The Flat Tax Is Not Flat and the FairTax Is Not Fair
Two specific tax reform plans that some libertarians have fallen for are the Flat Tax and the FairTax. Both plans promise to invigorate the economy, increase employment, and raise everyone's standard of living. Neither one is true to its name; neither one is an incremental step toward overall lower taxes. Both are fraught with problems and contradictions; both are revenue-neutral plans that would fund the federal government at the same obscene level that it is now. FULL ARTICLE
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Comments (137)
Comments (137)
cavalier973
I agree that, if a taxes are required by the populace to fund the government they want, the best tax system is a "Lump Sum Tax", where everyone pays the same amount.
I disagree that it would not be beneficial to replace the current tax code with either the Flat Tax or the FairTax, however "non-fair" and "non-flat" each of these proposals are.
Published: April 3, 2009 7:32 AM
JayH
The author makes a great case and the whole point is missed. The goal he is after is the ultimate goal for fiscal conservatives in this area. The problem conservatives have in getting there is the are not willing to take small steps along the way. We did not get where we are today but through many small steps and that is how we will reverse it. While these two plans are not perfect they are one step in the right direction.
Published: April 3, 2009 8:24 AM
Kevin Hall
"Barack Obama ran campaign commercials openly boasting that no taxes would be raised on any American making under $250,000. This, of course, means that he intends to fleece any American making over this amount."
This is true as of today; mark my words, he will cut the amount of deductions we are able to take and find any way possible to raise our taxes, without having to admit he had done it. My best guess is we will get a wake up this time next year when the things we are use to taking deductions on are no longer listed on TurboTax. As for the fair and flat tax, I agree 100% that neither is fair or flat. The only fair or flat tax is 0%!
Published: April 3, 2009 8:28 AM
E. Foreman
To more fully understand the system whereby government takes value from its citizens, one must note that inflation by stealth robs us all, and it is going to get a lot worse. We are on the road to revolution, and the government is paving it.
Published: April 3, 2009 8:38 AM
Mike
Let's be real here...abolishing the income tax is never going to happen! (Quite frankly, I don't know how the heck we would fund national defense without it or some other form of taxation.) The focus should be placed on reducing taxes and spending, the latter which is out of control and unsustainable. Surely there are Constitutional grounds for ending the countless entitlements and programs that have been piled on in the last 80 years. (OK, maybe I'm living in fantasy land in believing in the Constitution. Most of our elected leaders certainly don't think it's worthy of wiping their a$$.)
Published: April 3, 2009 8:43 AM
Kicker
While many of the author's points are valid, critical aspects of the FairTax are left out.
For instance, we can all agree the present budget for the federal government is excessive in the extreme, and serious pruning is required to return it to some semblance of rationality. While the author maintains that not addressing this is a failing of the FairTax, one must recognize that the FairTax is designed to address specific problems in revenue collection (complexity, inequality, transaction costs, etc). The FairTax doesn't purport to fix run-away government spending.
It would, however, make it easier for the public to realize just how much the government is extracting from them, and help fuel a second-wave movement to reduce that spending, and, hence, the sales tax rate.
The second issue raised, that the prebate makes the FairTax unfair, is a bit of a canard. The FairTax philosophy is that no one should have to pay taxes on the essentials of living (respects to Murry Rothbard). The FairTax defines this as the calculated "poverty level", and includes a refund (or prebate) equal to the amount of taxes that would be paid by someone living at that level. In essence, the "tax on living" decried by Rothbard is intelligently addressed under the FairTax.
While the author certain has every right to promote a reduction in the size and scope of government, and the reallocation of the resources consumed by government into the private sector, not recognizing the benefits of the FairTax in helping to secure those objectives does a disservice to the tax reform movement, and makes it more likely that nothing at all will be done to fix the problem.
Published: April 3, 2009 8:44 AM
Franklin
cavalier is correct.
I recall a health insurance benefit offering when I worked at a large electronics company. The more you earned, the higher was your premium contribution. They called it "fair."
Fair to whom?
The approved U.S. Budget is $3,200,000,000,000 (3.2 trillion).
At a population of about 300,000,000, every man/woman/child needs to ante-up $11,700.
Fair? Yes.
Acceptable? Never.
Published: April 3, 2009 8:57 AM
D. Frank Robinson
All these Fabian (incrementalists) pseudo-libertarian tax reform proposals amount to the same things. To paraphrase: Don't tax you. Don't tax me. Tax that guy behind the tree...and do it my way.
Of course, the first objection against tax abolition is that it would make defense of the people impossible. However, individuals are ultimately responsible for avoiding being 'collateral damage' first, then retaliating against the aggressor. Taxation disarms individuals and makes them MORE vulnerable and LESS able to retaliate.
The effect of collectivized national defense is to defend the elite ruling class first and sacrifice the populace. Taxation is war on the general populace by the governing elite. All taxation is aggression by the few against the many.
Flat taxers and Fair taxers simply differ in the tactics they wish to employ to execute the war. The strategic aim remains the same: preserve a hegemonic role for a ruling class to command obedience to their whims.
Published: April 3, 2009 9:25 AM
1776Freedom
There are many issues I take with Mr. Vance's article. 1) He says the sales tax rate is too low. Simply not true. 30% sale tax on the taxable goods and services from last year would have bee the same amount as the Feds actually took in. 2) He says there is nothing to stop the income tax from being reinstated. Part of HR25 is doing away with the 16th Amend. before the Fair Tax is adopted. Once the people are keeping 100% of their pay, YOU try and pass a law that takes income taxes out again. No way it will happen. 3) He says consumption taxes are not fair because you are asking for permission to live. The prebate will cover the things one has to buy to exist. 4) He says the 30% is too high. Again, this actually makes it apparent just how much government takes from us-and may make it easier to start enacting spending reform. 5) He supports an "equal tax"? Where a $20,000 a year worker pays the same as a $200,000 a year worker? HHHMMM, I don't see that generating the same amount of revenue. Plus, you will make sure the poor stay poor. 6) He seems upset that some will pay NO taxes under the fair Tax. Funny, he spends the first three paragraphs ripping taxes in general, and then he is mad that some won't pay?
I would be interestedin Mr. Vance's blueprint for how taxes should be collected. I too want much smaller government-cut in half for me-but we have to have SOME governement. How would he like to pay for the constitutional roles of government?
Published: April 3, 2009 9:38 AM
whittaker
The "equal tax" is definitely the way to go.
Furthermore, the amount of the equal tax should be determined by popular referendum-- NOT by acts of the legislature. Every citizen could suggest an amount, and final tax could be the median of all the suggestions.
Published: April 3, 2009 9:38 AM
Mike
Article 1, Section 8
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States
Published: April 3, 2009 9:47 AM
Nick E
In Article 1, Section 8: " . . . to pay the Debts . . ."
Yikes. Did anyone else decide to emigrate when they read that?
Published: April 3, 2009 9:52 AM
EnEm
I read about organizations for promoting Tax Reform. I didn't see any for Tax Abolition. The IRS is the henchman of the Federal government. Its role is that of a Capo. It's a collections agent of unimaginably vast sums of our hard earned money. And since money can be power, it gives the Feds unbridled power to play with the economy and our lives. The only way to prevent this injustice is to cut off their life line -- the IRS. And it's high time. Anything less is just Talk. And talk is cheap.
Published: April 3, 2009 9:54 AM
Dick Fox
Vance's whole argument is to set up straw men then attack them. Neither the flat tax nor the Fair Tax have eveer claimed to be tax systems to reduce taxes. As a matter of fact both take pains to demonstrate that they are revenue neutral.
What both the flat tax and the fair tax intend is to remove from the tax system the special priviliges and favoritism in the currenct tax system.
John Marshall was correct when he wrote: "The power to tax is the power to destroy." These tax systems take the power to destroy out of the hands of the politicians.
Finally, I assume that Vance would prefer no tax at all, meaning no government at all, meaning that he is not just a market anarchist but he is a moral anarchist. Ultimately this means he believes in the survival of the fittest, the law of the jungle.Di
Published: April 3, 2009 9:54 AM
Sovy Kurosei
There is no fair tax. Not even the equal tax is fair as the author claims.
Published: April 3, 2009 9:58 AM
Lou S
The author here is not advocating the total abolition of taxes - if you follow the logic laid out by Chodorov in 'The Rise and Fall of Society', that would force the government to cease to exist, therefore threatening the free operation of the marketplace and the ability of citizens to free themselves of the need to protect their personal property at a level that would hinder their ability to profit elsewhere. What is being advocated here - and it wasn't made totally clear until the last paragraph - is the scaling-back of our current government to the point where the United States no longer can afford to carry out empire-building activities around the world such as wars and economic blackmail through the United Nations and the World Bank, along with other dubious activities too numerous to mention here. The fact of the mater is, NO tax is palateable, however it is a necessary evil to the extent that you believe a form of government is needed to insure the safe and smooth function of the market system and the relative security of the personal property of citizens. The debate is around THE SIZE of the government needed to accomplish that, and the cost and payment method necessary to allow that to happen.
Published: April 3, 2009 10:11 AM
Clarity2009
1) The FairTax now contains a clause specifying that the 16th amendment must be repealed within 5 years of its passage, so you can stop the scare tactics of there being both income and consumption taxes.
2) Your suggestion that we should simply sit and toil under the status quo because the alternatives are not perfect is not acceptable. People don't support these plans for intellectual exercise Mr. Vance, they support them because even a change in the method of taxation can result in a dramatic improvement in our economy and our lives as free citizens. I would rather put up with an insulting label from "libertarian purists" than have to navigate through this tax code for another year.
3) You complain that you don't think the tax rates cited for the FairTax are accurate. Ok, let's assume that your assertion is true (Dr. Kotlikoff would disagree). So what? So what if they have to make a national sales tax 32% instead of 30%? Or even higher? If anything that is going to open peoples' eyes as to just how much the federal government taxes and spends. It will put business on the same side as individuals, both asking for this tax burden to be reduced. It would be a support of transparency in the tax system, how is that a bad thing?
4) Finally, the crux of your argument is that if we hold the view that taxes must be reduced, then we can't possibly support any reform of the tax code that does not simultaneously reduce taxes. This is a false dichotomy. The cause of reducing taxes is not a fight anyone has to give up in order to support a change in the manner in which the current unacceptably high taxes are collected. Additionally, advocacy for one does not hurt the cause of the other. These causes complement each other, they are not mutually exclusive.
I don't care whether you consider the flat tax flat or the Fairtax fair, what I care about is that they are both better than what we deal with today, and they both have a much better chance of getting passed in Congress than a moonshot proposal of eliminating taxes altogether. That doesn't mean I'm giving up on the moonshot, but it doesn't preclude making incremental improvements in the tax code.
As you pointed out, those who slowly imposed income taxation upon the populace did so incrementally at first, and yet somehow you think that can be wiped away with one fell swoop. That might win you a ribbon in a "who is the most Libertarian" contest, but for those of us interested in actually seeing some improvement occur in our current situation, it is not very helpful. Why give authoritarians the benefit of being able incrementally tax and regulate away our freedoms without being willing to respond and advocate in kind in the opposite direction?
Published: April 3, 2009 10:11 AM
Brodie
Anyone that thinks a flat tax or a fair tax will make things better is living in a dreamworld.
Thanks for writing the article. Libertarians need to strive for getting rid of taxes, not changing the kind of taxes.
Published: April 3, 2009 10:24 AM
Magnus
The only fair tax is the one you pay voluntarily.
In other words, it's not a tax at all, but a payment for goods and services.
Everything else is just institutionalized violence, no different, morally or economically, from slavery.
The State will not permit any major changes to taxation. It's that simple. A nation-state is a tax-farm, and we are the livestock.
The State may allow you to dicker around with some of the irrelevant details about how you will pay. The people in charge of the State realize that livestock that THINKS it's free is more productive than livestock that is kept in tight confinement.
Published: April 3, 2009 10:39 AM
AC
The spending is the problem, not the taxation. The spending generates the need for taxation or borrowing or monetizing debt (inflation). Gov't spending for services we do not contract for is an involuntary transaction and tyranny. Like many, I'm willing to put up with some tyranny, as long as its very small.
I would wager that if total gov't spending (fed, state, local) was 10% of current levels, we'd not be as caring about it. So cut back the spending to perform the functions gov't originally performed as outlined in the constitution. And everytime people want to "fix" something in their state, city, town, etc., let them put up their own money, pool it with others who are concerned, and hire the best person for the job. Privatize public property to the highest bidder, to pay back on our huge and growing debt. If there is one thing we need to communicate to the populace at large, it is that gov't spending is tyranny and the less of it the better.
Concerning military spending and use of our military around the world. In every place we have foreign bases, tell the host country that we are leaving, unless they want to pay for our troops, bases, and equipment to be deployed there. If some country is worried about their neighbors' aggression or potential aggression, tell'em we don't work for free and we get payment as we render the services. But we won't invade someone's neighbor for payment, i.e. mercenary work. Otherwise, let these other countries pay for their own defense.
Published: April 3, 2009 10:39 AM
Russ
According to the figures I've seen, the personal income tax accounts for somewhere between 40 to 50% of federal revenue. The military eats about 20% of federal revenue. So it's quite possible that we could cut out the personal income tax and still fund the military, as long as non-essential spending is drastically cut.
As for the idea that it could never happen... The IRS is in the executive branch, if I am not mistaken. So, wouldn't it just take an executive order that the IRS would no longer collect personal income tax? Of course, Obama would never do that, but a future president could. And if he made that promise part of his campaign platform, with the populist mood lately, I think it would be very popular.
Published: April 3, 2009 10:44 AM
D. Frank Robinson
What's not flat and fair about zero?
Re: Lou S, just what form of government justifies taxation? It is certainly not the form described in the aspirational U.S. Constitution? That design has clearly reveal many serious flaws. So serious that it has effectively been gradually repealed. It's a failure. It unlikely to be gradually restored. And even if it were, why would not expect it to fail again? It took a revolution and ten years to set up the con after a century of colonial experience. We now have two centuries of experience with the old Constitution. Perhaps, it's time to consider pushing the 'Reset' button.
Meanwhile, buy gold and think again.
Published: April 3, 2009 10:46 AM
Robert
The 'fair' tax does one thing well and that's to provide a daily reminder to all Americans of how much government costs. If the cost of government is too high then vote for peole who will reduce the spending and therefore reduce the rate.
The 'fair tax' provides clarity that isn't available under the current tax system which, in my opinion, is why government expenditures have gone through the roof. Too much smoke and mirrors, too many special favors for one group or another.
For example, do u think the people of this great country would have allowed the previous adminstration to embark on a 8 yr war if the NST rate was going to rise from X% to X+10%?
One last note, the 'Fair Tax' legislation also calls for the repeal of the 16th Amendment.
Published: April 3, 2009 10:58 AM
Nick
How about a monthly national lottery coupled with a repeal of the 16th and another amendment that enacts said lottery and specifically forbids the federal government from any other form of taxation?
Published: April 3, 2009 10:59 AM
Enjoy Every Sandwich
So the legislation calls for repeal of the 16th. What if the repeal is not ratified?
Published: April 3, 2009 11:16 AM
redshirt
Unless you repeal the ability to print money you are not going to stop the spending.
Get rid of the fed res bank. Restore the original money rules of the Constitution. The founders knew full well the evil of fiat currency. They said coin and they meant coin!
Meanwhile, yeah repeal 16th. Restore the original limitations of taxation. Uniform imposts, duties, excises to pay for existing debts, common defense, and general welfare. And given the clear subsequent enumeration of what the gov had the right to do, it meant general welfare as follows.
Published: April 3, 2009 11:24 AM
Matt
Dick Fox,
Those are some extraordinary statements about Mr. Vance that you made above. Do you mind if I ask how you know so much about someone you've (I'm guessing) have never met?
Mr. Vance addressed the issue of revenue neutrality in the article when he mentioned that some people would not have to pay taxes at all (i.e. "prebates"). How is this scheme not wealth re-distribution by another name?
