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Why Republicans Should Support the FairTax
Feb. 11, 2004 | Wm. Donald Tabor Jr., DDS

Posted on 02/11/2004 11:47:11 AM PST by phil_will1

It would be a lot easier to get support from Republicans if it were called the ClearTax or the TrueTax, since 'fairness', in the political arena, has become a synonym for redistribution of wealth. But the FairTax is the road out of this class warfare mess that paralyzes the country and prevents the Congress and President from attending to the country's business.

Populists pander to their constituencies by manipulating a complex illusion, a fraud upon the public, we call the Income Tax. We waste our time and energies fighting over changes in that system, but the truth is that no one, neither corporation, nor individual, really pays income taxes, or FICA taxes either, for that matter. For all the fighting and demagoguery over every change in the tax code, those complex schemes are no more than changing assignments over who will be required to COLLECT a hidden sales tax from consumers.

Economists have long been aware that corporations don't pay taxes, they only pass them along to their customers, but the same is really true for all of us. We trade our labor for what we take home, not for what our employer forwards to the government in our names. Few people are even aware of the gross amount of their pay. We pass our perceived income taxes and FICA taxes along to our employers, as a cost of the 'business' of being employed. Employers then regard our withheld taxes as just another cost of doing business, like their own taxes. And like every other cost of doing business those taxes become a part of the price of whatever goods or services we produce.

The simple truth is that ALL taxes are passed along like this and eventually paid by the consumer, as a hidden sales tax buried in the cost of those goods and services. The average portion of the price of everything, from a loaf of bread to brain surgery, that is really someone else's Federal Income, FICA, or corporate tax is about 22% of the price of everything you buy. And since everyone buys products and services, rich or poor, no one escapes that taxation. The real impact of taxation is not on our Form 1040, but at the grocery store and the doctor's office.

Imagine the change in the political landscape if that truth suddenly became clear to every American.

It really doesn't matter if we shift the total income tax burden to the top 10% of tax payers or if everyone pays the same percentage from bottom to top, NONE of that is real. Varied income tax rates only change the relative prices of the things we buy. Healthcare costs more because the income tax system makes doctors collect a lot of tax to earn their after tax incomes. The only REAL tax is that hidden sales tax, because that is the only one that cannot be passed along to someone else down the line. The FairTax simply makes this hidden sales tax visible.

Under the FairTax plan, (www.FairTax.org) the IRS and FICA are gone. You get your whole paycheck with no Federal deductions. There would instead be a 28% Federal sales tax. This would be revenue neutral to the government, and cost neutral to us, since the increases in our paychecks and the fall in prices would exactly cancel out the new sales tax. It would have to be that way if you think about it, as all we really would be doing, in the short term, is to replace the existing hidden sales tax with a visible sales tax of the same size. So why do it?

The answer is CLARITY, and that is what changes everything.

No more could the populists pander to the voters with promises to tax someone else for their goodies. Everyone would know exactly what government costs them, it would be on every receipt they get for a hamburger or a new house. And they would know that the burden falls proportionately on all, as it always has, even though they do not know it now.

Any major new program would have to be accompanied by a raise in the sales tax, with no illusion that the cost could be shifted to someone else. Every cut in the size of government would be visible money in the pocket of every American.

Class Warfare would be DEAD forever and we could at last go about the business of the country and set our priorities based on an honest understanding of the costs. And that is how we can bring this country together to face the real threats to our liberty and prosperity.


TOPICS: Business/Economy; Constitution/Conservatism
KEYWORDS: axixofevil; fairtax; jobs; taxes; taxreform
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Another very good explanation of the benefits of the FairTax - or some of them, anyway.
1 posted on 02/11/2004 11:47:11 AM PST by phil_will1
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To: phil_will1
Everyone would know exactly what government costs them, it would be on every receipt they get for a hamburger or a new house. And they would know that the burden falls proportionately on all, as it always has, even though they do not know it now.

