, what happens next? What is your plan following the repeal?
To all Libertarians, if you didn't know it existed, read The Fair Tax Book by Boortz and decide for yourself if the FairTax is worth supporting. When Mr. Vance hypothesizes regarding The FairTax, that doesn't make it fact. Again, read and decide for yourself...
EW
Published: November 16, 2006 4:14 AM
JeffG
Mr. Vance wrote "Get your own institute and your own blog and your own daily articles. Is it also not censorship when the FairTax website won't run my attacks on the FairTax? Why the double standard?"
We'll - The FairTax website is dedicated to promoting the FairTax. The Mises Institute, in my view, is for the discussion of classic liberal philosophy, libertarianism, and liberty. They have different purposes Mr. Vance and I would expect the Mises Institute to further the discussion on these topics and not limit itself to idealogical positions with no practical solution or advancement of these principals.
We're discussing tax reform (not tax cuts) which would hopefully result in a reduction / or limit government growth and result in reduced taxes. The argument which is discussed in Mr. Mastromarco paper. The FairTax would certainly result in reduced tax burden per several studies. It is important to separate the two (tax reform / tax cuts) as it is unlikely to be done together.
Such discussion is the longest running debate in our circles - incrementalism. You seem to believe publication of an incremental approach not worthy of the Mises Institute. Voluntary taxation is the only immediate solution as you might say. However, this is not a solution - it is an immediate pipe dream. You might as well be writing fiction. Don't get me wrong - I have not given up and I want many of the same things. However, I live in a world called reality. This world says we need to have incremental steps to achive such ideas. I'd expect the Mises Institute to be more then a one sided attack dog.
Published: November 16, 2006 9:09 AM
Geoffrey Allan Plauche
I'm not going to take sides on the Fair Tax issue here. I just want to comment on the accusations of censorship. Why is it that I so often here this accusation when some organization doesn't publish a person's cherished article?
First, I reserve the term censorship for government policies.
Second, the Mises Institute doesn't have to publish your article and there may be reasons other than the intent to suppress opposing viewpoints for their not publishing it. Example #1, they can't publish everything that is submitted to them. Example #2, they may honestly consider a particular article to be of poor quality.
Finally, it seems to me that there are plenty of pro-Fair Tax comments on this blog. Hardly evidence of suppression or censorship. Can't Jeff Tucker express his own opinion in a blog comment without being accused of intent to suppress?
Published: November 16, 2006 12:21 PM
Sione
This Fair Tax issue debate on and on and on. It's completely unprincipled really.
The magnificent idea of redesigning a tax system has been promoted and implemented before- more than once. Why can't you North American tax obsessives seek out other places where such this has already occurred and learn something?
Here is one small example.
During the 1980s in a little country called New Zealand (it's near Australia and no, the Harbour bridge does not cross the Tasman harbour to join Australia with New Zealand) the government restructured its taxation system. A new Labour government under the then Prime Minister David Lange and his Minister of Finance, Roger Douglas, introduced a sales or consumption tax similar in many respects to the "Fair Tax" (what a dishonest title, as if tax can ever be fair- who was the dirt low liar who came up with that moniker?).
There was a big promotion about how it was going to be more efficient, how people would pay less, how other product specific taxes and regulations would be eliminated, how income tax would be reduced, how much easier compliance would be and how everyone would benefit- paying less but getting more. Yes, a miracle!
What actually occurred since then is that more new laws and regulations were indeed introduced. The new tax (GST) which started at 10% was raised to 12.5% (an act which started off a recession at the time). Income tax has been raised. Product specific taxes remained and in some cases were increased (gasoline and imported Japanese cars for example). New types of impost, charges and taxes have been introduced and raised. There is tax on tax. The government take is UP. They steal more money than ever.
An important issue that is rarely discussed is the collection and collation of information that a tax of this sort enables. Thousands of new staff to implement and administer the GST system were employed. New software and computers were purchased. Much important and sensitive information collected. Every aspect of private business is able to be derived or obtained. There aint no privacy.
FT will not result in an improved situation for US citizens and residents. To believe so is foolishness indeed. These ideas have been tried previously and they do not work out as promoted or wished for. FT proponents have a lovely wee faith but it is arbitrary and based on little more than wishes. Real evidence demonstrates the futility of their position (unless of course what they are really working for is bigger, more intrusive taxation).
What FT fetishists ought to consider is PRINCIPLE. Tax is theft. Start from there. The way to go is to campaign to remove existing taxes and NOT to promote yet another new one.