Finally, the "special privileges" and "favoritism" you speak of above are things that should be applauded, not shunned. The less taxes one has to pay, the better. Today's proposals to close loopholes are merely another government attempt to crack down on people who - gasp! - have found ways to keep more of their own money.
Published: April 3, 2009 11:43 AM
geoih
Everytime the discussions on this forum shift to taxes, it makes me more certain that the realistic chances for any kind of a libertarian revolution are pitifully small.
Published: April 3, 2009 12:27 PM
Paco
Mr. Vance's premise is that the FairTax is not fair and a flat tax is not flat. Fine. But then he goes into great detail criticizing the FairTax because it doesn't reduce spending. Those are two separate issues.
Clarity2009 effectively dismantles Vance's primary arguments against the FairTax.
Matt: While I don't know if Vance believes in survival of the fittest, he clearly sets up straw men in his arguments. And what the prebate accomplishes is to eliminate taxes on basic living expenses. It has nothing to do with wealth redistribution one way or the other. Bill Gates gets a prebate. Mother Theresa gets a prebate.
Published: April 3, 2009 12:40 PM
DNA
Clarity2009:
"The FairTax now contains a clause specifying that the 16th amendment must be repealed within 5 years of its passage, so you can stop the scare tactics of there being both income and consumption taxes."
You need to live up to your username and clarify this statement. How, exactly, will passage of a fair tax bring repeal of the 16th about? This sounds like the usual scam of claiming future congresses will be bound to the balanced budgets demands of the current congress: in a word, bullshit. Apart from that, what happens during this 5 year period? Both consumption and income taxes, I assume?
Published: April 3, 2009 12:55 PM
Lou S
Re: D. Frank Robinson: The question you are proposing is whether you believe government should exist or not. ANY form of government that exists does not contribute production-wise to the economy of its state, and therefore has no means of supporting itself. What government is SUPPOSED to contribute to its state is a form of security for other members of the state so you don't have a situation akin to the wild west, i.e., one person, one gun. It also is SUPPOSED to allow people to contribute to the economy without needing to constantly personally protect their private property. It also is SUPPOSED to guard against fraud in the marketplace... However all these things come with a price, and require specialists to perform those tasks. Those 'specialists' are citizens of the state and as such are in need of income in order to survive.
My question to you, Mr Robinson, is: Do you think a form of government is necessary? And if so, how do you propose to financially support the structure and function of whatever 'government' you propose? We may argue ad infinitum about the size, nature and scope of whatever government you'd like, but in the end the funding for it MUST come from somewhere, and wherever it comes from it will be called a TAX....
Published: April 3, 2009 1:10 PM
Nick Bradley
I have a question (if anybody can answer it) on the tax incidence (who bears the burden) of the FairTax.
Basically (from my understanding) the party who bears the majority of a transaction tax is the side of the transaction who has a lower comparative elasticity. For example, if demand is more elastic than supply, the demand side will absorb more of the tax burden. Fuel taxes, for example, a levied on the buyer because demand for fuel is pretty inelastic over the short run.
So, how does this apply to the FairTax. My belief is that more of the FairTax will be passed on with required goods and NOT passed on with discretionary pruchases. As a result, consumers will bear a higher burden of the FairTax when buying meat, milk, and potatoes than when they buy ice cream or cheese whiz. That's only looking at demand side elasticity -- supply side elasticity seems a bit more complicated.
What will this do to consumer preferences? Won't consumers buy more "crap"?
Published: April 3, 2009 1:14 PM
Russ
Doesn't the repeal of a constitutional amendment require another amendment, ala the 18th and 21st amendments (Prohibition)? If so, the 16th amendment would need to be repealed by a new amendment that would have to be ratified by 3/4ths of the states. Since no act of law passed by Congress could possibly force this ratification, no act of Congress could legally repeal the 16th amendment.
Conclusion: No matter what the Fair Tax promises, it would just wind up being yet another tax, not a replacement for the personal income tax.
Published: April 3, 2009 1:19 PM
Gary
The Fair Tax specifically repeals the 16th Amendment and abolishes the IRS, two significant protections against a reintroduction of the income tax, as doing so would require a new Amendment and ratification. (Under Art. 1 Sect. 9 of the Constitution, in the absence of the 16th Amendment, income taxes are illegal.)
Tax abolition is a fantasy, but we cannot even begin to move in that direction without first dismantling the current system of taxation. Moving to the Fair Tax would provide an unparalleled first step toward the long-term goal of defining and eliminating unnecessary taxation. Revenue neutrality is a red herring; in reality many of the nation's current obligations cannot be abandoned overnight. Reduction of frivolous spending is essential, but it would be highly irresponsible to do so by simply cutting off most funding and letting the pieces fall as and where they may.
Published: April 3, 2009 1:23 PM
C. Evans
The idea of a tax-funded defense agency, i.e., a State, is a contradiction in terms. If we believe that the purpose of the State is to protect our lives, liberty, and property as some commenters have argued, then an entity whose first action is to tax its subjects cannot protect our lives, liberty, and property. Taxation is theft, a violation of natural law, and there is no way to define taxation without it being so. I cannot decide how much money to give the State nor can I decide to subscribe to competitors of security because the State threats to imprison me or kill me for disobedience. Thus, the State under which I live is the greatest threat to my life, liberty, and property because it threats me with violence every year, every month, every week, every day, every hour, every minute, and every second.
Crime is sporadic and attacks by foreign enemies are rare. In fact, the probabilty of crime and foreign attacks is greater due to the incessant interventions of our government into the market place and world affairs. But each day the US government attacks my property and my freedom. The question real libertarians ask themselves is not "How do I protect myself from criminals and foreign invaders?" Real libertarians ask themselves, "How do I protect myself from my own dishonest, insane, and intolerable government?"
Published: April 3, 2009 1:35 PM
DNA
Gary,
In Clarity2009's original post, the claim was that repeal would take place "within 5 years" of fair tax passage. Your claim makes it seem like repeal and passage happen jointly. At any rate, as Russ points out above, the necessary process (of repeal) is a bit more complex than that.
Published: April 3, 2009 1:48 PM
Enjoy Every Sandwich
So, repealing the 16th Amendment will stop the income tax, eh? Suuuurrrre.
Try going to the local mall and see how many people there know what the 16th Amendment is.
Note that although in the early 20th century Congress needed the 18th Amendment to have the authority to launch Prohibition, later on the War On Drugs was launched and nobody even seemed to notice the lack of constitutional authority.
I'm sorry to be so cynical. But we're not dealing with honorable people here.
Published: April 3, 2009 1:59 PM
Clarity2009
DNA,
The text of the bill changed in this Congress, it now as a clause that requires the repeal of the 16th Amendment within 5 years or the FairTax goes away. This would be the emergency ejection seat to prevent the scenario by which Congress could impose both a consumption tax and an income tax (which they obviously could do at any time anyway).
Within that five years, it certainly is possible for Congress to impost both consumption and income tax, just like it is now, but it would be very difficult for two major reasons: 1) the FairTax legislation dismantles the IRS, meaning the mechanism for which an income tax could be possible is taken apart. If the FairTax is passed as written, once we have gotten away from the income tax for a single year wherein no one has had to file tax returns, and all the infrastructure for income tax compliance has begun to vanish, it will be enormously difficult to go back to the income tax. 2) It would be hugely unpopular and the House tends to be a bunch of cowards when the general public gets pissed, and this is also what would generate the necessary pressure on Congress and the states to repeal the 16th Amendment. After 5 years of economic benefit from the FairTax, it would be very difficult to justify returning to the nightmare of an income tax code we all waste so much time and money complying with today.
Published: April 3, 2009 2:17 PM
Henry Stock
I don’t know about the rest of you, but I wish that Mr. Vance would have described a truly fair tax more thoroughly. The equal tax could be implemented only in a fairy tale because in reality there are people out there who through no fault of their own have no money or at least not enough money such as to make paying an unvarying lump sum impractical. Do we take the bread off their table or throw them into the street if they are unable to pay this lump sum?
I also think that the person who stated that the only fair tax is a 0% tax is not facing reality. There are services that are need for which it is impractical to charge people individually.
I do not mind paying more taxes than those who make less than I do as long as it is not a disproportionately larger share. I lean toward the fair tax because then I could control my taxes even more.
Both the flat tax and the fair tax are proposals for an incremental adjustment to the current grossly unfair tax system. Neither is perfect and neither addresses all issues that would make our system for financing the justifiable activities of our governments fair. We also need a return to the originally intended principles of a constitutionally limited government in which the powers of the federal government are “few and defined”. We need to return to the separation of responsibilities of a federal republic in which the national government’s sphere of power is focused externally, while those of the States are focused internally. I would prefer that all government powers, including State and Local, were also few and defined. If necessary, I would limit the amount that government can spend by constitutional ammendment to some small percentage of GDP.
In addition, having watched what happened when tax rates have been reduced, I suggest that if we were to adopt either the flat tax or the fair tax that perhaps we should start by lowering tax rates below the so called “revenue neutral” rates to make the changes revenue positive. We should continue to lower those rates until we experience two periods where total revenues actually go down and only then raise tax rate half as fast as we lowered them.
Published: April 3, 2009 2:26 PM
Russ
True. The fact that the Prohibition of alcohol required an amendment, but the Prohibition of certain other substances has gone on for some time without an amendment allowing it, is a good argument for the fact that the government will do whatever they can get away with, legal or not.
However, I think that if the 16th Amendment were repealed properly, people would notice and object if their incomes were getting taxed by the Federal government again. I'm not quite that cynical yet. And when I am, I'll just give up on this country altogether.
Published: April 3, 2009 2:31 PM
DNA
Clarity2009,
You're still not explaining what enforcement mechanisms exist for compelling a future congress to enact the steps necessary to repeal a constitutional amendment (the 16th). Do you understand that the word "require" is not sufficient for this purpose?
Given, that I cannot take seriously any claim that these congresses would find it difficult to impose both consumption and income taxes.
Published: April 3, 2009 2:32 PM
Matt
Paco:
I'm don't think Mr. Vance's arguments are straw men. I suspect any Austrian worth his or her salt would immediately point out the problem with a "prebate" being associated with basic living expenses.
Who determines basic living expenses, at to what degree? Do these factors change every year....and what about cost increases? I suspect government would be behind this scam. In short, the supposed benefits of installing a "prebate" system are vastly outweighed by the negatives involved with government determining what we should be consuming as basic living expenses.
Published: April 3, 2009 2:34 PM
AC
Nick previously mentioned lotteries.
I'll second that. People can voluntarily participate in lotteries or voluntarily choose not to participate.
Let the gov't raise money through lotteries and then let them live on that.
It's voluntary, doesn't require substantial amounts of capital, and would produce revenues to the gov't.
Published: April 3, 2009 2:38 PM
Russ
A bill signed into law by Congress cannot repeal a Constitutional amendment. Congress does not have the power to do so. There is a process for amending or repealing amendments to the Constitution that involves state ratification, and the Congress has no say in this matter. A "clause that requires the repeal" of an amendment is utterly meaningless. What is so hard to understand about that?
Assuming this happens, what would stop another agency from taking its place? As long as the 16th is still in place, which it would be, this is still a possibility.
No, the only way to get rid of personal income taxation would be to go through the proper, legal amendment process, as spelled out in the Constitution.
And even if the 16th could be repealed by a simple act of Congress, I wouldn't want that to happen, for it would set a very dangerous precedent. A Congress that could so easily get rid of the 16th, could just as easily get rid of the 1st, the 2nd, the 5th, etc.
Published: April 3, 2009 2:49 PM
DNA
"Assuming this happens, what would stop another agency from taking its place? As long as the 16th is still in place, which it would be, this is still a possibility. "
Actually, I'd say it's a dead certainty.
Published: April 3, 2009 3:03 PM
D. Frank Robinson
Re: D. Frank Robinson: The question you are proposing is whether you believe government should exist or not. ANY form of government that exists does not contribute production-wise to the economy of its state, and therefore has no means of supporting itself.
Define your terms. What is government? The traditional definition of government is a monopoly imposed by one minority class on the majority class. The monopoly imposed entails making up rules and enforcing them on the majority. Typically, the rules become progressively a scheme of caste privileges for the ruling class, i.e., taxes and regulations. See the literature on rent-seeking.
What government is SUPPOSED to contribute to its state is a form of security for other members of the state so you don't have a situation akin to the wild west, i.e., one person, one gun.
The rules enforced are alleged to be for the security of all. That means that government is a collectivized security service. This kind of collectivization might be justifiable IF the customers could freely secede and form another security service. Such peaceful separation is virtually never permitted.
It also is SUPPOSED to allow people to contribute to the economy without needing to constantly personally protect their private property.
Government - collective security (protection rackets) avoid acting to actually prevent violence. Typically, their goal is to administer retaliation against alleged violators of person and property. No one can actually or wisely delegate the protection of their life and property to another. So self-defense remains a cost that cannot be shifted to another. Instead, governments claim that all costs of retaliation shall be levied upon the victims. The supposed effect is that the government system of retaliation is more effective and less costly than self-help. That claim is disputable.
It also is SUPPOSED to guard against fraud in the marketplace...
Fraud is a matter of contract and entails as a matter of contract prior agreement on the terms of dispute resolutions. Government is not needed for contacts to be enforced. The costs of contract enforcement are a part of transaction costs and are mutual sunk costs of each of the parties to the contract. In other words, it is the market.
However all these things come with a price, and require specialists to perform those tasks.
That means these services have a discoverable market price.
Those 'specialists' are citizens of the state and as such are in need of income in order to survive.
Before they assumed the role of citizens of any state these 'specialists' were just people. People need to be productive to survive. All people specialize. What makes some 'citizens' a different kind of specialists than non-citizens? It is inclusion in the rent-seeking monopoly governing class.
My question to you, Mr Robinson, is: Do you think a form of government is necessary?
Every government takes a particular form and includes a governing elite of some size. I do not know, nor do you, what forms of government are least oppressive of the governed. The evidence of history strongly suggest the the U.S. government is not one of any possible form of least oppressive government.
And if so, how do you propose to financially support the structure and function of whatever 'government' you propose?
I need not propose any special terms for the financial support of a governing elite. It would be up to those making the agreement to be governed to negotiate with their would-be governors. It does seem intuitive that many people would devise many different formulas and modify those terms periodically to their mutual satisfaction based on experience and the market alternatives available. This implies the possibility of thousands of 'governments' from which individuals can choose to contract.
We may argue ad infinitum about the size, nature and scope of whatever government you'd like, but in the end the funding for it MUST come from somewhere, and wherever it comes from it will be called a TAX....
So long as it is coerced it is a tax. So long as one cannot freely transfer one's patronage to other retaliation enterprises, then one is being taxed in-kind. Fee for satisfactory service is not a tax. Compulsory payment for unsatisfactory service is a tax. Perhaps we can agree on that. It appears that what we will not agree on is that taxes ALWAYS pre-empt voluntary fees for service. Hence any form of government is a taxing entity; some are less tolerable than others. Not all people accept the same levels of extortion for the 'privilege' of 'citizenship'. Some of us are less submissive than others but each is entitled to seek a personal optimum. I think that's the function of markets. Hence, let a million 'governments' bloom. Some may well be so insignificant that they are scarcely noticed. Some may be utterly to totalitarian.
Published: April 3, 2009 3:09 PM
pbergn
Disagree with the author's main premise that Flat Tax or Fair Tax are mere "gimmicks", and that the "true" fair tax policy is either everyone pays the same, or there is no tax at all...
Taxation is necessary to some degree to pay for goods and services that are beneficial to all the members of the society regardless of their rank and social status, such as for building public infrastructure, police, fire and other disaster rescue services, medical emergencies and the army...
I think a Flat Tax of 10%-15% combined with low flat excise tax (
Now I agree that there should not be any exceptions to the taxation. Everyone has to pay the same flat rate of income or excise tax, regardless of their social status and rank...
This may not seem entirely fair, since this policy rewards the nun-productive behavior at the expense of more productive members of the society, but this can be regarded as the fee the more successful members of the society pay to their less fortunate counterparts to keep them reasonably satisfied, and to prevent them from resorting to non-productive methods for providing for their subsistence... Ultimately this differential in higher taxes paid will pay itself off...