I've been saying this since I started working in 1970. My father's words rang true when I saw the deductions on my pay stub.

2 posted on 02/11/2004 11:51:34 AM PST by Cobra64 (Babes should wear Bullet Bras - www.BulletBras.net)
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To: phil_will1
It would be a lot easier to get support from Republicans if it were called the ClearTax or the TrueTax, since 'fairness', in the political arena, has become a synonym for redistribution of wealth. But the FairTax is the road out of this class warfare mess that paralyzes the country and prevents the Congress and President from attending to the country's business.

The NRST is an inherently regressive form of taxation that is truly despotic.
Long term, it would result in a two-tiered socio-economic stratification of our society.
It is not disimilar to a 21st Century eco-feudal system where the corporate aristocracy invest and expand their property holdings completely tax-free, while the serfs are overburdened with the excessive taxation on consumption and persuaded that it's supposedly "fair" because the consumption taxes are redistributed through the formal social welfare system.

3 posted on 02/11/2004 11:53:18 AM PST by Willie Green (Go Pat Go!!!)
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To: Willie Green
Huh?
4 posted on 02/11/2004 11:58:15 AM PST by Luke Skyfreeper (Michael <a href="http://www.michaelmoore.com/index_real.php">miserable failure</a>Moore)
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To: *Taxreform
Tax reform bump.
5 posted on 02/11/2004 12:00:57 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Cobra64
It should prevent the Federal Government from collecting revenue Directly from the people. The tax should be collected by the States from sellers proceeds. Then the State will be responsible for collection and remission. (Simular to the Federal Gasolene tax). Therefor all you need is one person at the Treasury to collect State remissions. The IRS would not be needed at all, nor Income Tax "experts"..

The name doesn't bug me.. A rose is still a rose by any other name.. IMHO.

6 posted on 02/11/2004 12:01:37 PM PST by glowworm ( (Rats= rat behavior, a rat is a rat is a rat..))
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To: Willie Green
Income taxes are also "inherently regressive" without modifications to make them less regressive.

The FairTax's Personal Consumption Allowance is the simplest and most effective mechanism for removing regressivity. It is far less regressive, for example, than the payroll taxes that it replaces. As someone else has said, the FairTax is more regressive than the concept of a progressive income tax but less regressive than ours in actuality.
7 posted on 02/11/2004 12:04:52 PM PST by phil_will1
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To: phil_will1
Another very good explanation....

Well, if that's a good explanation, then it's clear this thing called a 'Fair Tax' is not at all what's being claimed. .

The specific example is not a sales tax at all! It's an income tax. It happens to be a flat tax of 28%, rather than a graduated income tax, but it's still - as the essay explicitly states - a tax on income taken from your paycheck, not a tax on any sale.

And there is an even greater flaw. I'll buy that all taxes are ultimately sales taxes. Certainly the consumer pays all taxes. But the issue is not and never has been where the total sum of taxes come from. The issue is the distribution of how the total burden is applied. Right now, if one assumes that the nominal pay is 'right' in some sense of value rendered to the organization, then the burden of taxes is higher on higher incomes. If one went to the flat income tax this essay really advocates, then it would either amount to a pay increase for upper brackets and a penalty to lower brackets, or salaries would need to be adjusted so that take home pay remains the same, in which case the only real difference is semantics.

The real problem is that there is any tax on income at all. It sends the wrong message - that the official government policy is to penalize people for providing services others are willing to pay for. Instead, we should have a true 'sales' tax, collected at point of sale of some good or service someone is willing to pay for. In the end, labor can be considered such a service - and after all, the true source of tax revenue is always the consumer - but if it's treated exactly the same for federal tax tax purposes as every other sales transaction, the proportion of the total tax burden collected for providing a service someone is willing to pay for would go down, and that's a good thing.
8 posted on 02/11/2004 12:08:32 PM PST by Gorjus
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To: glowworm
...Therefor all you need is one person at the Treasury to collect State remissions....

Hmmm, I like the way your thinking.

