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Why The Fair Tax WILL Work, A response to Bartlett's Unfair Attack on the FairTax
www.FairTax.org and Tax Notes ^ | January 15, 2008 | Laurence J. Kotlikoff

Posted on 02/17/2008 7:34:33 AM PST by DivaDelMar

In his December 24, 2007 Tax Notes article, “Why the Fair Tax Won’t Work,” Bruce Bartlett purports to critique the FairTax, a proposal to replace almost all federal taxes with a retail sales tax plus a rebate. In fact, Barlett’s article has little to say about the FairTax and even less to say that’s accurate. Instead, most of his article misstates research on the FairTax, criticizes unnamed proponents of the FairTax, lambasts unattributed views of the FairTax, and engages in political punditry. This paper takes a close look at Bartlett’s “analysis,” exposing his repeated use of straw men for what it is rhetoric disguised as economics. (1)

....

Bartlett begins his critique by accosting unnamed messengers (referenced by “FairTax advocates”) for supposedly suggesting that consumer, producer, and factor prices would be unaffected by the FairTax, with workers simply keeping the income and payroll taxes that would otherwise have been deducted from their paychecks.

Clearly, such an outcome is inconsistent with elementary economics, and no serious student of the FairTax would assert such an outcome. Nonetheless, Bartlett’s devotes, by my count, some 31 paragraphs, including a primer on the Great Depression, to demolishing this straw man. (2)

....

Bartlett’s second concern lies in the calculation of the FairTax rebate. He takes issue with the proposal’s treatment of childless households, suggesting that the size of their rebates are too large. From this Bartlett surmises that Congress would raise the rebates to households with children thereby “greatly increasing the cost of the rebate.” But if the rebates to childless households are too large, the solution is not to make everyone’s rebate too large, but rather to cut rebates to childless households and, thereby, reduce required FairTax revenue.

Bartlett’s next “critique” is even less memorable. He claims that Americans won’t perceive their monthly FairTax rebate check as progressive even though the rebates will be a much higher percentage of the resources of the poor than they will be of the rich. Instead, he says, households will view the FairTax as proportional because everyone will have to pay the same FairTax rate when they spend their money, no matter the source of their money. This is no different from claiming that people judge tax fairness based on their marginal rather than their average tax rates. Were this the case, marginal tax rates under our current tax system would presumably be set to rise monotonically with income, which is certainly not the case. (4)

Bartlett’s contention here is symptomatic of a pervasive failure to stick to economics. Bartlett’s expertise does not, to my knowledge, extend to psychology or political science. So when he asks his readers to accept his assessment of perceptions or his judgment of political reactions, I, for one, start feeling queasy.

....

Bartlett’s first significant economic critique of the FairTax appears five pages into his article, where he states “… there would be an enormous shift in the tax burden from the wealthy to those with lower and middle incomes.” (page 1245) As proof of this proposition he reproduces a table (his table 5, p. 1245) generated by the Treasury’s Office of Tax Analysis entitled “Distribution of the Federal Tax Burden Under the FairTax.”

Notwithstanding its source, there are two major problems with the Treasury’s analysis of the FairTax’s progressivity. First, the Treasury produced this table in response to a request from President Bush’s Advisory Panel on Federal Tax Reform. The Tax Reform Panel was charged with considering reform of the personal and corporate income taxes. Its purview did not extend to reforming the payroll tax. As a consequence, although the Treasury referenced the FairTax in the table, the Treasury completely ignores one of the most progressive elements of the FairTax, namely the elimination of the highly regressive FICA tax. Bartlett mentions that the table considers replacing only the income tax. But he fails to mention that were the table to include replacing the payroll tax, the FairTax would look much more progressive....

THIS IS AN EXCERPT. The Full paper is available at: http://www.fairtax.org/site/News2?page=NewsArticle&id=9321


TOPICS:
KEYWORDS: brucebartlett; fairtax; taxreform
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What Bartlett failed to disclose is his personal interest in maintaining the status quo. If the Fair Tax passes and the President signs it into law, all of Bartlett's "knowledge," "expertise," and life's work would be rendered irrelevant and obsolete by the stroke of a pen. That inconvenient fact provides ample incentive to unfairly vilify the Fair Tax proposal.
1 posted on 02/17/2008 7:34:35 AM PST by DivaDelMar
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To: Man50D

Ping.