This is in stark contrast to the alternative - no tax at all... Well, you would imagine what would happen - the State will either cease to exist as a result of being absorbed into the other states through coercive power, or by succumbing to the chaos and cessation of rule of law due to public unrest, or will deteriorate into tyranny brought about by the demands of the poorer strata of the society for social justice...
Conclusion: there is no "clean" solution to the problem, only the less bad ones...
Published: April 3, 2009 3:13 PM
Steve Maughan
I'm a big fan of the Mises Institute but I was disappointed with this article. Philosophically the protector of property right and the enforcer of contract law (i.e. the Government) needs to be paid by someone. Surely it is better to tax a transaction that requires protection than tax productivity that generates wealth? We should not penalize work. IMHO it's too much to ask to change the tax code and reduce the tax burden significantly in one felt swoop. What the FairTax seems to do is eradicate the dead weight of the tax preparation industry ($400B), it includes everyone in the tax system which in turn will give everyone an incentive to reduce the tax rate. All a good thing IMO!!
Published: April 3, 2009 3:14 PM
Michael A. clem
Taxes are supposed to merely provide income for the government to do its job, so one problem is that tax policy is full of deductions and loopholes and other ways to socially engineer society. However, even if such social engineering didn't exist, and we had some semblance of a flat and "fair" tax, the job the government is supposed to be doing is protecting the individual rights of its citizens. Involuntary taxation, being a violation of our rights, is clearly in contradiction with its legitimate purpose.
In spite of this contradiction, we are still stuck with government for the time being. If we hope to gradually do away with taxes, the first question should be what are they spending our tax money on? Is that spending for legitimate government purposes? Much of it is not.
Unfortunately, even if we manage to do away with taxes, there still remains the government's ability to print and borrow money, apparently with no significant limit. Ultimately, government is an agency of coercion, and it is difficult to see how to resist such coercion peacefully. But it surely cannot be done by calling for new taxes.
Published: April 3, 2009 3:19 PM
Russ
I agree that, unless one is an anarcho-capitalist (which I am not), one much admit that some form of taxation is necessary. I also believe that no tax is truly "fair". But as my dear old dad always told me, "Who ever told you life was fair?" As long as the taxation level is low, I can live with that.
I don't understand why new tax schemes are considered necessary. I have already pointed out that only 40 to 50% of the federal revenue is derived from the personal income tax. If you believe that the federal government is twice as big as it should be (if not bigger), then what is so objectionable with simply cutting spending in half, getting rid of the personal income tax, and replacing it with ... nothing!? The federal revenue would still be about 50% of what it is now. Surely that is more than big enough?
Published: April 3, 2009 3:34 PM
Ron@TheWisdomJournal
Taxation is the world's biggest bully (government) taking your hard earned lunch money.
Published: April 3, 2009 3:40 PM
Paco
It's called the FairTax -- that's a "brand" name (a FAIRly clever one at that - pun intended). It's not called the PerfectTax.
As a longtime libertarian (and often Libertarian -- I voted for Roger McBride in 1976), I don't look at the FairTax as the purest libertarian approach to tax reform. But it is an approach. An approach that, to me, has one overwhelming advantage over other approaches: elimination of the IRS. For any libertarian, getting rid of the most freedom limiting agency this side of the DEA should be enough alone to support the FairTax.
Now, about the 16th amendment. No, the FairTax bill, if passed, would not repeal the 16th amendment. However, the language of the bill provides that the FairTax would be sunsetted if the 16th amendment isn't repealed with 5 years (maybe 7, I can't recall).
Would that guarantee repeal of the 16th amendment? No. So? Currently, Congress can pass a national sales tax of 50% if they want and increase marginal income tax rates to 100% and put a $25 per gallon tax on gasoline and baby powder. This oppostion to the FairTax because, maybe, the 16th amendment wouldn't be passed is a straw man.
And Matt, (another straw man argument) the prebate has nothing to do with the "government determining what we should be consuming as basic living expenses." It is an arbitrary amount, derived from the amount of sales tax that would be paid by someone whose income is at some level of median income. Does it really matter whether that income level is $10,000 or $25,000? Bill Gates gets the prebate and Mother Theresa gets the prebate. Please try to think about these things conceptually.
Published: April 3, 2009 3:48 PM
Bill in StL
Dismantling the IRS is meaningless. The collection of any new tax, be it Fair or Flat, will require an executive agency. Certainly you don't suppose the citizens will be trusted to send in their taxes on the honor system? Instead of proving your claimed income is accurate, now you'll have to prove your claimed sales data is accurate. Coupled with the prebate, these conditions dictate an agency just as intrusive as the present-day IRS.
If you really want justice, and can't imagine life without government protection, push for voluntary funding. Churches manage, charaties manage, and businesses survive by either selling a good or service for a fee, or by contributions.
The church comparison has the added benefit of illustrating how this model would naturally limit government actions to those the citizens felt deserved funding. Sure, politicians would have to spend time raising money for their pet projects, but they're all a bunch of propagandists anyway, so it should be second nature.
Finally, if you think the free rider problem is sufficient to starve your favorite government projects to the point where you'd favor the reinstatement of taxation, perhaps you should ask yourself if you're really a statist tyrant.
Published: April 3, 2009 3:54 PM
Paco
Since this discussion seems to be focused around how many angels can dance on the head of a pin, here is another reason why the FairTax is the perfect tax for libertarians: IT'S VOLUNTARY!
Currently, we are forced to pay taxes anytime we but anything because all products and services contain embedded taxes (corporate income tax, payroll taxes, etc.). The FairTax eliminates embedded taxes (theothretically) and only taxes goods and services once at the ultimate consumer level.
So, if you only buy used items and grow your own food (and make your own liquor/beer/wine) you would never pay any tax. Plus you would get the prebate which should more than cover those few times when you accidently incurred a tax.
Published: April 3, 2009 4:01 PM
Russ
This argument is what a Randian would call a "package deal". The IRS could be eliminated *without* instituting a new tax.
No, it's not. The opposition to the Fair Tax is because, in actuality, it would almost certainly result in 5 (or 7) years of *both* personal income taxation *and* Fair Tax on top of that.
It's the idea that "Congress can pass a national sales tax of 50% if they want and increase marginal income tax rates to 100% and put a $25 per gallon tax on gasoline and baby powder" that is a straw man.
Published: April 3, 2009 4:04 PM
Lou S
C. Evans:
To argue that "Crime is sporadic and attacks by foreign enemies are rare" is a justification for no government is like saying "Cancer only affects one in 1500 people so spending money on searching for a cure is a waste". I am in total agreement with you in that the current state of the government Leviathan in the United States can be described as "dishonest insane and intolerable", however that answer to this is not 'NO GOVERNMENT'. It sounds as if you believe that by dissolving Washington all of mankind will suddenly evolve into Mayberry RFD... I'm not that trusting. As long as people own personal property there will be people who will covet that property and see theft as an easier alternative to reaching their means than by honest work. Similarly, in any social situation where a marketplace exists, there will be people who are willing to defraud or otherwise cheat others to forward their means. To not provide the citizens of the social situation (you apparently have issue with calling it a 'State') no remedy for these occurances because they occur 'rarely' is to invite the formation of posses, or gun-states and allow the people to take the situation into their own hands.
True, the current government has grown completely out of control, the centralization and socialization that is occurring now should be setting off alarm bells all over this country, and we would be much better served by a large-scale stripdown of the current situation as it exists today. But the answer is not 'NO GOVERNMENT'.
The Founding Fathers of this country struggled mightily with the question of the balance between individual liberty and freedom, and how to provide those governmental services deemed necessary while keeping the growth and intrusion of the government to an absolute minimum. And as soon as the ink was dry on the Constitution, there was dissent as to how to carry it out (see Alexander Hamilton vs. Thomas Jefferson). As much as anyone would want to hit the 'Reset' button on this country, these questions will still be there after the dust settles - what kind, how big, and how to pay for it...
I would certainly welcome your views on how to provide those minimum services usually provided by the government by not forming a government or quasi-governmental body. And please include how those services will be funded, and how providing that funding differs from a tax.
Published: April 3, 2009 4:10 PM
Russ
Eliminating personal income tax would be voluntary, too. After all, anybody who thinks that the federal government is not getting enough of his money, can write the federal government a check! *grin*
Published: April 3, 2009 4:10 PM
Paco
Bill in StL:
Under the FairTax, most citizens never have to send anything in. They don't even have to claim the prebate. Businesses collect the FairTax and get paid for doing so. I own a business and I am already collecting and remitting sales tax -- and I don't get paid to do it. In addition, I have to collect and pay SS tax, medicare tax, unemployment tax, withholding tax, income tax -- should I go on?
Read the bottom of the 1040 that you will be submitting to the IRS, right above where you are required to place your signature:
"UNDER PENALTIES OF PERJURY, I declare that I have examined this return...and it true, correct, and complete."
If you have made an error or committed fraud (the IRS decides which it is), you have admitted to perjury. If the IRS decides that they disagree with your interpretation of the tax code, the burden of proof is with you in Tax Court. It is the only court where you are considered guilty until you can prove you are innocent.
Again, as a libertarian who has been voting for Libertarian candidates for longer than many commenters on this thread have been alive, I am not seeking perfection. I'm tired of waiting for a libertarian society - a modicum of relief will suffice.
Published: April 3, 2009 4:19 PM
Russ
I am not seeking perfection either, Paco. I simply believe that the Fair Tax will not result in what you think it will result in. Here's what I see happening if the Fair Tax law you support is passed:
1) Let say, for the sake of argument, that the IRS is eliminated.
2) Another, new agency is created to handle the Fair Tax. It also takes over the IRS's old responsibilities.
3) Fair Tax is added to our current tax burden for 5 years.
4) After 5 years, the government decides they like the extra tax income so much they create a new Fair Tax law that doesn't have a 5 year sunset. This would be like income tax withholding; after WWII, the gov't liked it so much they decided to keep it. Then we are stuck with more taxes than ever before.
In short, I think you are being naive. I agree with Mr. Vance's general thesis: we are more likely to lessen our tax burden by eliminating taxes, than by creating new, different taxes.
Published: April 3, 2009 4:41 PM
Paco
OK, Russ, I agree. The federal government spends too much and collects to much in taxes. So, what is the optimum amount of spending and taxation - say as a percentage of GDP?
Let's start at 5%. I personally think it should be lower, but politically, that might be something that can pass. Now that we have that issue out of the way, let's figure out how the feds should collect 5% of GDP (that would be around $550 billion give or take.
I say we pass a consumption tax, eliminate payroll taxes, income taxes, estate taxes, and every other tax I can think of. Let's also eliminate the IRS and repeal the 16th amendment so Congress can't reinstitute a head tax. And to make sure we don't double or triple tax certain goods or services, let's only impose the sales tax on new items.
We can also have businesses collect the tax since they are probably already collecting sales tax at the state level, but let's reimburse them for the cost of collection, to be fair. Also, so that the %$#* government doesn't tax me and you for existing, let's reimburse us, and every US citizen, for whatever the amount of tax we typically would pay for basics like food and shelter.
Now, what rate should we make the sales tax so that the government only collects 5% of GDP? I would guess somewhere around 6%-8%. We need to do a little research to figure the correct amount.
One more thing; we need to come up with a catchy name to help pass this new tax reform legislation. I know. Let's call it the FairTax and see if we can get some congressmen and senators to write and file a bill that could get passed given enough pressure from voters.
Published: April 3, 2009 4:43 PM
Paco
Russ, you are missing the point. The FairTax eliminates the income tax. Congress would have to reinstitute an income tax in addition to the FairTax. Could they do it? Of course. But (and, au contraire, this isn't a straw man) they can do it now. Nothing prevents Congress from enacting any tax on anything.
Why don't they raise taxes to 35% of GDP? Because voters wouldn't stand for it (at least not yet). This is the same reason they would not be able to reinstitute an income tax in addition to the FairTax. I could be wrong.
BTW, who says passing the FairTax and repealing the 16th amendment can't be accomplished at the same time? A movement is building in several states to call for repeal of the 16th amendment, in conjunction with passage of the FairTax, through a constitutional convention.
It's a start.
Published: April 3, 2009 4:59 PM
Russ
Paco,
Seems like an overly-convoluted plan to me. I like the part about eliminating taxes, and repealing the 16th amendment. But completely restructuring the way the government collects funds makes me nervous. Maybe it's just my conservative side, cringing at the thought of wholesale social re-engineering. It seems to me that leaves way too much room for the socialists to spin your plan in some unintended and unpalatable way.
Anyway, here's my alternative. Here is some data I got of the 'Net; don't know how accurate is is, but let's say it's close:
2008 Projected Federal Revenue
----------------------------------------
1,146 billion - individual income taxes
275 billion - corporate income taxes
906 billion - social security taxes
81 billion - excise taxes
25 billion - estate and gift taxes
25 billion - customs duties
47 billion - miscellaneous receipts
TOTAL - 2,506 billion
If we hack out everything except corporate income tax and social security (no realistic chance in hell of getting rid of those anytime soon), we have cut out about 50% of the revenue (about 70% if we don't count Social Security). So there is still enough to run the federal government at a reasonable level, for a libertarian at least. Why add any new tax? What, really, would be the point?
Granted, the IRS may need to stay, to collect corporate taxes, but some agency would need to exist to collect the Fair Tax, too, so what's the difference?
And, yes, eliminating the government's ability to inflate the monetary supply and borrow money would need to be reduced, or we will just be taxed in an alternative way, but those are separate issues.
Published: April 3, 2009 5:17 PM
Russ
Paco,
Let's say, for sake of argument, that you're right, and that the Fair Tax law passes and would result in no federal taxes other than the Fair Tax, the corporate income tax and the SS tax (and let's be realistic, getting taxes down even this far has an almost nil chance of happening). And let's say my misgivings are unfounded, and that the Fair Tax results in a better financial climate for everyone.
Which is better?
1) Fair Tax + corporate income tax + SS Tax?
2) Corporate income tax + SS Tax?
I would pick the second option myself.
Published: April 3, 2009 5:31 PM
BWM
Why is it so hard to attack the Fair Tax on it's own ground if it's so bad? Every time I read one of these articles, I'm astounded by how little that is done. A flaw of the Fair Tax is that other taxes may aslo be passed? In what way is that possibly a reflection on the Fair Tax? Really, what's to stop them, RIGHT NOW, from imposing a consumption tax on top of the income tax? Nothing! But they don't do it, and just automatically assuming that the Fair Tax passage will lead to an income tax is a complete farce. That's like saying that buying a safe, family car is bad because it might inspire your daredevil brother to buy a tricked-out Mustang and drive like an idiot.
The rate of the Fairtax is 23 percent, and millions have been spent to establish it. And of course, yes, it's revenue neutral; it's STILL better than what we have. Libertarians like you who OPPOSE anything that's not flat out tax elimination prevent progress.
The amount by which prices would drop is clearly and openly admitted to be both unknown and unknowable; they simply state that, together, wages will raise and prices will fall roughly equal to the amount of the tax.
And charging the government the tax is bad how? It simply makes it easier and again tries to cover up loopholes.
And finally, complaining about taxes in general and then pinning those complaints to the Fair Tax is an obvious sophistry. No one is saying that it's AWESOME to pay money to the government. The whole point, thrust, and design of the tax is to reduce compliance costs and bring investment home; if you think it will fail to do that, then argue that point, instead of accusing it of being "a tax", like we didn't know.
The Fair Tax is not income redistribution. Since every household, by definition, would be paying pretty close to the amount of taxes given back through the prebate, no one would actually come out ahead. And since everyone gets the same prebate, even the rich, it's not just for one class. And it's only in the bill for one reason; so the poor can actually survive. Would you say the plan would be BETTER if the poor had to pay taxes before they bought food?
Really, why would it be better to argue tomorrow for lowering taxes by an amount less than the compliance costs of the system itself, when we could be arguing to eliminate those costs? That would be a BIGGER boon to the economy. It would bring home jobs and investment. And besides, remember when Bush "lowered" taxes? Right now, the system is SO complicated that you can raise taxes and make them look lower. We need to eliminate THAT ability for tax reduction to even be possible. I suppose you would say we are foolish for quibbling over whether to lay a foundation instead of just going straight to construction as you desire.