An analogy. Should one oppose the pack rape of young Australian women by lebbo thugs from Western Sydney, one does not proceed by campaiging for regulations to confine the rapes to Sunday's between 7:00am and 9:00pm, such rapes not to be visible to the public, nor to take place near or upon Sydney beaches or train stations. One does not proceed along such a path with the rather naieve hope that by incremental steps the raping can gradually be lessened and come under control. One proceeds as the Sydney-siders have done. Catch and imprison the rapists.
In conclusion: FT is an unprincipled idea. Best to realise it's been tried elsewhere and didn't work as promoted. Spend your energies elsewhere. This thing aint worth consideration.
Si
Published: November 16, 2006 1:14 PM
JeffG
Your rape story is a poor analogy. Problem is that the majority of people don't see taxation as theft or a crime. There lies your issue. Over time, I think many could be made to see the core classic liberal philosophy again. However, it won't happen at once and not anytime soon. It is extreme positions such as this that doom the party and any hope of progress. The philosophy is great and I agree, but impractical for implementation until the public is moved from their socialist brainwashing. The FairTax can help move the public and restrict government.
Published: November 17, 2006 8:26 AM
Sione
JeffG
The majority of rapists do not consider rape as a wrong either- certainly not while they are in the middle of undertaking such.
Interesting that you identify my position as "extreme" (whatever that is supposed to mean). I do consider the promotion of rape or theft to be unreasonable, just as I consider those very actions to be terrible wrongs. Surely you're not of the opinion that I should compromise and accept such evils albeit on a limited, regulated basis?
This issue comes down to a matter of principle. As long as the core principle is avoided (that tax is theft), all that is being undertaken is a wee bit of fiddling around the edges of the situation. Unless and until the principle is applied nothing worthwhile is to be achieved. All that you are doing is attempting to alter the time and place and exact method of the commission of the crime (the tax or the rapes), nothing more than that.
By avoiding principle you have conceeded the argument already. You will never stop a rapist unless you act on principle (as has been occurring in Sydney where these thugs are being chased down and removed from the scene for decades). Similarly you will not stop theft unless you act on principle. Ditto taxation.
In the case of the FT nonsense the principle that "tax is theft" has been evaded entirely. The FT people are promoting the notion that FT is a better way to steal. In reality that's about all there is to FT and that's about all that's being discussed. How does this nonsense demonstrate to ANYBODY that taxation of a form of theft? It doesn't. FT is theft.
It is unreasonable to expect anyone could come to the understanding of the nature of tax as a type of theft from FT promotions.
People will not "see the core classic liberal philosophy again" as the result of the FT evasion of it and of one of its core principes.
Meanwhile, I draw your attention to the reality of what occurs when schemes like FT are implemented. Places like New Zealand (do you even know where that is?) have tried all this stuff already. Go there and take a look for yourself. The results are not at all good for freedom. In the end you get more collectivism instead.
There is a saying; "What's bad in practice is bad in theory." FT is a really bad practice. Don't be applying it to the USA. You'll be responsible for hurting many innocent people.
Sione
PS: I am not a member of a political party.
Published: November 17, 2006 12:06 PM
JeffG
Sione,
Rape is considered wrong by most - not just the rapest. Taxation by force is not. The overwhelming majority are fine with tax theft. It is more consenting sex then rape to most. Your thought is extreme in mainstream culture. I'm not saying I disagree with your concepts. However, you are correct in that I conceeded the principle as it is unrealistic today - you might as well be posting in a fiction blog. I find the FairTax to be a realistic goal for reversing the perception and limiting government (over the current U.S. system). It is all a scheme no mater what system and country - I think consumption taxes have built in benifits over Marxist income taxes.
Published: November 20, 2006 10:52 AM
Sione Vatu
JeffG
It's a shame you concede the principle. In that case there can be no argument about taxation. The government has a right to everything of yours including your body and your mind. It's merely a matter of how much they decide to let you keep and how they calculate it.
Apart from the lack of principle FT is a poor idea. The theory is bad. It really is worth the time to find out what has already occurred in other jurisdictions when these sorts of taxation schemes are introduced. The compliance costs are high. Other taxes are not removed. The take increases over time. The govt receives a windfall of information about every activity in the economy and eventually about every person. "Perceptions" about limiting tax and limiting government are NOT ALTERED WHATSOEVER (how could they be when the scheme remains, pay or else?- exactly as with any and all tax). The people comply, pay the new imposts and go on to comply and comply and comply (as Stalin noted, you can "Squeeze them until the pips squeak"). These are the things that ACTUALLY DO OCCUR. Happens each and every time. So why persevere with FT when you already have ample evidence of what WILL happen? Promoting FT is wrong.