9 posted on 02/11/2004 12:10:02 PM PST by LowCountryJoe (Shameless way to get you to view my FR home page.)
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To: phil_will1
Although not necessarily show stoppers, I see two problems. First, there is a big transition problem. Do folks with huge Profit Sharing Plans avoid EVER facing an income tax, even though they got tax deductions for contributions to the plans in prior years? Same issue with stock options and appreciated property when the new system is implemented.

Second, do we no longer distinguish between payroll taxes that in theory were to fund "social insurance" for the earner? Historically, we've been pretty consistent in accounting for those taxes separately from general government revenues, though there has been some erosion in recent years. The theory was that general tax revenues are not subject to claims for social security and medicare. I suspect we're moving to blur that historical distinction, but given the massive shortfalls coming in future years on social security and medicare, those decisions should not be made lightly.
10 posted on 02/11/2004 12:16:34 PM PST by labard1
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To: Gorjus
"The specific example is not a sales tax at all! It's an income tax."

The FairTax is a National Retail Sales Tax (NRST). I'm not sure where you got the idea that its a flat income tax, but that is wrong.
11 posted on 02/11/2004 12:17:38 PM PST by phil_will1
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To: Gorjus
I think you mis-read the article. The NRST/FairTax is indeed a sales tax -- it is imposed/colelcted at the point of retail sale. If you choose to save or invest part of your paycheck, you would pay no taxes on it.

Neither is the NRST inherently unfair or regressive. Not only, as you mention, are most people already paying a hidden sales tax in the form of increased costs to production, but the NRST actually provides a mechanism to offset the amount of the sales tax paid on purchases up to the poverty line under the assumption that necessities should not be taxed. While this leaves everyone's marginal tax rates identical, it does make the effective tax rate progressive based on amount of consumption.

For example, let's assume the poverty line for a family of four is $14,000. A family spending $15,000 would be paying a 23% marginal rate on each dollar spent in the sales tax, but their effective tax rate, after the rebate is factored in, is only 1.5%. A family spending $30,000 would be paying a 23% marginal rate on each dollar spent in the sales tax, but their effective tax rate, after the rebate is factored in, is 12.3%. At $100,000 in expenditures, the effective tax rate becomes 19.8%.

12 posted on 02/11/2004 12:21:29 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Gorjus
It's not really an income tax, since you don't pay it on what you save. But you're both right. There are 260M people in the US and one way or another they will collectively pay the taxes, no matter how those taxes are calculated. Technically, the tax that's being discussed, which is a lot like the Euro. VAT (that is a consumption VAT, except that, from the description it is not clear that it is a Value Added Tax, since that really depends on how it is calculated, paid and credited at intermediate steps in the production and commerce process; really it doesn't matter since at the sales counter it will look like a VAT). The tax is not regressive, nor is it inherently regressive to income (which is what people really mean now when they call a tax regressive). Rich people buy goods and services whose true value (or utility) is lower than those generally purchased by the poor. We call those luxury items. How much more useful is a BMW than a Chevy? Not much, but you pay more for the BMW. What really makes it look like it is regressive to income is that the savings rates for rich people are generally higher than for poor people. Does anyone know if this Fair Tax would tax securities and investments?
13 posted on 02/11/2004 12:22:51 PM PST by NYFriend
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To: kevkrom
Ah....but it WOULD be unfair to all the POOR who pay $150 for Air Jordan's or other hyped merchandise....dontcha know!
14 posted on 02/11/2004 12:25:13 PM PST by goodnesswins (If you're Voting Dem/Constitution Party/Libertarian/Not - I guess it's easier than using your brain.)
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To: labard1
Although not necessarily show stoppers, I see two problems. First, there is a big transition problem. Do folks with huge Profit Sharing Plans avoid EVER facing an income tax, even though they got tax deductions for contributions to the plans in prior years? Same issue with stock options and appreciated property when the new system is implemented.

Yes, those investments would avoid income taxes entirely. They will stay pay taxes on anything the spend for new retail goods and services.