Published: April 3, 2009 7:22 PM
Redman
Folks, the point of Fair or FLAT is a non-starter as most folks in the US do not owe federal income taxes, regardless of what they may think or believe. Earnings derived from activities of common occupations in the private sector are outside the taxing authority of the fed. govt. These earnings are, by definition, not "wages" or "income" as those terms are used in the internal revenue code. Pls read Cracking the Code and get the rest of the story and do not fall for these 'other' tax schemes.
Published: April 3, 2009 7:33 PM
Peter
The FairTax philosophy is that no one should have to pay taxes on the essentials of living
Why not? If the reason is that taxes are wrong, then they're wrong for everything, not just "the essentials of living". If you don't think taxes are wrong per se, why would it be a bad idea to tax "the essentials of living" just like everything else?
Published: April 3, 2009 7:45 PM
D. Frank Robinson
I think this discussion illustrates my point that everyone has their own subjective evaluation of what is an acceptable level of oppression in return for some level of subjective security. Therefore, there should be many 'governments' with a variety of features and a variety of sizes of the inevitable oppressor class.
Among a population of 300 million it might well take 600 'governmental' units or more to optimize the subjective preferences of that population. A Fair tax set of 'states', a flat tax set of 'states', a progressive income tax set of 'states', etc. All such groups would be as they are now a temporary and provisional coalition of oppressors and oppressed. In other words, roll your own regime if you can attract enough like-minded individuals voluntarily.
One thing is apparent, the U.S. Constitution was not a very scalable scheme of governance.
Published: April 3, 2009 7:46 PM
Peter
The "equal tax" is definitely the way to go.
Furthermore, the amount of the equal tax should be determined by popular referendum-- NOT by acts of the legislature. Every citizen could suggest an amount, and final tax could be the median of all the suggestions.
I've got a better idea: have a referendum on what the tax rate should be, and then each person pays what he voted for. If you say 0% is right, you pay 0%. If you say 90% is right, you pay 90%. Etc.
But: don't tell anyone they'll be paying what they vote for until after the votes are collected. Let the evil ones shoot themselves in the foot...and then let them try to say it's not voluntary!
Re-run the referendum every 5 or 10 years. (Of course, after the first time everyone will write 0...)
Published: April 3, 2009 7:53 PM
Peter
Everytime the discussions on this forum shift to taxes, it makes me more certain that the realistic chances for any kind of a libertarian revolution are pitifully small.
So, if I'm inferring your meaning correctly, you'd prefer a libertarian revolution without the libertarianism?
Published: April 3, 2009 8:02 PM
Lowell
I don't know why the Flat Tax doesn't stay dead. The group on this forum should be looking at unintended consequences. Why so much discussion about the mechanism the government uses to steal from us?
Most state sales taxes are in the 6%-8% range. It pays to avoid sales tax on larger items. If the price is the same, why not buy on the internet if sales tax is greater than shipping (as is usually the case)?
Let's look at what will happen with a sales tax above 30%. Remember we will have to pay state sales taxes in addition to the national Fair Tax. This would really make it pay to avoid paying the Fair Tax. Expect Black Markets to crop up. The government will now have its excuse to regulate the internet since it will obviously be used to avoid paying tax. Expect raids by tax agents in homes and businesses to take inventory of all possessions. You had better be able to prove you paid the Fair Tax on all your possessions. What, you claim you bought that in 2008. Let's see your sales receipt.
If you don't like the present IRS you will not like these guys. Wait, it's going to be the same guys. You think the government is actually going to fire anyone.
Published: April 3, 2009 8:04 PM
Matt
Paco:
Conceptually, this is how I see the government remaining heavily involved in the fair tax scam. I'll quote Mr. Vance's article:
"This "prebate" is based on the government poverty level and family size. Thus, although everyone would pay the same rate under the FairTax, the end result would be that some Americans would pay no taxes at all, some would have most of their taxes offset, and some would get more money back than they paid in taxes. This makes the FairTax an income redistribution scheme under the guise of tax reform."
A tax system where some people end up paying no taxes is not "fair" at all. Further, these prebates are based on government poverty levels, meaning the government remains directly involved in the taxing system.
Published: April 3, 2009 9:06 PM
Clarity2009
DNA & Russ,
Please re-read my comments more carefully. I didn't not say the FairTax legislation repeals the 16th amendment. The legislation is written so that if the 16th amendment does not get repealed within 5 years, the FairTax ceases to exist.
All the arguments that we could have a consumption tax and an income tax ignore the fact that there is nothing stopping Congress from doing that today.
Believe me I have as much concern over federal expansion of power as anyone, but the FairTax would hamstring their capability to keep the income tax around.
Published: April 3, 2009 9:59 PM
Gil
I beg to differ Lou S - C. Evans was arguing (I believe correctly) that invasion by a random foreign aggressor is a highly unlikely event whereas being the victim of crime is far more common. Therefore, in an idyllic society, people would simply carry guns for self-defence and engage in militia training on the off-chance that they might actually be invaded (Switzerland?).
Still, talk of 'fair taxation' puts many a minarcho-Libertarians in a quandary - what's the 'reasonable' amount of taxation and government? What amount tax isn't 'theft'? What are the services that government is allowed and can't be provided by the free market (natural monopolies)? After all, governments can't be 'voluntary'. If you can choose your government and personally pay for the services you want and are free to stop using their services and stop paying them fees when you want to and choose another or none at all then you're dealing with a private business in a free market.
Published: April 3, 2009 10:58 PM
newson
americans, be warned about "modernizing" the tax code. here in australia, the gst (goods-services-tax) was ushered in with great fanfare, promising relief on direct taxation in favour of indirect.
result: federal tax revenues shot up, and marginal income tax rates have only come down slightly. it's been a gold-mine for the state. compliance costs also expanded dramatically, despite the gst being more "efficient" (fewer loopholes and arbitrariness) that the old wholesale sales tax regime.
forget about amelioration, and concentrate on progressively striking off imposts from the statute books.
Published: April 3, 2009 11:24 PM
Paco
Gentlemen, Ladies(?):
Let's not all get our underwear in a wad. Please stay in the realm of reality.
1. There will be taxes collected by the Federal government for as long as the Federal government exists. If you want to argue about whether there should be a Federal government, take that to another thread. This thread is about the "fairness" of the FairTax.
2. OK, the FairTax is not fair. So what? Go back to Marketing 101 if you want to equate tax fairness with the FairTax.
3. Here is the only question that counts: Which is better, the current system, the proposed FairTax, or some other tax reform?
4. In my opinion, the FairTax is the most well researched (and most radical) tax reform proposal. And it is the best of several possible tax reform measures because it actually has a remote chance of being passed.
5. It has a chance to pass because it "picks off" various objections: (a) it is revenue neutral so big government supporters can't object to it based on "cost" to the government. (b) arguably, it is less regressive than the current system (i.e., payroll taxes -- the most regressive taxes -- are eliminated and the prebate takes care of people at the poverty level). (c) It eliminates multiple government bureaucracies, including the IRS, the most hated and most anti-libertarian agency. Conservatives should support the FairTax for this reason alone. (d) There is an actual bill, with 50+ cosponsors, currently in the legislative hopper. 200 cosponsors would be better, but name another tax reform bill that has even been submitted.
I could go on, but these long comments become counter-productive at some point. BTW, Matt, please tell me you aren't really basing your arguments on anything Mr. Vance has written. Given the choice between trusting Larry Kotlikoff or the opinions of a part time accounting teacher at Pensacola Junior College, well, I don't really have to complete this sentence, do I?
Published: April 4, 2009 12:17 AM
Bill in StL
Paco,
Why do you think the FairTax courts will be any better than IRS tax courts? Should I be delighted that a slightly smaller class of people, businessmen, will be abused directly by the tax agents than those now abused? Do you think they'll suddenly stop prosecuting people randomly for perjury? How will the tax structure change that? That's just part of enforcement of any tax code.
FairTax and FlatTax proponents rave about getting rid of the IRS, but don't acknowledge that there will have to be an apparatus to collect these new taxes. Maybe fewer people will be affected directly, and maybe there will be some savings with compliance costs, but that's it. There will still be a large portion of the citizenry subjected to the injustice that is tax enforcement. Ultimately, enforcing the tax code is less about clear rules, and more about fear. The occasional demonstration of arbitrary power will still occur under the FairTax.
Furthermore, I have a dim view of a group that would be so misleading to say that an item that costs 1.00 before the FairTax, and 1.30 after, will only be subjected to a 23% tax. If we were talking sales tax, or any other mathematical equation that comes to mind, that's 30%. On top of that, that number can only be justified based on the mutually exclusive assumptions that the government will pay this tax for the goods and services it consumes, but won't have to spend any more money.
By what magic are prices not going to rise when you slap a 30% sales tax on everything? If you claim that the demand curve will hold them at current prices, remember that when assuming that, you best also assume a sharp reduction in supply.
Anyway. Not that I'd be outraged to wake up one morning and see a flat tax in place instead of an income tax. But I see it as a very marginal step towards liberty with a very huge danger of just getting both income and sales tax.
To answer the question of why the feds can't impose a national sales tax now. Indeed there is no law prohibiting it, it is only the disgruntled masses who resist it by voting out the proponents and making a stink. The more the FairTax idea gains steam, the less resistance there will be. Perhaps you'll get your wish - but even so, I bet the income tax outlives all of us.
Published: April 4, 2009 12:31 AM
Gil
"So, if you only buy used items and grow your own food (and make your own liquor/beer/wine) you would never pay any tax. Plus you would get the prebate which should more than cover those few times when you accidently incurred a tax." - Paco.
Golly, if you lived on your own self-sufficient farm and don't have a formal income you won't be paying income tax either!
Published: April 4, 2009 1:39 AM
Paco
Bill in StL
I don't know what to tell you. I own a business. I already collect sales taxes for the state. There is no reason for me to try to cheat. Whatever sales tax I collect, I report. Now I suppose there are some who would want to collect sales tax from a consumer and keep it. But that would be morally wrong. That's Madoff.
On the other hand, when I fill out my tax return, I really don't know what the tax code says. And neither does my accountant who charges me $5,000 to do my business tax return. I also employ an accountant who takes care of the books but who really isn't qualified to do my tax return. She's a CPA.
And really, what does it matter if the rate is 23% or 30%? It's the same amount of money. If I buy something and it says the price is $1.00 and that is broken out as 77 cents for the cost of the item and 23 cents as the tax, what is the difference if the price is marked as 77 cents and when I get to the checkout I have to pay 30% tax? The price is still $1.00.
How about if we just talk about the FairTax conceptually? Let's trade the IRS, income taxes, social security taxes, medicare taxes, withholding, capital gains, estate taxes, unemployment taxes, 401K rules, IRAs, alternative minimum tax, tax courts, audits, loopholes, $300 billion in compliance costs, section 179, K-1s, 1040s, 1120s, depreciation (I can go on) for a simple sales tax. It is the same type of consumption tax that everyone currently pays in every state except New Hampshire and (I think) Oregon. I hope you realize you are currently paying 15%-20% tax in the form of embedded taxes in everything you buy (you don't think I price what I sell based on what it costs me to employ people, including payroll taxes?). Plus you are paying payroll 7.65% taxes.
BTW, the Flat Tax is still a tax based on income. It would still require me to withhold, pay social security, medicare, and unemployment taxes, deal with 401K rules, and fill out whatever forms the IRS requires me to fill out under threat of perjury.
Published: April 4, 2009 1:51 AM
Paco
Gil
My statement about taxes under the FairTax being voluntary was a little tongue-in-cheek. It was in response to those who say all taxes should be voluntary. I wish that were so. As a matter of fact, search You-Tube for a Harry Reid video where he insists that the current income tax is voluntary. Sure, it's voluntary -- more like volunteering to go to prison.
In any event, notice that I said "BUY used items." You need money to buy and you need income to have money (unless you have made your money the old fashioned way -- inheriting it). Income = income tax.
Published: April 4, 2009 2:03 AM
Matt
Paco:
You said, "BTW, Matt, please tell me you aren't really basing your arguments on anything Mr. Vance has written. Given the choice between trusting Larry Kotlikoff or the opinions of a part time accounting teacher at Pensacola Junior College, well, I don't really have to complete this sentence, do I?"
LOL!! Nothing more needs to be said, this sums up your position perfectly. Basing your opinion on someone's level of education/where they work is as laughable as it is absurd. George Bush went to Harvard Business School...should we solicit his opinion on this matter? Methinks the difficulty of thinking about this debate conceptually lies with you, not me.
Intelligence is a tool; it doesn't matter where you went to school or where you are presently employed - a mistake is a mistake. I don't care if Mr. Vance is a Junior High School Janitor - he's on the right side of this issue. When viewed through your lens, the fact that a part-time accounting professor can refute the "venerable" Mr. Kotlikoff's tax proposal should tell you something about the absurdity of Kotlikoff's theory in the first place....but I've already given you more attention than you deserve.
Ha!
Published: April 4, 2009 7:46 AM
Kakugo
Greetings from the Land of the Soviets (Europe).
I find the argument behind Fair tax simply laughable. Why? Around here we have both a personal income tax and a "Fair Tax" in form of a 20% VAT and deductions are getting fewer by the year. And they still haven't enough money. Beware.
On the other hand I completely agree with Jay H.: small steps are what we need right now, both in education and politics. That's how Socialism conquered the West.
Published: April 4, 2009 7:56 AM
D. Frank Robinson
"Do not give in to evil, but proceed ever more boldly against it." But with bold baby steps?
Why be coherent, consistent and audacious?
Another illustration that many different temperaments call for many differing forms of governance - even if the levels of coercion and retributive torture are similar, form and style still matter to many people.
The United States is neither eternal, indivisible nor with liberty nor with justice for all. People are too diverse to ever live peaceably under one god either.
Those who hang together fanatically may also hang separately.
Published: April 4, 2009 9:30 AM
Paco
Matt
I didn't say anything about education. You just assumed -- and you know what that does. I am simply noting the difference between opinion and research. Published research can be checked, analyzed, and refuted or verified. Opinions are like you know what. Everyone has at least one.
The title of the article that is the subject of this thread posits that the FairTax is not fair. As I have commented before, so? In this article, Vance himself says "I don't consider myself to be an expert on the FairTax." Unless I missed it, he does not reference one iota of research while stating his opinion. Yet, you use his opinions to back up your opposition to the FairTax.
All I am saying to FairTax opponents and fence sitters is look at the research. Then decide. There seems to be very little review of the research going on by the opponents. A good place to start is here:
http://www.fairtaxblog.com/research/
I wager I have purer libertarian credentials than Vance -- I'm older and have voted for every Libertarian candidate since 1976, including Dr. Paul. We may all be tilting at windmills, but I think it is far more likely for a true libertarian uprising if voters can SEE how much they are being taxed -- which is one of the things the FairTax accomplishes. There is little chance for reducing taxes or spending under the current system that continuously reinforces the take and give cycle between politicians and their benefactors. Maybe, I say maybe, a different tax system will break that cycle.
Think about it.
Published: April 4, 2009 11:55 AM
Paco
Kakugo
You need to do a little research on the FairTax. It is not a VAT. And the bill is written to prohibit both the FairTax and an income tax. Not that it can't be changed, but that's another battle.
In reality, there is nothing stopping the feds from enacting a VAT and retaining the income tax now. In fact, a VAT is one of the tax measures currently being considered by the Democrats.
Published: April 4, 2009 12:02 PM
Bill in StL
Paco,
I'll grant that a national sales tax would be less byzantine nonsense than what we deal with currently. But ultimately it is the amount we are taxed, directly and by inflation, that measures our liberty. And even if there are economic improvements resulting from lower compliance costs, and a less destructive incentive (save vs spend), it's all just a sidetrack on the road to liberty. By your own insistence, this is revenue neutral, meaning the government is stealing just as much money from us.