A few years back in Sydney a group of twenty men and a few under age boys as well (all from a particular cultural minority) dragged two young women off to a secluded building and over the course of several hours tortured & pack raped them. They even called up their friends by cell phone and invited them over to take part; some did. When these thugs were eventually captured by the police investigators, they claimed that what they had done was justified. The women were not dressed correctly. They had asked for it and deserved their ordeal. It was a "punishment by God". The point here being that in that building, at that time, the rapists were in the majority (28 - 2). Most people present at the time (along with their families and relatives it would seem) actually considered the activities ocurring were OK and correct. They agreed with what was happening. Did that make it right? The answer, of course, is no. Taking a democratic vote is not the way to determine right or wrong, good or evil. It never has been.
Whether the great mass of people accept tax theft or not is irrelevant. The truth or morality of an issue can't be established and validated by social metaphysics.
Tax, like rape, is a wrong. In effect all the FT proponents are achieving is to argue how the violation should occur; front or back.
Talofa!
Sione
Published: November 20, 2006 1:07 PM
WGC
Everyone here misses the boat entirely.
While the federal government will still need to be funded by some form of tax, it is our responsibility to yank our senators and representatives out of office if they continue to spend like drunken sailors.
By forcing the government to implement a uniform consumption tax across the board without allowing exceptions or entitlements, it gives them less power to corrupt the system.
The biggest omission in this blog is what eliminating the income tax will do for this economy. Having no taxes on goods until the retail sale will have most of our off shore businesses coming back home. Right behind them will be foreign businesses stampeeding to this country because it will be a tax haven from their own countries. The only unemployment we will have is the people too lazy or sick to work.
The second biggest omission is that the number of people funding the government will become much larger. It won't be just income earners. Everyone will be contributing. Even visitors from other countries and yes, even the illegal immigrants that are here now. When more people pay, everyone pays less.
The current system punishes our economy. The Fairtax will stimulate our economy. We will have the fastest growing economy in the world... until the others catch on and do the same.
Published: November 29, 2007 4:14 PM
Beef N. Bean
Thanks for your nit-picking rebuttal to the Fair Tax. It's nice to see academia is still mired in the Karl Marx progressive taxation on income. Confining government revenue only to those people that actually have jobs seems like a fair and equitable way to pay for everything. According to you I should be grateful for the privilege of having 25+ percent of my income stolen from me each pay period to fund the needs of the federal government just because I have a job. Wow, thanks a whole pant load.
Why do you eggheads ignore the simple fact that the underground economy continues to get a free ride under the current convoluted income tax system that would otherwise be contributing to the general fund if the Fair Tax was in place? Now I know, the drug dealers and the prostitutes aren't going to remit 23% of their profit from their illegal activities to the federal government. When they purchase goods at the retail level with the above described profits, they will be paying the 23% inclusive tax just like everybody else. Ditto for everybody else purchasing new goods at the retail level in this nation whether or not they are here legally.
Your diatribe points out the imperfections of the Fair Tax as a collection system. Big deal. It's not a perfect system and neither is the current income tax system. The Fair Tax is a much better, much simpler method to collect revenue to run the federal government. Here's a few things I can do without if we switched to The Fair Tax: Keeping records of all the money I spend during the year to qualify for this deduction or that deduction. Buying $80.00 worth of software each year to make sure I can comply with the convoluted tax code and pay my fair share. Keeping records of how I invest my money to comply with the tax code. Hanging on to such records for 7+ years in case I'm audited in order to prove my innocence.
Thanks again for being part of the problem and not part of the solution.
Published: February 29, 2008 7:35 PM
Inquisitor
Are you aware that the LVMI is against all taxation?
Published: February 29, 2008 8:15 PM
Oops
"The maintenance of a government apparatus of courts, police officers, prisons, and of armed forces requires considerable expenditure. To levy taxes for these purposes is fully compatible with the freedom the individual enjoys in a free market economy. To assert this does not, of course, amount to a justification of the confiscatory and discriminatory taxation methods practiced today by the self-styled progressive governments."
-- Ludwig von Mises
Published: May 30, 2008 3:57 AM