Second, do we no longer distinguish between payroll taxes that in theory were to fund "social insurance" for the earner? Historically, we've been pretty consistent in accounting for those taxes separately from general government revenues, though there has been some erosion in recent years. The theory was that general tax revenues are not subject to claims for social security and medicare. I suspect we're moving to blur that historical distinction, but given the massive shortfalls coming in future years on social security and medicare, those decisions should not be made lightly.

First of all, there is no Social Security "trust fund". FICA taxes go straight into the general fund and benefits are paid from there.

That aside, barring changes to the Social Security and Medicare laws, the NRST still does require employers to report wages for their employees (assuming those employees want to be eligible for their correct level of benefits). A portion, and a large one at that, of the NRST rate is specifically set to raise the same revenue as the old FICA taxes -- this is, I seem to recall, 8.09% whereas the remainign 14.91% is to replace income and similar taxes.

15 posted on 02/11/2004 12:27:03 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
Ah, a rebate! Now you've messed with the whole thing. Well, at least it won't distort prices, but now I'm starting to wonder if it would effect work/leisure choices?

BTW, has any one ever said that social programs are effectively regressive against taxes?
16 posted on 02/11/2004 12:28:30 PM PST by NYFriend
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To: phil_will1
Georgians remember that Herman Cain, running for Zell Miller's seat, is a STRONG Fairtax supporter.
17 posted on 02/11/2004 12:29:48 PM PST by hilaryrhymeswithrich (Herman Cain for the U.S. Senate.....this Georgia man is in YOUR future!)
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To: glowworm
Therefor all you need is one person at the Treasury to collect State remissions.

With direct deposit.....we can ditch that loser too!

18 posted on 02/11/2004 12:33:38 PM PST by Onelifetogive
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To: phil_will1; All
It's kind of related but not entirely, has anybody read The Economic Report of the President? In particular, chapters 4 through 6.

If interested, curious, or just plain bored:

http://a257.g.akamaitech.net/7/257/2422/09feb20040900/www.gpoaccess.gov/usbudget/fy05/pdf/2004_erp.pdf

19 posted on 02/11/2004 12:35:26 PM PST by LowCountryJoe (Shameless way to get you to view my FR home page.)
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To: NYFriend
"Does anyone know if this Fair Tax would tax securities and investments?"

No, its a tax on new goods and services purchased for consumption only.
20 posted on 02/11/2004 12:37:54 PM PST by phil_will1
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To: phil_will1

For all the fighting and demagoguery over every change in the tax code, those complex schemes are no more than changing assignments over who will be required to COLLECT a hidden sales tax from consumers.

Precisely!!!, this guy gets it.

Also nailed in:

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?

by D. Sherman Cox J.D. L.L.M. Taxation

The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.

If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.

21 posted on 02/11/2004 12:38:39 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: NYFriend
Ah, a rebate! Now you've messed with the whole thing. Well, at least it won't distort prices, but now I'm starting to wonder if it would effect work/leisure choices?

Probably not. The rebate is not income-related, you get the same amount as everyone else (well, ok, different rates for adults and children) just by virtue of being a US citizen who is not incarcerated. The actual amount of the rebate wouldn't be sufficient to live on... let's take that same example of $14,000 as the poverty line for a family of four. That's an annual rebate of $3,220, or $268 a month.

The alternative for a rebate is exempting certain items, but then you just open up the special interests and social engineering can of worms again. The rebate is simpler because it applies evenly across the board.

22 posted on 02/11/2004 12:39:08 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: NYFriend
Does anyone know if this Fair Tax would tax securities and investments?

No, with the exception of any fees related to their purchase and sale, which would be taxable services.

23 posted on 02/11/2004 12:40:19 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: ancient_geezer
"Precisely!!!, this guy gets it."

As do you, AG, as do you!!
24 posted on 02/11/2004 12:40:36 PM PST by phil_will1
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To: NYFriend

Ah, a rebate! Now you've messed with the whole thing. Well, at least it won't distort prices, but now I'm starting to wonder if it would effect work/leisure choices?