2 posted on 02/17/2008 7:35:13 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: DivaDelMar; xcamel
In the interest of fair disclosure.

What is your interest in seeing the Fair Tax implemented? How will you personally benefit?

3 posted on 02/17/2008 7:37:38 AM PST by mad_as_he$$ (John McCain - The Manchurian Candidate? http://www.usvetdsp.com/manchuan.htm)
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To: DivaDelMar

ping for later reading.


4 posted on 02/17/2008 7:39:39 AM PST by GeorgiaDawg32 (I'm a Patriot Guard Rider..www.patriotguard.org for info on joining.You DON'T have to ride to belong)
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To: DivaDelMar

Tax Reform? Fuggedaboutit!


5 posted on 02/17/2008 7:41:51 AM PST by Don Corleone (Leave the gun..take the cannoli)
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To: DivaDelMar

If it was ‘fair’, it wouldn’t need rebates. Fair is in the eye of the begetter.


6 posted on 02/17/2008 7:43:43 AM PST by ex-snook ("Above all things, truth beareth away the victory.")
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To: mad_as_he$$

I guess she isn’t interested in the more recent developments where LJK and DJ have backed of their original extraordinary claims. Go figure.


7 posted on 02/17/2008 7:52:45 AM PST by xcamel (Two-hand-voting now in play - One on lever, other holding nose.)
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To: DivaDelMar

It’s the whole rebate part that puts me off... why should the poor be exempt from sales tax on “essentials” while the middle class and rich are not. Doesn’t sound “Fair” to me. Why not just exempt certain items from a national sales tax?


8 posted on 02/17/2008 7:55:34 AM PST by MeanGreen2008
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To: DivaDelMar
Thanks for the excerpt, but what I found more interesting is what you conveniently did not excerpt.  From Kotlikoff paper:

......FairTax.org-sponsored research acknowledging that wages must fall if consumer prices don’t rise and that consumer prices must rise if wages don’t fall

Thanks.  I have been called a liar well over a 1000 times by fairtax supporters for stating that fact.  I am glad Kotlikoff publicly acknowledges it, because very few fairtax supporters do.  Appologies accepted.

9 posted on 02/17/2008 7:58:25 AM PST by Always Right (Was it over when the Germans bombed Pearl Harbor?)
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To: xcamel

Just can not be bothered with anything that changes our preconceived notion!!!!/s


10 posted on 02/17/2008 8:00:15 AM PST by mad_as_he$$ (John McCain - The Manchurian Candidate? http://www.usvetdsp.com/manchuan.htm)
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To: MeanGreen2008
I really don’t know too much about the fair tax but what bothers me is can’t the gov. increase the fair taxes any time they want when they need more money to pilfer? So what’s the dif? A screw is a screw.
11 posted on 02/17/2008 8:01:38 AM PST by Bitsy
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To: DivaDelMar
"Now consider the FairTax, which includes a rebate whose present value, I’ll assume, equals B regardless of the size of R. In this case, the average lifetime net tax rate R is given by the formula ζ = (θC - B)/R or ζ = θC/R - B/R or ζ = θ - B/R, which rises with R. Hence, by including the rebate, the FairTax transforms what would otherwise be a proportional consumption tax into a progressive consumption tax."

[In dining room conversations across the country ....]

Lookee here, Martha Rae. Mr. Kotlikoff defines Sigma as Theta minus B/R. Shoot. I always figgured it as plus B/R.

Well, that decides it for me. I'm in favor of the Fair Tax. What channel's Wheel of Fortune on, anyway? Oh, and git be a beer, wouldya?

12 posted on 02/17/2008 8:06:15 AM PST by robertpaulsen
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To: MeanGreen2008
It’s the whole rebate part that puts me off... why should the poor be exempt from sales tax on “essentials” while the middle class and rich are not.

umm, didja notice the rebate plan is optional and applicable to all households, regardless of income?

13 posted on 02/17/2008 8:06:36 AM PST by no-s
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To: DivaDelMar

Who would argue that a 23% tax billed at 30% is fair?

When the foundation is a mirage nothing can be built upon it.


