The Fair Tax Debate
“In this world nothing is certain but death and taxes” or so said, Benjamin Franklin. I have come to realize however that there is yet a third certainty, and that is when either the subject of death or taxes is brought up strong emotions inevitably follow. The emotions invoked on the subject of death are generally consistent, with most feeling regret and sorrow when speaking of the deceased. On the flip side, taxes will generally invoke anger, some will be angry taxes are too low (yes there actually are people who feel this way), others that taxes are too high. What I have witnessed in the Fair Tax debate which has recently taken center stage due to Mike Huckabees endorsement of it, has been quite disturbing.
For those of you unfamiliar with the Fair Tax, in a nutshell it replaces tax on income (including payroll taxes, capital gains, dividends etc.) with a national sales tax. There are numerous arguments against such a policy, with most of them showing a complete lack of understanding of the Fair Tax plan itself. Rudy Giuliani for example attacked Mike Huckabee for endorsing the plan, claiming that it does away with tax incentives for homeowners. The former Mayor completely disregarded that the tax advantage he spoke of was a write on your income tax, therefore if there is no longer an income tax a write off would not be necessary.
On the left we have arguments that the Fair Tax would disproportionately affect the poor which is also a baseless argument. The Fair Tax offers an annual consumption allowance, meaning individuals would receive a rebate at the beginning of ever month as a reimbursement of tax paid on essential purchases (food, clothing, etc.). A family of four for example would receive a monthly rebate of $525… every month! Below is the breakdown as built into the plan:
I would be typing for hours if I were to delve into all of the arguments used against the Fair Tax which are either misleading or completely untrue, but I would like to shift my focus to two arguments I have seen recently in the Wall Street Journal of all places. A recent editorial with regards to Mike Huckabees candidacy focused solely on the Fair Tax issue, and was both misleading and untrue. The author starts off by attacking the rate:
“But while proponents use that 23% figure as an easier political sell, the rate is closer to 30% when it’s calculated like any other sales tax, with the levy on top of the price. State sales levies would go on top of that”.
This is an argument you will see allot as opponents of the bill attempt to make it sound as unappealing as possible. The same argument can be used on our current income tax however, so let me demonstrate. A person who earns $100,000 in ‘gross income’ and is taxed at 30% comes home with $70,000 per year in ‘net income’. The net income is all the wage earner actually sees, with the rest of his or her money being siphoned off the top and sent to the federal government before they even touch it. So under the current system a person who comes home with $70,000 per year and has paid $30,000 in taxes was taxed at a rate of 42.8%.
The author claims that the levy should be added on top of the price as with “any other sales tax”, but that is not true either. Currently we pay sales tax predominantly to local governments, in which case, the tax is added on top of the price. However if you were to look at the Federal tax which we pay on gasoline and cigarettes you will clearly see the federal tax built into the price of the product, as the Fair Tax intends to do. So anyone who believes it would be too confusing having the tax built into the sale price, think about it the next time you fill up your tank.
The author goes on to claim we would need to repeal the 16th Amendment in order to pass this plan:
“The plan would require repealing the Sixteenth Amendment that allowed a federal income tax, and the chances of that happening are approximately zero. The political risk, given the nature of government, is that we’d end up with both an income tax and a national sales tax”.
Although I understand his concern of politicians having two separate means of taxation available to them, I don’t see how it in any way differs from our current system. Under our current tax policy the Federal Government has the right to tax our income at will, while also having the authority to place a sales tax on individual products (such as cigarettes and gasoline). That power goes largely unused because of national outcry when a new, or increased sales tax is proposed. By stating the 16th Amendment would need to be repealed in order to institute the Fair Tax, the author is employing scare tactics, knowing how Americans feel about making changes to our Constitution.
The most outrageous argument against the Fair Tax I have seen yet however was from William Ahern, spokesman for The Tax Foundation, a nonpartisan tax research group in Washington, D.C., :
“Say (a drug dealer) spends $100,000 on a tricked-out Hummer,” Ahern said. “Instead of just paying the local car tax or sales tax, he would be paying, according to the Fair Tax, the full 23 percent (tax).