Actually it isn't even a "rebate", it is referred to as the Family Consumption Allowence, a fixed amount paid each month to all legal residents. Every household gets it, depending only on number of legal residents in the household. Every one from Hermit the Hobo to Bill Gates qualifies for it as it is not dependant upon one's income. Works more like the personal exemption(which it is designed to take the place of) of the income tax.)

The FCA works like this:

 

All legal residents will receive a FCA equivalent to the FairTax paid on essential goods and services. The FCA will be paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate.

Every year, the Department of Health and Human Services [HHS] determine the "poverty level" for each family size.

The 2001 "FairTax" Family Consumption Allowance Figures

Family Size

HHS Poverty Level

Annual FCA

Monthly FCA

One

$8,590

$1,976

$165

Two

$17,180

$3,951

$329

Three

$20,200

$4,646

$387

Four

$23,220

$5,341

$445

Five

$26,240

$6,035

$503

Six

$29,260

$6,730

$561

Seven

$32,280

$7,424

$619

Eight

$35,300

$8,119

$677

1) Federal Register: February 16, 2001, Pages 10695-10697).

[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer

A family of four, for example, could spend $23,220 per year free of tax because they will have received over the course of the year rebates totaling $5,341. $5,341 is the amount of sales tax paid on $23,220 in expenditures. A family spending double the "poverty level" or $46,440 per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

[71] To illustrate the plan's progressive nature we can examine the tax burden that a family of four will have at various annual income levels (or in this case, annual spending levels).

H.R.2525 "The FairTax Act

Not only does every family receive a FCA based on family size, not income, but they will also receive 100% of their paycheck:

Fedup Smith makes $39K per year...once the FairTax is the law of the land he will receive an instant increase in pay of $200.00 per week. Since he has a family of four, he will receive a FCA of $445 per month, for a total of $1,305.00 additional income per month that he can do with as he sees fit

25 posted on 02/11/2004 12:47:59 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: hilaryrhymeswithrich

Georgians remember that Herman Cain, running for Zell Miller's seat, is a STRONG Fairtax supporter.

As are many House contenders all over the country.

My growing list of Congress Critter's & wanna be Critter's supporting national retail sales tax

all the HR25 Cosponsors (43)

plus some Congress Critter's In the News

Vernon Robinson running for North Carolina's 5th Congressional District

Jacksonville Daily Progress: Hensarling stumps in Cherokee County (Texas' 5th Congressional District)

Bill Lester (Texas' 11th Congressional District)

Anymore you run across, let me know so I can add them to the lists.

26 posted on 02/11/2004 12:55:49 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: Luke Skyfreeper
Huh?

It's a tax "reform" Trojan Horse.
The IRS is the big bad boogeyman who's supposedly eliminated,
but everybody has to line up at the Social Security Administration to receive their cradle-to-grave monthly sales tax rebate checks that supposedly make the system "fair".

Don't let the NRST shills fool you...
It's nothing but a paradigm shifting shell game.

27 posted on 02/11/2004 12:57:49 PM PST by Willie Green (Go Pat Go!!!)
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To: Willie Green
The IRS is the big bad boogeyman who's supposedly eliminated, but everybody has to line up at the Social Security Administration to receive their cradle-to-grave monthly sales tax rebate checks that supposedly make the system "fair".

First of all, the FCA/rebate is completely voluntary -- no is compelled to do anything. Secondly, applying for the rebate requires filling out one simple, annual form (or upon change of family status -- births, deaths, amrriages, divorces, etc.) that is no more complicated or invasive than registering to vote.

Secondly, there is no "lining up" anywhere. File an annual form, get a monthly check. Don't file a form, don't get a check. It is that simple.

28 posted on 02/11/2004 1:05:11 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Willie Green

but everybody has to line up at the Social Security Administration to receive their cradle-to-grave monthly sales tax rebate checks

Baloney.