14 posted on 02/17/2008 8:06:51 AM PST by Mark was here (The earth is bipolar.)
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To: All
The misnamed "fair tax" will never gain any ground among the baby boomers who near retirement. Not to mention that a consumption tax is regressive and easily defeated by the wealthy who only need to purchase their goods out of the nation in order to avoid the 30% tax rate.

Additionally, in order for fair tax to work, people would need to take at least a 30% pay cut.

Sorry...the only "fair tax" is an across the board Flat Tax. This deceptive "fair tax" scam isn't going to fly.

15 posted on 02/17/2008 8:07:44 AM PST by Digital Sniper (Hello, "Undocumented Immigrant." I'm an "Undocumented Border Patrol Agent.")
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To: ex-snook
Add to the mix that the IRS will still exist under the "fair tax" system...and it will have the power to audit all your receipts to make sure that you didn't buy your new plasma TV on the tax-free black market.

Add to that mix the assured increase of the "fair tax" percentages as black markets grow and increasingly deny the government the revenue it thinks it deserves.

The "fair tax" system doesn't eliminate the IRS; it pours Miracle Gro on it and gives it powers that would make the Secret Service blush.

16 posted on 02/17/2008 8:10:45 AM PST by Digital Sniper (Hello, "Undocumented Immigrant." I'm an "Undocumented Border Patrol Agent.")
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To: Bitsy

As the long as the Income Tax (sic) is enshrined in the Bill of Rights..(now there is a chuckle worthy topic) then any law imposing the Fair Tax can be coupled with increased income (sic) taxes, there is no getting around that fact.


17 posted on 02/17/2008 8:12:08 AM PST by padre35 (Conservative in Exile/ Isaiah 3.3/Cry havoc and let slip the RINOS)
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To: DivaDelMar
The Fair Tax won't work because it can't get the support it needs to pass. Why? Because it really isn't "fair" in the final assessment.

The Fair Tax is flawed concept.
18 posted on 02/17/2008 8:19:24 AM PST by Filo (Darwin was right!)
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To: no-s

Well, again... why even have a rebate? Why not just exempt certain items such as food, clothing, and medical care?


19 posted on 02/17/2008 8:30:17 AM PST by MeanGreen2008
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To: Digital Sniper

Amen.


20 posted on 02/17/2008 8:36:14 AM PST by xcamel (Two-hand-voting now in play - One on lever, other holding nose.)
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To: DivaDelMar

As long as there are democrats, the fair tax is a VAT.


21 posted on 02/17/2008 8:41:04 AM PST by Buckeye Battle Cry (Life is too short to go through it clenched of sphincter and void of humor - it's okay to laugh.)
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To: Digital Sniper

Have you read the book and tried to understand it?


22 posted on 02/17/2008 8:43:37 AM PST by AFPhys ((.Praying for President Bush, our troops, their families, and all my American neighbors..))
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To: padre35

As the long as the Income Tax (sic) is enshrined in the Bill of Rights..(now there is a chuckle worthy topic) then any law imposing the Fair Tax can be coupled with increased income (sic) taxes, there is no getting around that fact.

In other words, any way you want to tax it, it come out to be - one day we will all own an outhouse because a toilet will be too expensive!!


23 posted on 02/17/2008 8:49:19 AM PST by Bitsy
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To: All
Did you have to read Mein Kampf to understand that National Socialism was a bad idea?
24 posted on 02/17/2008 9:04:40 AM PST by Digital Sniper (Hello, "Undocumented Immigrant." I'm an "Undocumented Border Patrol Agent.")
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To: ancient_geezer; Taxman; Principled; EternalVigilance; phil_will1; kevkrom; n-tres-ted; Jaysun; ...

Fair Tax ping!


25 posted on 02/17/2008 9:28:15 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: RobFromGa

See post #9. I never knew Kotlikoff has come out so cleanly that wages must fall for prices not to rise. But there it is.


26 posted on 02/17/2008 9:36:32 AM PST by Always Right (Was it over when the Germans bombed Pearl Harbor?)
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To: aflaak

ping


27 posted on 02/17/2008 9:38:17 AM PST by r-q-tek86 (If your not taking flak, your not over the target.)
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To: MeanGreen2008

The prebate goes to all, not just the poor. The Prebate will allow all to buy essentials effectively tax-free.