From a practical standpoint, I think the issue has slightly more chance of succeeding than efforts to show the 16th Amendment was never legitimately ratified. Regardless of the merits of the proposition, political reality prohibits it. Was it Mencken who said, "The art of taxation lies in so plucking the goose as to get the most feathers with the smallest fuss?" Our byzantine tax code, with it's myriad components, serves the political purpose of obscuring the true amount of taxation from the citizenry. To suppose that politicians will open up the books and reveal their parasitic cost is, in my opinion, to misjudge their selfish natures.
In conclusion, I agree it would be better than what we have now, but I don't mistake it for liberty. I don't think it will ever happen, and if it does, we'll probably just end up with a national sales tax in addition to everything we've got now.
Published: April 4, 2009 1:35 PM
cavalier973
We already have an income tax coupled with a national sales tax in the form of corporate taxes. Corporations do not pay the taxes themselves, they collect the taxes from its customers and/or its employees (through higher prices and lower wages).
The 23% percent/30% rate quotations turns on whether you calculate it tax exclusive or tax inclusive. With the income tax, we quote the rate as tax inclusive. That is, we say that a person who has income of $100,000 and pays $30,000 has a 30% tax rate. But you could also say that he has a 42%-43% tax rate, if you exclude the amount of taxes he pays from his income ($30,000 is around 43% of $70,000).
The proponents of the FairTax use the 23% number, to be sure, because it's a little less threatening than 30% (which, as someone has already pointed out, is added to any state sales taxes). The argument they use for doing this is that they are comparing a tax-inclusive income tax rate with a tax-inclusive sales tax rate. Even though I'm a FairTax supporter, I prefer to use the 30% rate to avoid charges of dishonesty by people who cannot or will not comprehend the difference.
I am less troubled than some about black markets arising under a FairTax system; several states that rely exclusively on sales taxes seem to have more or less honest venders who do not sell their goods out the back door to customers wishing to avoid the tax.
Perhaps the increased cost of retail goods brought about by a national sales tax would incentivise such behavior, but I think that the elimination of costs to productivity would in the long run tend to reduce prices, which would also make the benefits of trading in the black market less likely to outweigh the costs involved in circumventing the law. At least, that's how I think it would be for most people, especially as the purchasers have more money to spend, their gross incomes and net incomes being the same.
Most objections to the FairTax are answered on the website: http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#5
Published: April 4, 2009 2:27 PM
Kakugo
Paco, the only difference I see is how the tax is collected. I end up paying a surcharge anyway, no matter who picks up the cheque to put it in the government's coffers.
A tax is tax, no matter how it's painted.
Published: April 4, 2009 3:55 PM
Fogyreef
Why is the blog owner blocking my posts? Is there a problem quoting Supreme Court cases?
Published: April 4, 2009 4:10 PM
Scott D
I see no point in even debating this issue, which, if you read Laurence M. Vance's article carefully, seems to be his stance as well. Libertarians should have higher standards than to argue with a mugger over whether he should threaten you with a gun or a knife. Fairtax is a distraction from the real issue, which is the choking off of liberty by government. Whether it passes congress or not, it's not my concern unless it allows government to grow larger, and Mr. Vance discusses some of the ways that it might.
I also found it rather amusing that so many people expressed confusion when Vance proposed his "equal tax". "Oh, but that will be too much for some people to bear!" "How can you call that fair when some people are too poor to pay such a tax!" Slap yourself a few times hard and TRY to see the problem here. Got a good slap in? Good. Don't you think that a tax that is larger per capita than a great many people earn in a year might be a bit too big? Does government really need to spend more on its citizens than they can possibly produce on their own?
And I call bullshit on people that express the woefully naïve idea that the fairtax will both improve standards of living and due to its "transparency" (I hate this political buzzword--look, it's see through!) will also cause people to agitate for lower taxes. It's one or the other, folks. A given person will either be happy with the income redistribution of the prebate, or pissed off that the price of everything rises. If you want to piss people off, start taxing at rates high enough to pay down the national debt.
I see a lot of non-libertarians making their case here. To be blunt, if you don't see the enormity of government spending as an issue of critical importance, you are in the wrong place, and in my opinion, are in need of further education. If you, like me, remember the Reagan era and all its promises and still trust government to pass tax reform that a) makes people agitate for tax reduction, and/or b) restricts the power of government to increase taxes, then you are either a fool or a liar.
Published: April 4, 2009 6:14 PM
Aunt Polly
My commentary is of the textile sort:
http://tinyurl.com/crmtza
'nuff said.
~ Aunt Polly
Published: April 4, 2009 6:46 PM
Paco
Bill in StL: I pretty much agree with everything you say. My support of the FairTax comes from my belief (hope?) that changing the system from an insidious web of hidden taxes to one that screams out from every receipt "You fool. You just paid $130 for 4 bags of groceries and the federal and state governments just tacked on another $40 -- 10 bucks a bag! " The FairTax bill requires the taxes to be itemized. Of course, lifting the compliance burden alone would be worth it to me.
Kakugo: The difference between the FairTax and a VAT has to do with my response to Bill, above. I believe the first step in reducing taxes is make sure everyone knows how much they are paying.
Published: April 4, 2009 7:19 PM
Travis
I wish someone would explain what they would do to fund the legitimate expenses of a responsible government. I agree with the spirit of Mr. Vance's arguments, but I fail to understand what he and others think will be the result of the practical implementation of their philosophy.
Published: April 4, 2009 8:37 PM
Lowell
Freedom, Peace, and Prosperity.
Published: April 4, 2009 10:07 PM
Paco
Scott D: If Vance would just stick to espousing the elimination of taxes, I would be right there with him. Unfortunately, he continues to attack every proposed change to the current tax system. It's a little naive for Vance to think that we will leap from government taxing at the current level to having a user fee or head tax based tax system. First things first.
As to your points, I'm not sure where to begin.
(1) The IRS is public enemy #1 when it comes to "choking off liberty." You are the one who is naive if you don't get this. The FairTax bill eliminates the IRS. See if you can construct a logical syllogism around these premises and come up with a conclusion that follows.
(2) As has been pointed out in numerous comments, nothing in the FairTax provides any additional power to the government to raise more taxes. They already have this power. On the contrary, it does just the opposite by bringing into the equation the repeal of the 16th amendment.
(2) I don't recall any commenter expressing confusion about Vance's "equal tax." Certainly I am not confused by it.
(3) Transparency. What do you think would happen if withholding were eliminated and employees had to write a check each month to pay SS taxes? Milton Friedman called withholding his greatest regret (he invented it).
(4) Your comment about the prebate redistributing wealth or being pissed off about prices rising is a non sequitur.
(5) I'm not sure what case a lot of non-libertarians are making here. Yes, the government spends too much. And?
Now, why the anger? I assure you I am neither a fool nor a liar. I imagine I was agitating for libertarian ideals while you were still in diapers. The fact is that currently there is nothing to restrict the government from raising taxes and spending. At least the FairTax, along with its concommitant repeal of the 16th amendment, does restrict the government from raising, even imposing, income taxes.
Published: April 4, 2009 11:59 PM
Scott D
Paco:
Propose to cut federal spending by 2/3rds and income tax in half. If Vance is opposed to that, you will have proven your case. It seems to me that he is opposed to tax reform that does nothing to actually address the problem of government spending.
Who decides whether or not the US needs a new tax? Who decides which people will be taxed? Who decides how much they should be taxed. It's not the IRS. The IRS is only there to ensure compliance. Yes, it is a horrible institution, but calling it "public enemy #1" misses the point. Eliminating the IRS now, today, would not remove the people's tax obligation. Consider your major premise refuted and your syllogism void.
I found two without much effort.
1776Freedom:
Henry Stock:
What you describe and the fairtax are two different things. What would happen in your scenario is that a LOT of people would come up short on their taxes. This might precipitate some kind of movement towards lower taxes. In fact, I kind of like this idea. Let's do that instead of the fairtax!
No, let me explain how I see this. The fairtax people are playing politics and seeking support from diverse groups with conflicting claims. "It will be fair and progressive", they say to the liberal. "It will protect the wealth of the rich" they say to the conservative. "People will be upset and want to lower their taxes", they say to the libertarian. Just thinking of this pandering makes me sick.
The non-libertarian arguments I've seen above amount to: well, we need to fund the federal government, why not try to improve our methods for collecting taxes? A libertarian always questions the need for new legislation, always looks for hidden meanings and motives, and always makes the point that there WILL be unintended consequences. If you trust government to not screw this up and the economy to react as predicted, then the fairtax probably looks pretty darned snazzy.
I am angry because the ship is sinking and people such as yourself are arguing over the configuration of the deck chairs. Socialism is here, staring us in the face. Have you seen the proposed federal budget for the next few years? The fairtax sure as hell isn't going to pay for it. Not without crippling commerce.
So what you are saying is that you do trust government to pass the fairtax and retain the spirit of what you and others claim it is. You expect the federal government, using internal processes, to restrict its own size and even put itself into a position where smaller government is seen as desirable by the majority?
You act as though the concept of cutting spending is this monumentally complicated problem, that it somehow requires us to alter the methods for collecting revenue to change. If a company has too many people on the payroll, management doesn't first change the packaging of its products and alter its distribution chain. No, they just look at who is expendable and they fire them. We know that the size of government is the problem. I say we try to address it directly. Coming at it from an oblique angle like this will fail precisely because you have not made your case for your true intent. "Lower taxes?" your congresscritter will scoff. "Son, this here bill swapped one tax for another. Revenue neutral, you know what that means? It's supposed to pay the same as before. Have you seen next year's budget? The money has to come from somewhere."
I can see a few incentives for instituting the fairtax, if we view the government is a parasitic entity. First off, enforcement becomes much simpler. Rather than keeping track of hundreds of millions of working adults, the fedgov only has to audit businesses that sell retail products. Compliance will rise, bringing in more revenues. Look, the government is saving money and getting more money! That'll sure put a dent in that $900 billion deficit!
I hate to be the bearer of bad news here, but even some of the regular contributors to Mises.org have it wrong. Here is the text of the 16th amendment:
Without understanding the history that preceeded the creation of this amendment, it would seem that the 16th amendment is saying that Congress has been granted a power that it did not have before. That isn't exactly true. The first income tax was imposed in 1862 and eliminated in 1872. A number of court decisions followed in the intervening years leading up to 1909, with the 1895 case Pollock v Farmer's Loan and Trust (157 U.S. 429) disallowing a tax on income derived from real estate. The actual debate in this and preceding cases was over whether an income tax was direct or indirect.
To understand the difference, consider:
Article I, Section 8, Clause 1:
Article I, Section 2, Clause 3:
Article I, Section 9, Clause 4:
What the 16th amendment actually did was to declare that an income tax was, in fact, an indirect tax, and only subject to the rule of uniformity, not the rule of apportionment. Repealing the 16th amendment would not remove the power of Congress to tax incomes, but would only roll back a "clarification" of what is and is not a direct tax. To achieve the effect you want, Congress would need to define the income tax as a direct tax, in which case the apportionment rule applies.
So I say again: fairtax is a distraction. Stop thinking you can hoodwink Washington into tying its own noose. The only way to get rid of the income tax is to (shock), get rid of the income tax. Creating a new tax will only do that: create a new tax.
Published: April 5, 2009 3:20 AM
guinea-pig
Let me offer glimpses of real-world experience with going from the progressive brackets system that maxed out near 50%, into a 19% flat-tax regime.
Sure flat-tax here is progressive, especially after the latest changes done to it. But know what, those last changes were concentrated on reducing the deductions, as we managed to get the politicians away from touching the "flat" rate of 19%, never mind reintroducing progressive brackets.
So there've been tax increases, but at the same time the taxes for the richest remained the same, they paid 19% before and pay 19% now. Neat.
On the budget side, the reform was targeted to be neutral, but right from start it brings more revenue than expected. The key is simplicity, and cutting the highest tax by more than half helped, too. I'd say there's more consent paying the flat-tax than there's been within the progressive system.
All in all, I'd choose flat-tax over progressive regime any time, then continue in the quest to abolish income tax altogether.
To get more details about us, google Slovakia. (Small speck of land next to Austria. Once parts of the same empire, then divided by iron curtain, now getting sort of rEUnited.)
About the fair-tax: first, not sure how they deal with the repeated taxation one gets when stuff must be sold from one manufacturer to another before it becomes the finalized consumption thing. (VAT addresses this.)
Second, the real kicker is to distinguish consumption from proudction. If say someone buys a car, it then can be used for his personal benefit (consumption), or for conductiong business (production), and most of the time it's a mixture of both. (VAT suffers this very same issue of course.)
Published: April 5, 2009 4:09 AM
a chinese student
Extremism in defence liberty is not vice, and moderation in pursuiting justice is not virtue. Remeber what Goldwater told us.
Anyone who believe changing the name of tax would makes things better is living in utopia.
excellent article,but where can I get some further reading. If anyone has some resources, publish them ,thank you.
Published: April 5, 2009 9:43 AM
Chris Long
As a Libertarian I understand, and largely share, Vance's stance on taxes in general. As a critical thinker and a natural skeptic, I constantly question everything I see & hear, as well as what I already know & believe...especially when something appears to be "too good to be true". Having said both of those things, I am a FairTax supporter. Having said THAT, & considering my Libertarian views & skeptical nature, I have long been searching for an sound, intelligent and fact-based rebuttal to the FairTax. Sadly I have not found one, & Vance is no exception.
Vance's writings reveal his objections to be largely rooted in philosophy (taxes are bad) & semantics (the use of "Fair" in the FairTax's name), rather than in actual economic concerns. Now I am not saying that Vance does not offer an economic basis for his opinion; simply that his objections are obviously not rooted there. Sadly, neither of those objections offer a substantial rebuttal. Even more sadly, the few lucid objections that Vance does offer are quickly & resoundingly discredited by the fact that he admits both to not fully knowing the subject matter & [most egregiously] misrepresenting the tenets of the FairTax. He simply refuses to base his critique on an apples-to-apples comparison, & thus misinforms & shortchanges anyone looking for a sound, intelligent and fact-based rebuttal to the FairTax.
It pains me that someone who represents himself as a scholar & an expert (boasting of degrees in history, theology, accounting & economics, & prolific authorship) shows such willful disregard for intellectual honesty and academic integrity. What pains me more is that a revered institute like the Ludwig von Mises Institute would allow its name to be associated with Vance's work.
Mr. Vance, it is perfectly acceptable that you dislike the FairTax, but it is both discrediting & reprehensible that you abuse your credentials by peddling misinformation. If you are going to disagree with something, you are both ethically and morally bound to do so without misrepresentation. I implore you, not as a supporter of the FairTax, but as a concerned citizen with a limited knowledge (I know more than the average guy, but less than the average "student" or practitioner) of taxes & advanced economic concepts who eagerly searches for sound, intelligent & fact-based information (both pro & con) - please be honest & accurate in your critique of the FairTax.
PS - Mr. Vance, on a side note, as you say you frequently quote Ron Paul's assertion that the real problem is government spending (which I agree with), I'm sure you know that he is on record as preceding that statement by stating that he would probably vote for the FairTax if brought to vote.
Published: April 5, 2009 10:45 AM
Dan Fallon
Chris Long,
Taxation necessarily means privilege and privilege represents moral hazard. Taxation also displaces the market and is an imposition on society- it hinders the maximization of society. There is solid economic logic to back this up.
The FairTax proposal can definitely be criticized on apriori grounds: any taxation lends itself to creating calculation problems and misallocation of resources. True, incentive issues do have a moral component as well as a scientific side. But surely calculational issues are logical criticisms not relying on moral pleas. What you need to show is a solid theoretical basis and justification for taxation. You can try listing facts and history. But the past does not interpret itself. Any explanation of the facts presented presupposes an organizing theory/understanding.
Cheers
Published: April 5, 2009 11:15 AM
JD
It's a bit frustrating that so many people don't seem to see the forest for the trees. There exist two core issues which must be addressed, and which, once addressed, obviate the necessity for further directed correction:
- coercive taxation
- state monopoly on currency
We do not need to argue about how large the government should be, or what proportion each individual should contribute in order that it continue to operate. We understand the market, and we just need to recognize that there is also a market here - we just need to let it work, rather than trying to explicitly dictate how government looks and works.