If you don't want it, you are expressly not required to apply for it. Your choice.

29 posted on 02/11/2004 1:06:40 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: Willie Green
First of all, what's an NRST?

Is this anything to do with the "Fair Tax"?

30 posted on 02/11/2004 1:12:12 PM PST by Luke Skyfreeper (Michael <a href="http://www.michaelmoore.com/index_real.php">miserable failure</a>Moore)
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To: phil_will1
What do you mean by regressive?
31 posted on 02/11/2004 1:14:18 PM PST by Luke Skyfreeper (Michael <a href="http://www.michaelmoore.com/index_real.php">miserable failure</a>Moore)
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To: kevkrom
First of all, the FCA/rebate is completely voluntary -- no is compelled to do anything.

Yeah, yeah, yeah...
Income Tax refunds are voluntary too...
Nobody's gonna FORCE you to accept a refund from the IRS...

LOL! It's hilarious to see what convoluted inside-out topsy-turvy spin you shills will try next.

It's a crying shame, however, that there are totally clueless idiots out there who actually believe in your snake-oil.

32 posted on 02/11/2004 1:15:17 PM PST by Willie Green (Go Pat Go!!!)
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To: Willie Green
"It's nothing but a paradigm shifting shell game."

Well, it certainly shifts the paradigm, all right.

Here are some of the basic fundamentals of our current tax system that will change:
(1) We will be taxed on what we take OUT of the economy (consume), rather than what we contribute TO the economy (earn).
(2) We will stop penalizing US production and making it extremely difficult for US producers to compete with their international counterparts.
(3) We will start putting illegal immigrants and foreign visitors on our tax rolls at a rate that is disproportionate to the rest of us.
(4) We will end the 46,000 page monstrosity that our tax system has grown into and replace it with one that is app. 100 pages, saving several hundred billion $$ in compliance costs in the process.
(5) As the author points out, it will be much more difficult to play the class warfare game.
(6) As the demand for US production increases, jobs will be created here. Even displaced tax lobbyists will be able to find productive employment.

All of that makes for a nice paradigm shift, wouldn't you say?
33 posted on 02/11/2004 1:17:50 PM PST by phil_will1
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To: Luke Skyfreeper
First of all, what's an NRST? Is this anything to do with the "Fair Tax"?

They are almost synonyms. The FairTax is the most prominent national retail sales tax (NRST) proposal, currently with 40+ sponsors in the U.S. House as HR 25. They have been other NRST proposals, but in general, most people are referring specifically to the FairTax when they say NRST.

An NRST, in general, is a single-stage, single-rate retail sales tax that taxes goods and services only at the point of initial retail sale. Business-to-business transactins are not taxed. The NRST is designed to completely replace income, estate, gift, and FICA taxes. It is completely transparent, there are no hidden taxes.

There is a strong community on FR committed to promoting the NRST/FairTax: the TaxReform ping list. There is also a smaller, but no less vocal, group of detractors who will also frequent realted threads.

34 posted on 02/11/2004 1:18:07 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: phil_will1
Good explanation. I pray that one day it becomes a reality.
35 posted on 02/11/2004 1:18:27 PM PST by free me (Fight Socialism - Support the Fair Tax! (NRST))
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To: ancient_geezer
Thank you. Now I've got it. It's actually, in theory, a tax preference for basic needs, but in order to avoid distorting prices by exempting food, etc. for the tax you estimate the cost of basic needs for each household size and cut them a check for what they would spend. OK, that works. This tax scheme, by offering a preference for investments, would be a great short term economy booster by providing a great incentive for investment (= capital). How are commodity investments handled?