28 posted on 02/17/2008 9:45:22 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: Mark was here

The Fair Tax is 23% on a tax inclusive basis. The tax-inclusive basis is analogous or comparable to the way we conceptualize the income tax.

The Fair Tax is 30% on a tax EXCLUSIVE basis. That is the way we typically conceptualize sales taxes. Let’s do the math to demonstrate:

If you have $1 to spend, you can buy .77 worth of goods and you will pay .23 in sales tax. On a tax-inclusive basis, that is a 23% tax. 23/100 = 23%.

On a tax-exclusive basis, where the value of the goods purchased serves as the denominator or the basis upon which the tax is calculated, the rate is 30%. 23/77 = 30%.

SAME NUMBERS, DIFFERENT ways of calculating the rate provide different results. THERE IS NO INTENT TO DECEIVE.

Let’s approach this from a different perspective. I you want to buy an item that costs $100, how much do you have to earn under the income tax system to permit you to buy the $100 item? If your marginal effective Federal Tax Rate is 23%(15% FIT, 7.65% FICA/Medicare(rough justice 8%)), the answer to that question is $130. Let’s do the math.

$130 gross x 15% = $19.50

$130 gross x 8% = $10.50(rough justice)

NET PAY: $130-$19.50-$10.50 = $100

IS that a 23% tax or a 30% tax?


29 posted on 02/17/2008 9:57:40 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: MeanGreen2008
It’s the whole rebate part that puts me off... why should the poor be exempt from sales tax on “essentials” while the middle class and rich are not.

You are confusing the concept of exemption with the prebate. No one is "exempt" from paying The Fair Tax since the tax will be collected at the point of sale. The prebate will vary in amounts depending on family size. Only the small number of very wealthy will have an effective tax rate(after the prebate) maximum of 23% because the prebate is so small relative to the size of their expenditures considering those with the largest incomes tend to spend more. Fair Tax FAQ #49.

Why not just exempt certain items from a national sales tax?

Exemptions won't work most importantly because the y are lobbyist creations on behalf of their wealthy clients that distort the current taxation system. If you exempt items for one industry than lobbyists ill want more exemptions and we will end up where we are today. Fair Tax FAQ #4. Abolishing exemptions eliminates lobbyist's power and the distortions they create. I suggest you visit the Americans For Fair Taxation website before making anymore incorrect assumptions.
30 posted on 02/17/2008 9:59:00 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: Digital Sniper

False. Please cite the section of the Fair Tax Bill that gives the sales tax enforcement agency (The STATES, not the IRS) the right to audit consumers.


31 posted on 02/17/2008 9:59:30 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: Bitsy

And that differs from the current system, how, exactly? Congress can raise the income tax rates anytime it cares to and we are virtually powerless to resist. Not so with consumption based taxes.

From Federalist No. 21:

“...It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, ``in political arithmetic, two and two do not always make four.’’

If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

Impositions of this kind usually fall under the denomination of indirect taxes, and must for a long time constitute the chief part of the revenue raised in this country....”


32 posted on 02/17/2008 10:02:35 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: DivaDelMar
SAME NUMBERS, DIFFERENT ways of calculating the rate provide different results. THERE IS NO INTENT TO DECEIVE.

Oh please, you are promoting a sales tax, and everyone adds the sales tax to the amount. Computing a tax the non standard way is meant to deceive.

33 posted on 02/17/2008 10:04:45 AM PST by Mark was here (The earth is bipolar.)
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To: Digital Sniper
Sorry...the only "fair tax" is an across the board Flat Tax. This deceptive "fair tax" scam isn't going to fly.

The Fair Tax is a flat tax on consumption. Your statement perfectly illustrates the income tax is far more deceptive than you realize. The income tax began as a flat tax on income when enacted in 1913. The first $20,000 was taxed 1% and any income in excess of $500,000 was taxed 7%. So few earned more than $20,000 that it was essentially a flat tax and covered less than .5% of the population. The income tax now has a multi tiered system covering more than 80% of the population. Another flat tax on income will bring us right back to where we are today only faster thanks to all the lobbyists that isn't exist in 1913. I'll take a flat tax on consumption any day to avoid this oppressive income tax monster again.
34 posted on 02/17/2008 10:07:13 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: MeanGreen2008

The Bill was written to include a prebate, instead of exempting certain items, for several reasons.