To unchain this market requires the implementation of two essential components:
#1: repeal coercive taxation by instituting a 'Taxpayers Line-item Veto'. How this works is: the IRS is tasked with dividing the proposed budget into several distinct categories, providing the appropriate level of contribution for each based on a combination of (a) a flat per-person fee, and (b) the individual's net worth*, and sending these forms out to citizens. Now in this system, payment is strictly voluntary, and the individual can direct where the funds they contribute are to be applied. Categories which receive no support will have funding cut directly by the taxpayers. Where politicians currently have the vote as their sole incentive, they now have a price mechanism; if they are too expensive, they lose power, if they are not, they gain it.
#2: provide the Federal Reserve with a feedback mechanism as regards monetary expansion; that is, abolish legal-tender laws. It is not strictly necessary to abolish the Federal Reserve itself, it only needs to face the possibility that the money it prints is as worthless to the government as it is to the people. This feature is necessary because even under a purely voluntary funding system, the state is able to print its funding in toto. This feature subjects the Federal Reserve to the rigors of competition.
As to the article, if one approaches the question from a neutral direction, there is only one obvious answer: there is no such thing as a fair tax, so long as that tax is coercively collected. Someone will invariably have his funds expropriated against his will, to be used for ends of which he explicitly disapproves. The problem is not the level or manner of calculation; it is coercion - he cannot opt out on a selective basis. That aside, the question still remains: how much should he pay? What is his fair share? What is the proper price of his citizenship? The answer is simple, since it is the same as with any other transaction he may choose to make: as much as it is worth to him.
I am not idealistically proposing that these things are even remotely possible to accomplish, due to the current state of affairs in this country. But they are, nonetheless, the true keys to solving the problem. Anything else is just another consequentialist faustian bargain; reasoning men should expect it to fail.
* the reason that estimates of 'fair' taxation should be tied to a combination of a head-tax and individual net-worth is simple. The baseline fee is based on the fact that all people realize certain benefits as individuals, and none realizes a greater benefit than another, due to the nature of the benefit. As to the net-worth modifier, many government services roughly equate to insurance against various calamity (i.e. national defense), and it is not difficult for people to understand that those with more have more at stake; they should not have it protected for the same fee as those with less to lose. To be clear though, I propose these factors be used in determining contribution recommendations; the ultimate choice of what to pay remains in the hands of the individual.
Published: April 5, 2009 12:24 PM
Paco
Scott D
Based on your latest post, I think your original comment, on Saturday, is correct. There is no use in debating this issue -- with you.
For enlightenment, refer to the post from Chris Long.
Published: April 5, 2009 12:44 PM
Scott D
Paco,
You are probably correct. To debate this matter on your terms, I would have to accept premises to which I violently disagree and which would significantly weaken any attempt at argue the matter with moral and logical consistency.
As a thought experiment, imagine we were transported back in time to the turn of the 20th century, and the debate we are currently having was over whether to institute an income tax or a sales tax that will drastically expand government and consume 25% of GDP. What should the libertarian position on this be? Lesser of two evils? Or would you rather simply oppose evil altogether? Would the imposition of a 30% sales tax in this situation be considered a "triumph" for libertarians?
Also, please have a look at the 16th amendment issue. At the very least, it's a solid loophole for reinstituting the income tax.
Published: April 5, 2009 1:02 PM
BuckSteele
Paco,
You've done very well on your explanations, and your responses have been amazingly temperate. You are to be commended.
I agree with many that the Fair Tax isn't perfect, but GEEZ is it better than the current system! One of the biggest things that I don't think you mentioned was that should be very effective in reducing goverment control in our lives by social engineering (and market interference) through the tax code. That will throw a lot of lobbiest's out of DC! Unfortunately, that's not a good selling point to get it through Congress. Hopefully, there are other selling points to offset that...general simplification, the progressive aspect of the prebate, etc.
Also, can you see the possibility...finally...of a tax revolt if congress tries to reinstitute an income tax if peole get used to (after the first paycheck) of getting every penny they earned and the concept of "takehome pay" disappears!!!??
Once again, well done.
Published: April 5, 2009 1:25 PM
Paco
Yes, I do see the possibility of a tax revolt. And that would be the best thing to happen. However, I think it is unlikely. Primarily because too many people (1) don't understand that they are paying embedded taxes; (2) see social security taxes as an "investment" in their retirement program; and (3) are in the almost 50% of the population that pay little or no income tax.
That's why I think the best, possibly achievable, path toward a more libertarian society is the FairTax. As I have said before, it's not named the PerfectTax. Taxing people every time they buy something will at least go part way toward eliminating the three reasons I mention above.
Then the liberal/conservative battles on taxes will be whether to increase or decrease the prebate and whether to add or reduce the tax by a quarter percent. At least those are black and white choices. No ambiguity.
Compare those battles with trying to convince the chairman of the House Ways and Means Committee not to pass some obscure loophole in the tax code that is being pushed by a lobbyist representing clients willing to contribute $100K to his next campaign. After all, it will only cost the average family 25 cents a week.
Published: April 5, 2009 3:38 PM
Chris Long
Don Fallon:
My intent is not to justify taxation. As previously stated, I understand, and largely agree with, the Libertarian/Austrian philosophy on taxes; however, it would seem that I'm a little more grounded in reality than most here when it comes to the issue. Unfortunately too many Libertarians/Austrians seem to be unwilling to settle for anything less than what they deem the ideal tax solution - which, depending on the individual, ranges from zero to only what is absolutely required for the operation of the Federal Government as stipulated by the Constitution.
Either one of these scenarios would be fantastic, but there is simply no way (barring armed revolution) that this country is going to jump from the current system directly to "the ideal". Any thought/belief that such a utopian wet-dream is possible is simply an exercise in futility. As many here have aptly stated, the US Government is a Leviathan with an insatiable appetite for our hard-earned money - do any of you honestly think that it will succumb to such drastic change? Not a chance. Of course, that's just the Government - we haven't even discussed the fight that will come from the dependents that suckle at the Government's teat. The only way to reach a Libertarian/Austrian acceptable tax system is through an intermediate step, or series of steps.
I share the same ultimate goal, but I realize that to stubbornly stick to absolutes will do nothing but ensure that the ultimate goal will never be reached, or even sniffed. As such, I am open to any realistically feasible alternative to the current tax system that will help move us all toward the ultimate goal. Presently there are really only 2 main-stream alternatives right now, with several other lesser known/lesser supported, and of those, the FairTax is the best as far as I can tell.
Now again, I freely admit that I am not a tax expert and/or an economist, but the FairTax, even with all its flaws, presents the most compelling case - and the failure of opponents to put forth a substantial, fact-based, apples-to-apples comparison/critique only strengthens the case for the FairTax. If so many of you are so opposed to the FairTax, then it should not be difficult to compile such a rebuttal. And I'm sorry guys/gals, I understand and agree with your point-of-view, but saying that "taxes are wrong/unfair/harmful" or any variation thereof is NOT an acceptable rebuttal. This doesn't mean the arguments are not true, but they will only serve to garner a few pats on the back in Libertarian/Austrian circles. This type of debate will do nothing to advance the cause - and will most likely hurt it. The argument at this stage is not whether or not we should be taxed at all, or that taxes are bad/unfair/unjust/etc, but rather what is the best alternative to the abomination that exists today.
We can all sit on the sidelines, stubbornly clinging to absolutes like a bunch of petulant curmudgeons, or we can get involved by either coming up with a viable alternative to the Fair/Flat taxes or backing the one that will more quickly deliver us to the ultimate goal. The former is counterproductive and guarantees nothing except that our shared goals will never reach fruition, but the latter, at the very least, offers possibility by putting us on a path toward realization. It's not perfect, but it would be a start...and failure to act only adds to the inertia that is powering the status quo.
What we have now is unacceptable, and what all of us ultimately want is unattainable as a one-step solution, so please, if the FairTax is not the needed intermediate step, or one of them, what is…and what’s the best way to mobilize support for it that extends beyond message board rhetoric amongst like-minded people?
Published: April 5, 2009 6:25 PM
Chris Long
Don Fallon:
My intent is not to justify taxation. As previously stated, I understand, and largely agree with, the Libertarian/Austrian philosophy on taxes; however, it would seem that I'm a little more grounded in reality than most here when it comes to the issue. Unfortunately too many Libertarians/Austrians seem to be unwilling to settle for anything less than what they deem the ideal tax solution - which, depending on the individual, ranges from zero to only what is absolutely required for the operation of the Federal Government as stipulated by the Constitution.
Either one of these scenarios would be fantastic, but there is simply no way (barring armed revolution) that this country is going to jump from the current system directly to "the ideal". Any thought/belief that such a utopian wet-dream is possible is simply an exercise in futility. As many here have aptly stated, the US Government is a Leviathan with an insatiable appetite for our hard-earned money - do any of you honestly think that it will succumb to such drastic change? Not a chance. Of course, that's just the Government - we haven't even discussed the fight that will come from the dependents that suckle at the Government's teat. The only way to reach a Libertarian/Austrian acceptable tax system is through an intermediate step, or series of steps.
I share the same ultimate goal, but I realize that to stubbornly stick to absolutes will do nothing but ensure that the ultimate goal will never be reached, or even sniffed. As such, I am open to any realistically feasible alternative to the current tax system that will help move us all toward the ultimate goal. Presently there are really only 2 main-stream alternatives right now, with several other lesser known/lesser supported, and of those, the FairTax is the best as far as I can tell.
Now again, I freely admit that I am not a tax expert and/or an economist, but the FairTax, even with all its flaws, presents the most compelling case - and the failure of opponents to put forth a substantial, fact-based, apples-to-apples comparison/critique only strengthens the case for the FairTax. If so many of you are so opposed to the FairTax, then it should not be difficult to compile such a rebuttal. And I'm sorry guys/gals, I understand and agree with your point-of-view, but saying that "taxes are wrong/unfair/harmful" or any variation thereof is NOT an acceptable rebuttal. This doesn't mean the arguments are not true, but they will only serve to garner a few pats on the back in Libertarian/Austrian circles. This type of debate will do nothing to advance the cause - and will most likely hurt it. The argument at this stage is not whether or not we should be taxed at all, or that taxes are bad/unfair/unjust/etc, but rather what is the best alternative to the abomination that exists today.
We can all sit on the sidelines, stubbornly clinging to absolutes like a bunch of petulant curmudgeons, or we can get involved by either coming up with a viable alternative to the Fair/Flat taxes or backing the one that will more quickly deliver us to the ultimate goal. The former is counterproductive and guarantees nothing except that our shared goals will never reach fruition, but the latter, at the very least, offers possibility by putting us on a path toward realization. It's not perfect, but it would be a start...and failure to act only adds to the inertia that is powering the status quo.
What we have now is unacceptable, and what all of us ultimately want is unattainable as a one-step solution, so please, if the FairTax is not the needed intermediate step, or one of them, what is…and what’s the best way to mobilize support for it that extends beyond message board rhetoric amongst like-minded people?
Published: April 5, 2009 6:26 PM
Chris Long
My apologies for the double post (browser problems), and also for mistakenly calling Dan Fallon, Don. Both were unintentional...
Published: April 5, 2009 7:01 PM
Dan Fallon
Chris Long,
I do understand the need for practicality and will weigh FairTax agendas in this light. That said I do believe there is a difference between unrealistic expectations and utopian ideals. Indeed, it is unrealistic to expect that the US Government dissolve overnight. On the other hand it is utopian to believe that government, democratic or otherwise, can be shaped into something that is mostly fair. To be invested ideologically in the existence of taxation is to unwittingly agree to injustice.
It is way more unrealistic, crazy really, to think that the power and privilege that taxation commands can be tamed vs. the hopeful prospect for taxation's demise.
Besides, ending taxation only represents removing one piece of the anti-social pie. If you understand, as I do, taxation to be a crime- then utopianism has nothing to do with standing against it. It has everything to do with what is right.
To most colonists it was inconceivable that the Crown would no longer be sovereign right up until the mid 1770s. How many in the European/American world would believe that chattel slavery would be abolished within a couple of generations? Was the idea of ending slavery utopian? unrealistic?
Within the narrow paradigm of 'what form taxation should take, the current system or FairTax' it may seem like FT is radical. But therein is the problem.
Who has the claim to the higher moral ground when it comes to promises? Socialists, taxists, and government types always claim they are doing what is best. It is that a system based on taxation cannot deliver.
So what is practical about re-arranging the deck chairs on the titanic?
In addition, I do not think that taxation's imposition on economic calculation should be dismissed- especially since there have been many calls for economic proof of taxation's destructiveness.
Cheers
Published: April 5, 2009 8:08 PM
Paco
Chris Long: Bravo!
Published: April 5, 2009 11:06 PM
bucksteele
Paco,
Just a clarification on the tax revolt possibility. I DON'T see the slimmest possibility of a tax revolt as the situation currently stands. The only people with a motivation TO revolt are seriously in the minority...the people who pay most of the taxes. I was referring to the time if and after there is no withholding or payroll taxes (at least at the Federal level), and then congress tries to implement an income tax.
Published: April 6, 2009 6:12 AM
D. M. Dillon
We are obviously long past the time when we should take a Meat - Axe approach to taxes : we need chainsaws.
Published: April 6, 2009 6:14 AM
tm
I oppose income taxes, but if we had a true flat tax that did not give an initial exemption on the first X dollars, that would be far better than what we have. Since some percentage of the population pays no income tax, they have no incentive to demand lower income taxes. Changing this such that everyone pays a percent on every dollar would be a great way to get everyone in the game to oppose income taxes.
Published: April 6, 2009 8:20 AM
tm
I oppose income taxes, but if we had a true flat tax that did not give an initial exemption on the first X dollars, that would be far better than what we have. Since some percentage of the population pays no income tax, they have no incentive to demand lower income taxes. Changing this such that everyone pays a percent on every dollar would be a great way to get everyone in the game to oppose income taxes.
Published: April 6, 2009 8:20 AM
Robert
The Fair Tax works only in the class room. Our current tax policy gives politicans a reason for being. It gives them the ability to do favors for special interests.
The reality of the NST is that IF it were passed into law, and IF the 16 Amendment were revoked you would have politics chipping away at the tax base (AARP, Realtors, etc etc). The secret of the NST is the base. It covers EVERYTHING.
The last thing you want is the euro system with their VAT.
Remember folks, humans act on their own behalf not that of others. People with influence will eventually game the system to their benefit.
Published: April 6, 2009 10:23 AM
we're screwed
that people, on the mises.rog site no less, are supporting taxation for the 'necessary state functions' shows that the possibility of ever eliminating the murderous leviathan is rapidly approaching nil.
wow. and I thought 'we the people' had a chance. the best option is to streamline government theft in the hopes that people will wake up to their pilfering? hahahahahahahaha....good one.
Published: April 6, 2009 12:04 PM
AC
We do focus on the paying of taxes and the taxing mechanism a tad too much, perhaps.
There's no other way to cut spending than to, uh...well, ... cut spending.
My contention is the total spending of all gov't, federal, state, local is the real problem, along with the total amount of debt our Gov't has incurred. To attack the problem of taxation, I believe misses this key element. I am not suggesting we forego continuing to decry coerced taxation, but I am suggesting adding the component of total spending.
For example (these figures are illustrative only and approximations), the current US federal budget is $4 trillion. With a population of 300 million, that is the equivalent of $13,333 for every man, woman, and child, or $53,333 for a family of four. Add in the national debt, and these figures are approx. 4x and climbing. With this money going to the gov't, it means the employer can't hire you, can't produce a better product, businesses and individuals give smaller portions to charities. When approx. only 30 cents of every dollar that is specifically collected to help the poor, actually goes to the poor, I'd say we've got ourselves a problem. Where's the over 70 cents? Good question. It's wasted in a bureaucracy that makes it harder to get out of poverty.
Gov't is always a waster of money because 1) it didn't have to earn the money to get it, 2) it can legally steal more, and 3) it disrupts the market pricing signals so it can't figure out if its getting a good deal, not that it actually cares about getting a good deal.