I agree now that the rebate would not effect work/leisure to any great extent. Actually, I'd like this system, not because it's fair (no tax system can be absolutely fair since we can't agree on what that means) but because it would eliminate the efficiency losses that we know other tax plans create. It also does what the author of the above article says. It makes it clear how much you pay in taxes. Food is not taxed. Except, included in the price are wage taxes for store employees, agricultural and manufacturing employees, taxes on package printing and advertising services, fuel and mileage taxes on the transportation costs, property taxes on place the food moves through, etc. We have no idea how much we really pay in taxes.
36 posted on 02/11/2004 1:20:05 PM PST by NYFriend
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To: Willie Green
Yeah, yeah, yeah... Income Tax refunds are voluntary too... Nobody's gonna FORCE you to accept a refund from the IRS...

Well, if you would actually read the proposed legislation (HR 25), you would be able to see that:

CHAPTER 3--FAMILY CONSUMPTION ALLOWANCE
SEC. 302. QUALIFIED FAMILY
(e) Registration Not Mandatory- Registration is not mandatory for any qualified family.

37 posted on 02/11/2004 1:22:58 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: NYFriend
It also does what the author of the above article says. It makes it clear how much you pay in taxes... We have no idea how much we really pay in taxes.

Actually, what's even better, is that the NRST would make it appear that you're paying more taxes than you actually are. Everyone is going to see the marginal 23% rate paid at the register on every purchase -- that is what they are going to think is their tax rate despite the fact that their effective tax rate will be lower.

38 posted on 02/11/2004 1:26:17 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
On further reflection, I believe I got the transition problem exactly backwards, for which I apologize. Let me try again.

Anyone who today has assets left after all income and payroll taxes have been paid would be subject to the same federal sales tax as folks receiving new untaxed income. In short, this proposal would subject all current assets already taxed under current law to a brand new sales tax on all purchases.

That's a pretty effective to raise significant new revenue for the government. Good for young folks with no assets. Bad for old folks with big (previously taxed) assets.
39 posted on 02/11/2004 1:27:26 PM PST by labard1
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To: phil_will1
The best part about this proposal is that the federal government could never sustain enough revenues to support current levels of spending with a 28% sales tax. At around 10%, the marginal gain in revenues from an increase in the sales tax rates turn negative as the incentive grows to avoid those taxes and turn to black markets. 28% is WAY over that number. Unfortunately, that is also a reason why the tax may not gain support in Congress.

As much as I loathe an income tax, the best bet we may have for sustained reform is to push for a flat rate income tax of around 20%. It is not ideal, but is certainly preferable to the Leviathan that is our tax system now.
40 posted on 02/11/2004 1:28:21 PM PST by Texas Federalist
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To: Luke Skyfreeper
"What do you mean by regressive?"

A regressive tax is one in which those who are at the lower end of the scale pay higher rates than those at the high end of the scale. A perfect example is our social security tax, which is flat until you get to the maximum and then decreases as a percentage as your income level increases.

Contrast that to a progressive tax, which is what our income tax is supposed to be. The problem, however, is that all the "loopholes" and special preferences greatly distort its progressivity.

For example, here in Atlanta, the Ted Turner/Jane Fonda divorce was heavily covered in the media several years ago when it happened. One of the articles revealed that court documents indicated that Mr. Turner had taxable income of something like $125 MM for the previous year and he paid around $5 MM in taxes. That's an overall effective rate of less than 5%. How many people reading this post make far less than $125 MM and would love a tax rate of 5%?

As Ancient Geezer pointed out above, the FairTax is truly progressive, not regressive.
41 posted on 02/11/2004 1:29:32 PM PST by phil_will1
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To: ancient_geezer; kevkrom; lewislynn
There would instead be a 28% Federal sales tax.

Hey! Why are the shills still claiming 23% when the article says it's 28% ?

42 posted on 02/11/2004 1:30:21 PM PST by Willie Green (Go Pat Go!!!)
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To: labard1
Anyone who today has assets left after all income and payroll taxes have been paid would be subject to the same federal sales tax as folks receiving new untaxed income. In short, this proposal would subject all current assets already taxed under current law to a brand new sales tax on all purchases. That's a pretty effective to raise significant new revenue for the government. Good for young folks with no assets. Bad for old folks with big (previously taxed) assets.