“But he won’t be collecting the Fair Tax on his sale of drugs,” Ahern added. “You and me, the two secret heroin addicts who are pouring our wages into the coffers of this drug dealer instead of making mortgage payments . . . we avoid paying the Fair Tax by buying heroin instead of taxable goods.”
This was his response to the claim that the Fair Tax would allow the government to collect revue off the estimated $1 Trillion dollars which passes through our economy illegally every year. After such a statement one must wonder wether or not Mr. Ahern was speaking literally when referring to himself as a ’secret heroin addict’. You would have to be on some form of illegal narcotic to believe people who do not currently do drugs, would start doing drugs just to avoid paying the sales tax!
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FairTaxers routinely claim that the FairTax (a national retail sales tax) would succeed where the current income tax fails: in taxing the the underground economy. They’re wrong. Some criminals’ purchases would be more heavily taxed, but others that are now taxed would escape. No reasonable tax-writer at the federal or state level who’s contemplating a FairTax proposal should think there’ll be a large revenue gain from the underground economy.
There are good arguments for the idea of taxing spending instead of income, but FairTaxers should stick to the reasonable points they can make without reaching for phony arguments and without personal attacks like Mr. Signorile’s silly blog post above. Of course, it is probably just a bad joke.
Ironically Mr. Ahern, I was under the impression your comment implying Americans would become heroin addicts in order to avoid paying taxes was a bad joke as well.
Your statement regarding the taxes on the underground economy is not entirely true. The undeground economy consists of more than just drug dealers and prostitutes, it also consists of illegal aliens, and anyone working off the books. If you factor in those in service industries who consistantly under report their tips on tax returns, the amount of new money being taxed is astronomical.
It is also important to remember the money saved by employers, many of whom have moved factories overseas due to high tax rates. Aboloshing the 7.5% payroll tax alone would be enough to bring some of these companies back to America.
The effective tax rate percentages, that different income groups would pay under the FairTax, are calculated by crediting the monthly “prebate” (advance rebate of projected tax on necessities) against total monthly spending of citizen families (1 member and greater, Dept. of Commerce poverty-level data; a single person receiving ~$200/mo, a family of four, ~$500/mo, in addition to working earners receiving paychecks with no Federal deductions) Prof.’s Kotlikoff and Rapson (10/06) concluded,
Further, per Jokischa and Kotlikoff (circa 2006?) …
Prices after FairTax passage would look similar to prices before FairTax - not “30% higher” as opponents contend - competition would see to it. So, the FairTax rate (figured as an income-tax-rate-non-comparative, sales tax) on new items would be 29.85% (on the new, reduced cost of items because business isn’t taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the “tax inclusive” price tag - this is the way INCOME TAX is figured (parts of the total dollar).
There is no reasonable equity of distribution under the current INCOME tax system. What’s more, the Tax Code has become a “tinkerer’s paradise” for 53% of the lobbyists who game it in Washington DC. It’s a lucrative business, and the U.S. TAXPAYER pays for ALL of it in higher prices (i.e., a hidden tax which is incomprehensible to the average working person). It’s well past time to get personally involved to ensure our legislators scrap the tax code and pay for government the way that America’s working men and women are paid - when something is sold!
Well we know and acknowledge Rich people pay less.
No more 35% Income tax on $x,xxx,xxx Salary, No More 15% on $xxx,xxx Capital Gains or Dividends tax, and No more $x,xxx,xxx Estate Tax)
If I’m Buffett or Head of Disney or Goldman Sachs I LOVE IT.
And they say it’s revenue neutrall, right?
So…. uh.. who pays more?
Pass the lunatic fairtax!! Please! We need to see this farce in action, so we can move on.
Fairtax pretends the federal government can pay itself taxes. This is as stupid as stupid can be — Neal Boortz wrote (Page 148 of his Fairtax Book), “The federal government itself will become a MAJOR taxpayer.”
Well hell, if the federal government can pay 500 billion to itself — why not pay a trillion? Hell, pay 2 trillion and don’t bother to tax people.