Published: April 6, 2009 12:10 PM
Paco
I can walk and chew gum at the same time -- in fact I'll even throw in humming.
What I am hearing is that libertarians should only focus on cutting spending. OK. Another way of putting that is to reduce the size of government, at all levels.
Here's how I approach this goal:
1. I always vote against all bond issues. Period.
2. I always vote for the Libertarian candidate, if there is one. If there is not a Libertarian, I vote for the person who I think will be less likely to propose or support more laws or more spending. Usually, in Texas, that is the Republican candidate, although sometimes it's a Hobson's choice.
3. I write letters and comments about reducing the size of government wherever I can -- the Internet, newspapers, elected officials.
4. I belong to trade associations that generally oppose new taxes. When they support some silly new law (like banning transfats) I let them know I oppose it.
5. One more thing i do: I support the FairTax. I was born at night, but I wasn't born last night. I realize the FairTax along with repeal of the 16th amendment is a long shot. But an even longer shot is for anything to change under the current tax system.
Think about what happens locally or at the state level when some school bond comes up. The proponents say it will only add 50 cents a week to the average persons property taxes -- and it passes because it's "for the children" and nobody really notices that their monthly PITI goes up by $2.
But what often happens when the government tries to raise gas taxes or the sales tax? People scream bloody murder because they can identify with paying more each time they buy gas or a Happy Meal.
The FairTax will be a big slap in the face every time someone buys anything. With the FairTax, maybe a politician who promises to reduce the tax from 23% to 22% will be able to "buy" votes the right way -- by promising relief to everyone instead of to the supporters with the biggest wallets (or the most votes to deliver).
And of course, there will be pressure from the AARP to eliminate the tax on prescriptions and hearing aids. But to do that they will either have to increase the overall sales tax rate -- on everyone --or increase the deficit. That's a lot easier battle to fight than opposing raising some hedge fund manager's marginal tax bracket from 36% to 39%.
Published: April 6, 2009 3:56 PM
Ball
The only federal tax that makes sense, if you take the term 'federal' at face value, is a tax on the states (or a fee for membership in the USA).
The so-called FairTax is nothing but a way to introduce the (ironically termed) VAT, which will be added to all previous taxes. The whole 16th amendment clause is a farce—when has a tax ever been repealed? Heck, the withholding tax was a "temporary measure," and now we're supposed to be believe the 16th will be repealed instead of that clause in the FairTax bill? Give me a break.
And then there's this:
>Quite frankly, I don't know how the heck we would fund national defense without it or some other form of taxation.
OH NOES!! Who will kill the ayrabs now?
Published: April 6, 2009 8:03 PM
Mike Stahl
I have to say, perhaps it's time to be honest. It's been bandied about that "both Bill Gates and Mother Teresa" will get the quaintly termed "prebate" checks (that will, no doubt, arrive with unicorn surety and timeliness) in order to offset the tax paid for "essentials of life". This puts everyone, from Bill Gates to Mother Teresa, on the dole.
A newsflash: people on the dole are subject to enhanced government control currently-government housing is inspected, and you get the whiff of the idea of drug tests for welfare recipients from time to time, and God knows what else those wretches deal with-bureaucrats at the least. I would suggest that anyone who thinks that a check from the Feds will be minus a string is deluded at best. Ask AIG, or GM.
And the size of the dole check will permit politicians to continue divisive pandering unabated, and even abetted-paying for it with the debt monetization as always. The people who created the plan must know that these things will happen, putting their integrity seriously in question.
Personally, I'll take the Devil I know-especially when the other Devil is openly claimed to be just as large In Utero, has, advertised, shiny new shackles jangling, and is backed by people whose, to paraphrase Frank Herbert, eyes are chilled by the glint of Jihad.
Besides, I like tax loopholes and deductions-I'm an outside salesman, I'd either be raising prices dramatically, or out of business without the vehicle millage deduction(likely looking for a real job in the current environment, honestly). Oh, I know, I'll get a bigger prebate to compensate, so long as my vehicle is "green", right?
The amount of taxation is the sin-not the complexity, unless you consider the Abacus superior to the PC.
Actually, if this comes about, I might just shoot myself in the foot and try out disability-if I have to track down a bureaucrat to find where my money to buy things "essential to live" is, I might as well avoid work as well( and I think I could make a better "libertarian" case for that than some of the ones I've seen for the "fairtax")
I know, I just don't understand the plan. Educate me, do.
Published: April 7, 2009 12:43 AM
Tim Kern
Several problems of logic here, the biggest (only obliquely smashed) is that any tax proposal "should" be revenue-neutral. (The expenses of compliance and the infrastructure to support these tax schemes would be societal savings -- there is no need for income-neutrality, even to maintain the bloated government we now enjoy.)
Additionally, under any tax scheme other than a sales tax, the satanic mechanism of the IRS -- the world's largest government-sponsored terrorist organization -- would continue to exist.
The damage done to America by the IRS is so very much more than financial, that the amount of tax itself is the least of my ulcers. The constant threat of audits, vague and capricious laws and rules, local interpretations, kangaroo tax courts and the threat of prison -- these are the things that are ruining America.
The money involved is nothing more than "protection money" extorted in the same was as by any other bunch of crooks, and must be considered merely a cost of doing business in a dictatorship; but the terrorist tactics and unregulated powers of the IRS are crimes against humanity itself!
Strong views may follow...
Published: April 7, 2009 8:33 AM
JD
@Tim: you're right, I strongly agree. Except for your pardoning of the sales tax - those are just as forcibly-collected (if not more so) as any other. What we have is not a problem of funding the government, we have the problem that each person seems so arrogant that they think along the lines of 'well, I'd pay my fair share voluntarily, but nobody else would, so we need enforcement.' That's the only real problem.
Libertarians and anarchists (the real kind, I mean, not the antilogical collectivist utopians) need to clarify their message, because we often get tied up arguing with people about how everything which exists must be abolished. It isn't necessary - we only need to abolish the concept of 'legal' non-defensive force. Anarchists go off on long theory-sessions about how private defense agencies would look; this is not only confusing to the uninitiated (or usually, disinterested), it's also totally unnecessary. Just make it so that existing agencies have to earn their money; let them try overreaching and see the effects it has on their power. Same goes for state and federal governments - they need not be torn down, only to be rebuilt in some currently-incomprehensible private manner; they could be left as-is if they were de-clawed.
Obviously, it is unrealistic to think this can be done from the top down; government will not willingly subject itself to such a loss of power.
There are ways though. Just for example, consider your local city. If you are like me, you live in suburbia, and you pay taxes to your county. Therefore, the portion which is returned to your city is first passed through several levels of bureacracy. This is where pseudo-governmental agencies (metropolitan councils, etc.) derive their power; by lobbying and putting pressure on county and state officials, they are able to exert influence over the requirements your city must fulfill to get its own money back. Hence, you see policy in your local city council which seems counter to the wishes of the locals; your money is being held hostage. There is one way around this: get elected to city council or mayor and push forward a new agenda which is composed of two reciprocal actions:
1. that a zero-dollar levy will be assessed for collection by the county
2. that the city will directly petition local residents for operating funds
What this does is to remove the power of the county, and therefore, those higher-up metropolitan and state councils. You can sell this as a very good thing (since it is), but one which will require good faith behavior on the part of local residents. The payoff is a huge reduction in the cost of city government, mainly by (a) cutting out the inefficiency involved in passing city money through county and state levels and (b) eliminating the onerous requirements of metropolitan councils.
This strategy can begin to be applied at the city government level, then through the public school boards, and then ultimately at county and state levels. Obviously this would not solve all our problems, but it's a concrete idea that can be acted out by real people on the ground.
Published: April 7, 2009 11:57 AM
Chris Long
What is so profoundly troubling about many of the posts from the purists here is the obtuseness and myopia w/which they "advance" their ideals.
The lack of research/education/analysis among many of you, including Vance, on the topic of the FairTax is startling...and that's being generous. You are so mentally shackled by your personal ideology that you cannot bring yourself to consider or accept alternatives. You claim (implicitly or explicitly) your enlightenment & petulantly dismiss the FairTax out of hand without educating yourself on the topic.
Instead of taking the golden opportunity of mounting a thoughtful, intelligent & fact-based opposition effort, you merely peddle misrepresentations & half-truths based on a loose "Cliff's Notes" understanding of the topic. You do a disservice to your beliefs b/c your lack of intellectual honesty discredits your arguments, however valid they may be. On top of that, your actions only serve to bolster support of the FairTax among people who, like myself, are actively looking for dissenting opinion that is truthful, accurate & "apples-to-apples". Instead of converting people to your opinion, you're pushing them away.
Then there's the fact that you are missing the point of the debate. The debate is not whether or not taxes are a good thing or a bad thing, or a childish war on semantics over the accuracy/validity of the movement's common name, the debate is, how do we successfully transition from the [insert litany of applicable insults here] system we have now, to the ultimate goal that would be acceptable to all of us? What we all want, and what you will not accept anything other than, simply can't be done overnight, or "cold turkey". So there must be an intermediate step, or steps. The debate is about what is the best step(s) to take to accomplish our goals.
What's worse, is that you criticize w/o producing a practical/viable alternative. Of course, I guess that shouldn't surprise me. I have stated before that I am a novice when it comes to advanced economic concepts, but I am eager to learn more. Being a libertarian, I was naturally drawn to the Austrian school, but I'm not one to get all of my information from one source. As I search for alternative resources, the major critique of the Austrian school is that they are essentially big on theory, short on practice. I'll take that w/a grain of salt until I learn more, but many of you are validating that criticism. Opposition means little w/o a viable alternative - it’s not enough to simply disagree.
So many of you waste so much time & energy "preaching to the choir" about the evils of taxation as if we don't already know that & share your opinion. You're not charting new territory. You're not staking a flag anywhere. We all get your point. The difference between "us" (Paco, Clarity2009, myself, et. al.) & "you" is that we're willing & hungry to take action to see that our goals can eventually be realized, whereas you would rather sit on the sidelines and gripe w/o offering a viable alternative. We’re not happy about the situation, & our support is given begrudgingly, but we give our support b/c we care enough about the ultimate goal to do something more than spew rhetoric to a bunch of people who share the same opinions. What's that saying about "crap in one hand & want in the other"? You can’t simply “want reform/abolishment” & expect it to happen, & you're pissing away your opportunity to contribute to your own cause.
As Clarity2009 astutely points out, all of "that might win you a ribbon in a "who is the most Libertarian" contest, but for those of us interested in actually seeing some improvement occur in our current situation, it is not very helpful." Clarity2009 makes another excellent point in that "the cause of reducing taxes is not a fight anyone has to give up in order to support a change in the manner in which the current unacceptably high taxes are collected. Additionally, advocacy for one does not hurt the cause of the other. These causes complement each other, they are not mutually exclusive." You do not have to give up your ideals to support an alternative. The task is Herculean as it is - why make it impossible?
Although perhaps I'm wrong? Maybe I've misjudged your intent? Maybe many of you are not really interested in the practical application of your ideals. Could it be that your real interest is in martyrdom? That seems more logical b/c your stubbornly myopic stance(s) does nothing to advance your cause, it only guarantees that your cause will never advance beyond rhetoric. Your unwillingness to accept anything less than 100% adherence & total capitulation by opponents is completely unproductive & unrealistic. Of course, if martyrdom truly is your goal, then you're well on your way to achieving it. Unfortunately for you though, I doubt that you'll have 72 virgins waiting for you on the other side.
Published: April 7, 2009 2:26 PM
Bob
Although I have practical issues with the "Fair tax" proposal, mainly in the way it creates a larger incentive for black markets, there seems to be, in the article and many of the comments, an opposition of a totally different kind, one that is left unnamed.
Let's call our present state A, and the ideal "no forced taxation" libertarian state Z, while B is simply the government as it is now, with the "Fair tax" in place (I'll assume it brings in the same $ to the gov as those taxes it replaces).
Then the 1st argument against it is that B is worse than Z, which while true, is hardly a useful criteria (it's a bit like the statists comparing free market results to some utopic 'perfect allocation' and complaining it falls short).
The second complaint is that it addresses only minor issues, but leaves the important ones (ie the size of government) untouched. It is true, but there are benefits, like lower compliance costs, to name one. Even if you do not value these benefits at all, then B is no worse than A (or at least I haven't heard anyone say that, I'll just assume that it's pretty much agreed upon). So why is there outright hostility to the proposal? And why is there no other solution advanced by those who oppose it (some other reform C through Y to be done while waiting to have the support or ability to achieve Z)?
And there I think is the unnamed opposition to the "Fair tax" idea: it might make things better than they currently are. And if you take the position that popular support of libertarian reforms is entirely caused by the harm imposed by government, then the shortest path to Z is to maintain the harmful status quo, and only push for a total reform.
Anything which makes government more palatable, such as reducing the headaches associated with the tax code, is seen as a detour from the straight line from A to Z. Just like the communists saw the welfare state as just a means of propping up capitalism, so do those libertarians see small government as making government less poisonous, and therefore less likely to be abandoned.
I can't possibly emphasize enough how harmful this way of thinking is. It is similar to criticizing Gorbachev's reforms based on the idea that he should instead have maintained the misery and suffering of the status quo for as long as he could, so that the eventual backlash would propel Russia right into anarcho-capitalism (note: I'm not defending that guy, just giving an example of this reasoning in a different context).
Libertarianism can stand on its own merits, it does not need to be preceded by total destruction of society by the state in order to gain acceptance. Until we can make things 'perfect' (ie. as good as humanly possible), we might as well make them better, even if only slightly.
Published: April 7, 2009 9:06 PM
JD
@Chris Long: did it ever occur to you that you may be displaying your own brand of petulance, through your fairly dogmatic claim that the Fair Tax necessarily represents some type of forward progress? You may prefer to write off those who disagree with this premise as being unreasonable, myopic, obtuse, intellectually dishonest, rhetorical, stubborn would-be martyrs, but that's really up to you. You admit that you are only somewhat acquainted with Austrian economic theory - well, you might do well to learn a bit more on the topic, because it is your slight understanding which allows you to think it can be bent into some sort of compromise. It can't. Not that we don't wish it could be, but it is what it is; where ideas like the Fair Tax are based on principles of expediency, Austrian theory represents scientific conclusion based on reason. It is not partially true or partially correct; it is no more an ideology than is one's belief in the theory of gravity. As such, it is futility to attempt to dilute the conditions it prescribes (meaning, individual liberty) for the purpose of constructing any type of consequentialist compromise. It should not, therefore, be so difficult to understand why there are those who are unwilling to do so - it is our contention that any such compromise is inherently illogical.
Liberty is not an elective feature in Austrian economics; it is not just that we may prefer to live in liberty, in fact, such a desire is immaterial. Rather, liberty is simply the fundamental prerequisite for the healthy economic functioning of a society. Fair Tax does not address this. Not only does it start out by establishing a bona fide welfare state, it cares not whether individuals are coerced into funding government (of course, the former requires the latter). As such, it is guaranteed to fail, ultimately, and in ways not so dissimilar to those inherent in the current system. It is therefore, hardly a thing to be desired. It is the Austro-libertarian contention that, though (thankfully) the market is able to bear even a quite high level of government intrusion and intervention, coercive action in general necessarily destroys the market's ability to determine price; this leads to an unavoidable breakdown. Fair Tax (or any other coercive tax scheme) does not address this, it merely shifts around the damaging stimuli - there is in fact no possible, or even useful, compromise to be found here.
As to your charge that we are not interested in proposing realistic solutions, may I direct your attention to my previous post. Having been in business for years and having had the pleasure of dealing with sales taxes, it is my opinon that the Fair Tax would be functionally no better than what we have now, and in many repects, likely to have even worse effects as regards state intervention in general, its distortion of the price mechanism, and also of the people's general awareness of the real level of their taxation. I prefer, therefore, to pursue what I see as being a more correct and more productive solution.