1. Giving the government the power to determine what is or is not a necessity transfers power back to them by giving them an opportunity to sell “exemptions” in exchange for campaign cash. Taxing everything while providing a prebate removes the power of K Street lobbyists.

2. Providing every legal resident with a prebate provides the greatest possible choice to the individual. My market basket of necessities may be and probably is different from your market basket of necessities. With the prebate, we are free to choose what we wish to purchase effectively tax free.

3. Without the prebate, the tax is truly regressive and the Democrats would NEVER allow it to pass.

In summary, the prebate provides the individual with the greatest possible choice, removes the influence of lobbyists and allows the Fair Tax to be more progressive than our current system.


35 posted on 02/17/2008 10:08:01 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: Buckeye Battle Cry
As long as there are democrats, the fair tax is a VAT.

The Fair Tax is nothing like a VAT. A VAT taxes each stage of production of every item. The Fair Tax will only impose one tax at the point of sale.
36 posted on 02/17/2008 10:10:02 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: Mark was here

Incorrect. The rate is quoted both ways to facilitate comparison to the income tax. A 30% sales tax is equivalent to a 23% income based tax. There is no intent to deceive, rather advocates wish to provide a valid basis of comparison. A 30% sales tax is NOT equivalent to a 30% income tax and those who don’t think about this at any depth would equate the two. In a rush to judgment, without a valid basis of comparison, most would dismiss the proposal out of hand as a tax increase. That is false.


37 posted on 02/17/2008 10:14:07 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: mad_as_he$$

I will not benefit. As a CPA/Tax Attorney/Estate Planner, my business will suffer.

My interest in seeing the Fair Tax enacted is simple. It is the best thing for the country and it will free my children and grandchildren from the insanity and slavery of the income tax.

And what is your interest in preserving the status quo?


38 posted on 02/17/2008 10:17:04 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: MeanGreen2008

why should the poor be exempt from sales tax on “essentials” while the middle class and rich are not.
***********************************************
Everyone gets the prebate ,, whether you’re working at McDonalds or if you’re Donald Trump... it is simply based as a percentage of the income denoted as the “poverty line” for each family size.


39 posted on 02/17/2008 10:17:54 AM PST by Neidermeyer
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To: DivaDelMar
Remember.. the folks she’s quoting didn’t even have indoor plumbing, for take it FWIW.
40 posted on 02/17/2008 10:22:52 AM PST by xcamel (Two-hand-voting now in play - One on lever, other holding nose.)
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To: Bitsy
As the long as the Income Tax (sic) is enshrined in the Bill of Rights..(now there is a chuckle worthy topic) then any law imposing the Fair Tax can be coupled with increased income (sic) taxes, there is no getting around that fact.

You need to read the Bill Rights again. It only pertains to enumerated rights of the people. Section 8 in Article 1 of The Constitution grants Congress the power to lay and collect taxes but does not specify an income tax. The 16th Amendment does not require Congress to levy an income tax.

Regardless of that point, you are forgetting one little detail about imposing a national sales tax while maintaining an income tax. Congress could have done so long ago if it weren't for the fact they realize the outrage from their constituents would be on the same level as it was twice this past summer when Congress critters tried to shove amnesty for illegal aliens down our throats. They quickly wilted under the pressure.
41 posted on 02/17/2008 10:22:57 AM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: xcamel

The folks I quote were writing Constitutions while doctors were performing blood lettings and surgery without the benefit of anesthesia or sterilization. Your point is, what, exactly?


42 posted on 02/17/2008 10:34:53 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: DivaDelMar
You walk up to someone who is not all cranked up on your inside baseball. You say we want to swap the Income tax for a sales tax. He asks what is the tax rate. You say 23%. He takes it to mean the tax on a $100 purchase will be $23.00.

Just as any other sales tax.

If you said the truth, according to how we compute sales taxes, 30%, then you would have a greater risk of having the prospect run away from you as fast as he could.

Then you would have to shout "wait you haven't heard about the pre-bates yet!"

43 posted on 02/17/2008 10:35:54 AM PST by Mark was here (The earth is bipolar.)
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To: Man50D; Bitsy

And the “Bill of Rights” encompasses the first ten amendments, not the 16th.