ITs a crock a total crock — and thats only the START of the crock.
The other absurdity — Faitax pretends it can tax people in nursing homes, people with cancer, the parents of a child with leukemia - a huge sales tax. Are they mental? Where will the 80 year old alzheimer’s patient in a nursing home GET 30,000 a year in sales taxes anyway? There again, the governemtn — who is probably paying her bills, would have to pay itself its own tax.
Some people are SO screwed with this lunatic tax - anyone with medical bills, anyone who rents (rent is taxed) anyone who pays utilities (utilities are taxed) and anyone who pays insurance (insurance premiums are taxed).
Its simply impossible to tax the government, and impossible to tax many health care patients. THefore, that money WONT be coming in to the treasury.
So the Fairtax would have to rise to over 50% to make up for that nonsense.
Imagine a 50% tax on rent, on utilities, on new houses, on new cars.
Hey - fairtax folks - your king has no clothes. Quit pretending it does. ITs a farce, nonsense, make belive crap.
I guess you havent heard — Fairtax has backed off on its claim that you “keep your whole paycheck”
In fact, I was critisized for even suggesting most fairtax fans THINK we would keep our whole paycheck. Fairtax groups dot org told me emphatically and repeatedly that NO ONE EVEN SUGGESTED that you will keep your whole paycheck. Which is poppycock — of course Fairtax has claimed that 10000000 times.
But Fairtax itself is a giant farce, its bogus. It depends on the absurd nonsense that Fairtax will “make the federal government itself be a MAJOR taxpayer” Page 148 of the Fairtax book.
Utter and complete nonsense — the federal governmetn CAN NOT be a MINOR taxpayer, much less a major one. The government has to WRITE the check for these taxes — so its not INCOME to itself.
As crazy at it seems, Fairtax lunacy COUNTS the money the federal government would “pay” itself. Utter nonsense.
There are other huge absurdities to fairtax, but if you dont understand why that ONE absurdity is enough to doom fairtax, I can’t teach you about the other absurdities. This is about as easy as it gets — if you don’t understand this — you won’t understand much.
ATTENTION!
Mark Curran is actually Mark Douglas Curran. He lives in Quincy, Illinois. He is a convicted child molester. He was caught exposing himself and trying to fondle a six year old boy. Though he is a known sexual predator, he has been caught again and again at the local park or anywhere children are playing. I also live in Quincy and I know this man well. This monster will not stop until he’s put in prison. Besides molesting children, his hobby is spamming FarTax blogs. You’ll see his comments all over the internet. You’ll know because they’re always the same. He spams YouTube FairTax video’s heavily as MarkDouglasC, MakeMyPower, TaxSanity and MyBookDeal.
Say — did you know you DONT — repeate DONT keep your whole paycheck, under Fairtax? Thats right. Boortz has now admitted your pay is “readjusted” downward. That means cut in the real world.
Sure - you get your whole paycheck AFTER its reduced. So keeping your whole payheck is just a meaningless phrase. You kept your whole paycheck before Fairtax too, by that logic.
We all thought “your whole paycheck” meant you kept the money you used to pay in taxes. Now we find out, Boortz and others have used this trick to fool you.
There are other tricks and absurdities to Fairtax.
CHeck out fairtaxabsurdity@blogspot.com to see more.
Plus — Fairtax wants to put the highest sales tax on earth on almost everything you buy — food, rent, auto insurance — yes you will have to pay this high tax on rent and insurance payments. But its also on medical cost — so if you get cancer or some other expensive disease — you are going to pay the government a small fortune in sales tax.
SOmeone with cancer could easily pay 5 or 10 times as much sales tax to the government as their neighbor, who was otherwise exactly like them financially, except for the cancer expenses.
Why should someone with cancer have to pay more of the government burden than someone without?
This is my new blog. The old one doesn’t work anymore.
Whoever is posting the slander and lies, realize that every dog has its day. Ive sent reports into various agencies, and as soon as we find out your name, we will be seeing you in court of law. Or, just show your name and give us your attorney’s name. You are going to need one.