Published: April 8, 2009 12:30 AM
Chris Long
JD, you & others could write a book on "Missing the Point". The sequel would be "How to Avoid a Topic of Debate by Cherry-picking Selected Ideas From Another's Argument, then Changing the Premise to Fit Your Own Message & Building/Sustaining a Loosely Related Argument by Rehashing Talking Points That Were Never in Dispute". Truly remarkable. Of course, its amusing to see that the one point you take in context is the one where I acknowledge that I lack an experts' understanding of advanced economic issues & of the Austrian school...as if that bolsters your argument. Well, I may not be a fireman either, but I could certainly tell you if something were on fire.
As for your alternative, it's laughable that you think it's actually a realistic and productive solution. What you suggest is good in theory, but it ignores practice (gee, that really is a theme around here). It's too impractical to be realistic, & slow-moving to be productive. You would essentially replace a war on one front with a war on thousands of fronts. What century were you expecting an ROI on that anyway? Heck, would America still exist by then? Although, what am I thinking? I'm just too much a novice to understand, let along question, your reason-based, scientific conclusion(s).
Published: April 8, 2009 3:04 AM
Paco
Chris/Bob/FairTax Supporters
It seems we are beating a dead horse. The pseudo libertarians on this thread who can't think conceptually and insist on maintaining the status quo are either opposition trolls or people who don't know the difference between strategy and tactics.
I don't think I have read a more well thought out, reasoned, and eloquent response to the trolls than yours, Chris.
BTW, a couple more comments from me and then I'll be moving on to more productive efforts:
(1) Tim Kern -- "several problems with logic?" Please. Try to construct a logical syllogism around even one of your statements.
(2) JD, I don't believe you have "been in business for years" as you state -- at least not as an owner. Too much of your rhetoric betrays your lack of understanding about how the current system affects businesses.
Published: April 9, 2009 9:46 AM
Scott D
Paco,
Pseudo-libertarians, nice. I had decided to stop responding to you until you said that. You who are willing to employ the coercive power of the state upon me, to fully support the power of the state to tax up to and above the huge amounts it already takes. You won't demand a tax reduction as part of the bill because you know (and I agree) that it will doom the bill to failure. What does that say about the efficacy using state power to advance libertarian ideals?
I think that your heart is in the right place, and I'm sure that you believe that you have examined this subject logically and thorougly. I can see that it is very frustrating for you to encounter resistance when it all seems so simple. Surely I must just be ignorant, to reject so perfect a plan?
On the contrary, I have read articles both from fairtax supporters and from other sources that raise critical questions about many of the numbers that fairtax supporters claim. For example, the Treasury Department claims that the cost of the prebate program will be much higher than the $485 billion that is estimated by fairtax supporters, and will be closer to $700 billion. The reason I do not bring up these objections is that I feel they are (you guessed it) irrelevant to the real point. Once you've conceded to using the coercive power of government to make societal changes, you are stuck living with all of the little inefficiences, inconsistencies, and excesses of government power.
As it stands, I feel that the fairtax is, in spirit, enough of a potential threat to government power that it won't pass. However, should it start to gain support, it will be corrupted by the political process and become something different altogether. Remember the Medicare pharmeceuticals bill? Remember how that monster was sold to the public?
You ask what people such as myself--who obviously are big layabouts if we don't support the fairtax--will do to advance the cause of libertarianism. We will do what we have been doing: develop and spread libertarian ideas.
Published: April 9, 2009 11:07 AM
Herb Whitson
The article was very interesting but failed to mention five key components and surmise why we are debating it in the first place.
1) The first being the billions of dollars spent annually in compliance costs of taxation. This is reported to be 65 billion to 200 billion depending on which authority you read. Any tax other than the FairTax still has compliance costs and does nothing to eliminate the IRS which in turn can still be used by congress to reward or punish.
2) The second is addressing the corporate tax which at 35% is the highest in the world. The reported 13 trillion dollars (who knows the real figures) that would come back to America and create jobs is not relevant under any other plan than the FairTax.
3) The third is under the Flat Tax you have no personal control of your taxes as you pay a set amount per individual. Under the FairTax you control your taxes. If you have been frugal all your life and by "used" versus "new" you pay no taxes. Anything that you spend over the poverty level is totally in your control.
4) You don't even come close in reporting how the "empty lockbox" of social security will be covered. The Flat Tax does not address this issue but The FairTax does.
5) The Flat Tax does not cover illegal immigrants, the underground economy, or foreign visitors. The FairTax does in that they all are consumers and will pay their share.
Sorry, "we the people" let the Federal government into the hen house! A government who has the most employees, owns the most land, has the most buildings, the largest bills in the world, and yet produces no commodity other than the ability to tax its people. If I "must" pay, I choose the FairTax way!
Published: April 9, 2009 8:03 PM
JD
@Chris Long: accusing others of missing the point is simply diversionary when they have not done so. I specifically addressed the main libertarian issues with the Fair Tax, i.e.:
- it officially institutionalizes a welfare state
- it collects taxes by means of coercion
You choose not to address these issues, and instead embark upon yet another sarcastic rant which, while lacking nothing in the way of verbosity, offers no substance. You write off my example proposal, which represents a useful tactic, by claiming it to be unrealistic. You then admit that it's not actually unrealistic, but that it is unattractive because it has, as you put it, a bad ROI, time-wise. Well, that's your opinion, and you're welcome to it; just don't expect everyone to agree with you, especially in a forum where the principle of laissez faire is considered to be an absolute prerequisite for the proper functioning of any imaginable socio-political arrangement.
I do not hold a low view of the Fair Tax just for fun, or to annoy you; I consider it to be yet another in a long line of arbitrary, oppressive, and fundamentally-flawed ideas. If you do not wish to address this contention, so be it, but do not expect libertarians to advocate for a proposal which, while more novel in its formulation, is still diametrically-opposed to the very concept of individual liberty.
@Paco: your odd claim that those who do not approve of the idea of the Fair Tax are 'pseudo' libertarians only shows that you have a gross misunderstanding of the term libertarian. Also, though it may seem inconvenient to you, I have been self-employed most of my life, and have been involved in several different enterprises, either as owner or partner, during this time. I am painfully aware of the burden imposed by the current tax system, and I've spent (read: wasted) much time becoming adept in the art of tax avoision. This being the case, it just happens to be my opinion that something like the Fair Tax represents nothing more than a lateral shifting of the burden - it has its own set of issues, and I've not even remotely been convinced that those are actually preferable to the current set. As I said, I tend to think that some of its effects hold the potential of being much worse.
It seems that the Fair Tax is appealing mostly to people who've spent the entirety of their life on the customer-side of the counter; from that point of view, it could seem to make alot of sense. But this is a narrow view. I am not concerned whether it would possibly result in better conditions for me personally; there are many political arrangements which might accomplish that, and I don't support them either.
@Herb Whitson: I hear you, but I think that to some degree, you have rose-colored glasses on.
1) This expenditure does not go away with any alternative tax scheme, it is simply shifted to a different group. Collecting x-amount will always cost x-amount.
2) What makes you think these funds will not ultimately be collected from the citizenry? Again, it is just a lateral shift in collection from individuals via their 1040s to another point. You think you can 'opt-out' but you can't; the more people that do, the higher the cost on the activity that you still need to undertake. Government will not accept a reduction in its size simply because you decide not to spend your money.
3) This is already the case in the current system, where it is called the standard deduction.
4) No plan can account for this shortfall; we will pay for it, though the burden will be adjusted downward by further raising the retirement age and diluting the value of promised payouts via inflation.
5) These groups can continue to do business just as illegally as they do today; the Fair Tax does not reduce the burden on the system which they represent.
To present a scheme like the Fair Tax as some kind of cure-all for society's tax ills to be willfully near-sighted; individual liberty is the only true antidote. In the meantime, trading oppression A for oppression B may make some people feel better about the situation, but that is all it can do.
Published: April 10, 2009 2:45 PM
Ryan Murphy
OK, I'd thought to write something on this when Mr. Vance's article arrived in my inbox, but then I read that some of the people who had already posted had basically covered my thoughts, so I did not post, but it's still on my mind, so I guess that means that I need to post anyway.
I understand that Mr. Vance's article basically restates some of the ideas in Murray Rothbard's "For a New Liberty" and that the FairTax and the flat tax (I guess, I don't know much more than the broad concept of the later) apparently go against libertarian philosophy, but unfortunately Mr. Vance only tells us that both of these ideas are wrong and fails to provide us with a solution that he *would* agree with.
So what we're left with is the current income tax system that acts as a drag on our economic activity and that everyone agrees is cumbersome and unweildy to the point of being basically unknowable in all of its particulars. I'll add that our US Supreme Court found the income tax to be unConstitutional in 1895, which necessitated the passing of the 16th Amendment to the Constitution so that we could continue to be taxed unConstitutionally (there is some debate as to whether the 16th Amendment was properly ratified by the states and may not even be legally valid).
Without offering a method of taxation that he agrees with philosophically, Mr. Vance leaves us with the presumption that he prefers that WE THE "CREATED EQUALLY" PEOPLE be FORCED to pay tax at UNEQUAL RATES just for working and not waiting on handouts from Uncle Sam on the first and fifteenth of every month instead of ALL of WE THE "CREATED EQUALLY" PEOPLE being taxed at EQUAL RATES and being able to CHOOSE how much tax that WE pay by CHOOSING what WE buy beyond the poverty level.
How does that square with his philosophy? Not very well either, I imagine.
So, until presented with a more philosophically pure method of taxation, I choose the philosophically impure method of taxation that treats ALL of WE THE "CREATED EQUALLY" PEOPLE EQUALLY instead of UNEQUALLY and UNCONSTITUTIONALLY like our current system does.
Don't get me wrong. I don't like our leviathan state either, but if you'd like to reduce its size and level of expenditure, then make a nuiscance of yourself with your Representative and Senators, don't discard a method of taxation that treats ALL of WE THE "CREATED EQUALLY" PEOPLE EQUALLY just because it is philosophically impure (no more impure than the current unConstituional income tax that we have now, and at least it doesn't have the top 10% paying ~70% of the tax burden).
I anxiously await Mr. Vance or others to present a philosophically pure method of taxation.
(Incidentally, my state of Florida has had a state sales tax which provides ~75% of the state's revenue INSTEAD of a personal income tax since 30 September, 1949, so I think that one *just might* work on a national scale).
Published: April 11, 2009 9:00 PM
Pat
The idea that America is free to elect public officials who are in office as representative elected, not sovereigns, defies the concept that government is free to sell off Constitutional rights to the highest bidder - through Communism or Capitalism.
Forcing public officials to remain loyal to their office is the method by which Americans can get taxes they respect, and government they enjoy.
Anything else is deceptive, false advertising, or government coercion.
Published: April 13, 2009 7:47 AM
Paul Buede
I like your piece here... See one I blogged some time ago... I think the real solution is what I present at the end. http://freelanders.blogspot.com/2005/09/fair-tax-sales-tax-value-added-tax.html
Published: April 15, 2009 10:10 PM
Ryan Murphy
Paul,
Thanks for including the link to your post.
I see the appeal of the final tax in your post about the states funding the federal government and wonder how we might go about getting it implemented.
(Although judging by the footage of the FairTax signs at the various "Tea Party" demonstrations today, I think that the FairTax might have a good head start, but anything would be an improvement over our current unConstitutional income tax system that required an Amendment so that we could continue to be taxed unConstitutionally).
Published: April 16, 2009 1:37 AM
Jon Kines
By your reasoning since the Fair Tax is imperfect we should sustain the far more horrible system that we have now and quite frankly it's an absurd assertion.
No legitimate free market capitalist can fail to see the gain of eliminating taxes on investment entirely and replacing it with a single consumption tax at the retail level. Furthermore, your 30% claim is false as this is an inclusive, not exclusive sales tax. However, given that you fail to see the benefit to eliminating capital gains taxes entirely, it's not surprising that fail to understand this difference either,
Would replacing our current system with no taxation be superior? Obviously. However, to use an analogy you're logic is basically "since I can't afford a Rolls Royce I see no reason to trade in this Edsel on an upgrade."
Any step toward a more free economy, no matter how small, is a positive step. Given the direction our nation is currently headed this should be patently obvious. Your refusal or inability (I'm honestly not sure which) to see the benefits of a viable improvement in our tax code is hubris pure and simple.
Published: April 16, 2009 8:20 PM
Jon Kines
As for your repeated assertion that removing the current embedded tax on all goods and services will have no effect on pricing, you either believe that taxation has no effect on price structure or that market competition is incapable of having an effect on price structure or both. All of these are inconsistent with not only empirical evidence but Austrian theory.
Furthermore, the black market, of which you claim will grow exponentially upon implementation of the Fair Tax, is alive and well under our current income tax system, not to mention a surfeit of investment capital sheltered overseas.
The Fair Tax will add the underground economy to the tax pool each time they approach a cash register and a great deal of investment capital will return to the States.
Again, I'm not claiming that this is a perfect system by any stretch, all taxes are bad taxes. However the superiority of the Fair Tax to our current system is patently obvious.
Published: April 16, 2009 9:18 PM
Mark Douglas
Fairtax would work great if we cut federal spending by 70%. But unless you cut spending drastically, Fairtax is kind of a fairy tale.
Fairtax math is based on collecting taxes from people -- we know that.
But what is less apparent -- what is hidden -- is that Fairtax isn't just a tax on people. Its a massive new tax from the government --- every city, every state, every county, and the federal government would be forced to pay massive taxes on their own spending.
Medicare and the military, for example, would have to pay this tax too, on every penny of its spending. So would every citie, every state.
Yes, if you could just tax people 23%-- maybe the plan would work great. But that's not the Fairtax plan. The Fairtax plan is to get almost half its revenue FROM government.
While this may seem wonderful to some -- the sad truth is, cities, states, counties would have to get that money in order to pay it. Fairtax has never listed how much each city would have to pay, nor how much each state.
Nor do they list how much the military or medicare would have to pay. If this plan is so transparent - this kind of information would be easily available. Yet even the fact that cities and states would have to pay it, is couched in clever glib phrases about why government should pay taxes.
This tax on government is by far the biggest revenue stream Fairtax depends on -- as Boortz says "The federal government itself will become a MAJOR taxpayer" Page 148 The Fairtax book.
And it's not just the federal government. Its all government at all levels on all spending, except spending on education.
Why would Fairtax hardly mention this largest revenue source? Why is it that no mayor state legistlator or governor has any idea Fairtax is based on this massive new tax?
Don't believe me that mayors and governors don't know about it -- contact them. I haven't found any that yet know.
If a play is supposedly "transparent, open, and honest" --why wouldn't the people reponsible for pay these massive new taxes have any idea? Seems to me if this part of the plan were transparent --mayors and governors would know.
Published: July 14, 2009 9:00 AM
Rob Kirchoff
In principle, I agree with the arguments laid out here. I don't like taxes, period. But they are here, and like it or not, Libertarians do not control the government. Point of fact they control very little of anything. Sad truth, but truth all the same. That being said, I believe that the libertarian dream can come true, but it's unlikely to happen by being overt, radical, and absolute. Should the government tax us? No. But it does and it will. Under the FairTax, the advantage is that the taxes that do occur are the least evil. More importantly, taxation would become transparent. This point is why I still support the FairTax, even after reading this well-written and well-argued article. People don't see what they're throwing away. Their paychecks have taxes taken out automatically, the majority of people don't shoulder the burden they should, and worse yet, the taxes on non-consumer entities obscures taxes entirely by shifting costs onto consumers that they can only assume to be operating costs. This transparency would be a good thing. Unfortunately, yes, the FairTax would require a complex Constitutional amendment, perhaps more than one, banning all other forms of taxation. Obviously it would be preferable to do away with them entirely, but radical, instantaneous change is usually only accomplished through violence, something we libertarians cannot condone. Therefore, we should endeavor to limit coercion, or at least make it more obvious to the common, and therefore easier to eliminate later. As far as budget neutrality goes, why would you complain about that? If the alternative code produces massive shortfalls, either the taxes would have to go up, or spending down. And if everyone could see the bill for the "services" the government so kindly "provides" us every time they buy a Big Mac or a Ford Mustang, something tells me they'd be less than pleased with the idea of more of their money being taken away.
Published: September 22, 2009 4:16 AM