And on the danger of enumerating rights, I recommend Federalist Paper No. 84, here: http://patriotpost.us/fedpapers/fed_84.html


44 posted on 02/17/2008 10:37:56 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: DivaDelMar

I’m not certain that the Fair Tax will work, but i am certain that it would be sooo delicious to see all at the IRS have to go get a real job in the private sector. And keeping said job has to do with profit and loss.

Oh yeah, that thing called profit and loss..... Gee now let me see....How does that work? Yeah, you have to work efficiently right?


45 posted on 02/17/2008 10:42:43 AM PST by NeverForgetBataan
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To: Mark was here

The prebate is factored into the rate calculation, just as exempting “necessities” would narrow the base, necessitating an increase in the rate.

When I’ve explained the rate difference to groups, I always start with the $1.00 example I gave you. When I ask what the rate of the tax is, they ALWAYS respond: “23%.” When I explain that if they want to spend $1 on goods and they will have to pay 30 cents in tax, and I ask what the rate is, they ALWAYS respond “30%.” After saying, “But wait a minute, you just told me the rate was 23%!” I launch into a discussion of tax inclusive rates vs. tax exclusive rates.

THERE IS NO INTENT TO DECEIVE, only a genuine desire to provide a valid basis of comparison to the income tax.


46 posted on 02/17/2008 10:44:20 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: DivaDelMar
THERE IS NO INTENT TO DECEIVE, only a genuine desire to provide a valid basis of comparison to the income tax.

Your intent is different from the known effect. Not what one would expect from something claiming to be fair.

47 posted on 02/17/2008 10:50:01 AM PST by Mark was here (The earth is bipolar.)
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To: Mark was here

If within 2 minutes of initiating a discussion on the rate we disclose the fact, yes FACT, that the tax exclusive rate is 30%, how is that unfair?

Before making a decision on a policy, don’t you want all of the facts or is your mind made up such that you don’t care to hear all of the facts?


48 posted on 02/17/2008 10:55:42 AM PST by DivaDelMar (CRAm member-- (Conservative Republicans Against mcCain) Think you're entitled to my vote? CRAm It!!!)
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To: MeanGreen2008
Well, again... why even have a rebate? Why not just exempt certain items such as food, clothing, and medical care?

The rebate and an exemption schedule are equivalent in intended effect, i.e. to avoid taxing the essentials of life. A rebate is a more effective approach than exemptions, since the rebate:

The cost of administering the rebate program itself is limited to disbursing the funds and making sure there is only one rebate issued per actual person. If a person doesn't apply for a rebate, they have nothing to do with the rebate program.

It occurs to me someone should mention the basic premise of the FairTax. The current income and payroll tax system is perverse, unfair, incorrect, indefensible, incompatible with a healthy economy, dangerous to our future as a nation and basically un-fixable. Every time we meddle with income tax to fix some problem, we create new opportunities for influence-peddling and indulgences, taking a step closer to bureaucratic despotism and the dissolution of freedom. Or the chaos of revolution - after all, you don't think folks will stand for this forever, do ya? As long as there is a direct tax on individuals someone will desire to wield it as an instrument of power and influence. And we'll never get the issue of spending for power and influence.

But we can't just throw the whole thing out without causing tremendous upheaval and destroying the country. That's the status quo the spenders and looters would prefer, to prevent us interfering with their power. The FairTax is the answer to the challenge. Replace the payroll and income taxes with the FairTax and the relationship between spending and taxation becomes crystal clear. The tremendous influence of the government over social policy, which has always been misused, is now diminished to let us live freely again.

So, I view the FairTax as kind of a litmus test. Are you going to be part of the problem or part of the solution?

49 posted on 02/17/2008 10:59:22 AM PST by no-s
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To: DivaDelMar
My interest is not in preserving the current system. I believe in fixing the problem not just putting lipstick on a pig and calling it a show girl. The FT is neither fair nor equitable. Lower end wage makers will suffer and the turmoil it will cause for small and medium businesses is crazy. It will throw hundreds (if not thousands)out of work in the first year. The black market will develop and actually decrease the revenue to the Government. Solve the real problem which is out of control spending.
50 posted on 02/17/2008 11:02:29 AM PST by mad_as_he$$ (John McCain - The Manchurian Candidate? http://www.usvetdsp.com/manchuan.htm)
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