"Assets" is probably a poor chocie of words -- selling a previously taxed item, whether or not that tax was paid pre-NRST or post-NRST would not be subject to being taxed again.

Now, converting assets to cash and using that to buy new goods and services... yes, that would then be subject to the NRST. However, that is little different from today, where the income tax acts as a hidden VAT on goods and services. The only real difference is that the tax is explicit instead of implicit. The amount of the embedded tax should be roughly the same either way (probably within a few percent of each other).

I'll be the first to admit that the transition period could be a little strange, but I don't think anyone is going to be shafted as a result.

43 posted on 02/11/2004 1:33:13 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: phil_will1
Thanks for the explanation.

Do the wealthy really get by with paying so little income tax? If so, how do they do it?
44 posted on 02/11/2004 1:36:55 PM PST by Luke Skyfreeper (Michael <a href="http://www.michaelmoore.com/index_real.php">miserable failure</a>Moore)
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To: phil_will1
Any reform plan that end "withholding" and tax on productivity is something I am 100% behind.

It breaks the hold of government on the productive citizens.
45 posted on 02/11/2004 1:38:03 PM PST by WhiteGuy (Congress shall make no law... abridging the freedom of speech, or of the press...)
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To: Willie Green
claiming 23% when the article says it's 28%

It's how you calculate it. If you use the same mechanism as calculating income taxes (in order to make a more equal comparison), you would say that on $100 total spent, 23% of that ($23) is the tax and 77% ($77) is the price without tax. This would correspond to saying that an effective income tax rate of 23% would be taking $23 out of every $100 earned.

The other way to calculate is based on how state sales taxes are usually figured. An item that is $77 before taxes would have a 29.87% (I'm not sure where the article comes up with 28%) tax of $23 added to it. It still totals the same $100.

The tax is 23% of the total, or 29.87% of the pre-tax price. Both work out exactly the same. As I said before, the first number is used to compare apples-to-apples with income taxes.

46 posted on 02/11/2004 1:39:28 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Texas Federalist
"Unfortunately, that is also a reason why the tax may not gain support in Congress."

I understand your concern. However, you forget one thing - these guys work for US. When enough Americans understand the benefits and demand it from their legislators, it will pass. I will share two experiences to support my point.

When Bill Clinton was President, congress passed welfare reform bills 3 times. The first two times, he vetoed them. The 3rd time, he signed it. What was the difference? Glad you asked. The 3rd time his pollsters told him the American people were solidly behind welfare reform and that if he continued to veto that legislation and came to be viewed as obstructing it, he would pay a political price for it. Lo and behold, a welfare reform champion was born! He even listed welfare reform as one of his administration's accomplishments during his later State of the Union addresses.

Here in Georgia, we are seeing the issue affect campaigns. Why the difference between Georgia and the other states? Glad you asked. Because Rep. John Linder and Neal Boortz have been educating about the issue for some time now. Georgians are more familiar with the proposal than any other group in the nation and are therefore more supportive. The one thing that we have found is that the more you know about the proposal, the more you support it. That is, unless you have a vested interest in perpetuating the current system because some of the billions we spend in compliance costs go into your pocket.

Anything you want to tell us about how you earn your living, Willie Green?
47 posted on 02/11/2004 1:43:44 PM PST by phil_will1
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To: Luke Skyfreeper
"Do the wealthy really get by with paying so little income tax? If so, how do they do it?"

They do it by paying high-priced accountants and attorneys to wade through the thousands of pages of the system and find every loophole that they can. They spend a LOT for tax advice, but they save even more on taxes. That is why we have rich people who pay little or no income taxes, but compliance costs which run into the hundreds of billions of $$$.
48 posted on 02/11/2004 1:49:40 PM PST by phil_will1
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To: phil_will1
"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.

-Alexander Hamilton, The Federalist Papers

This "limit" that Hamilton talks about is well below 28%. I am wholeheartedly for reform, but can you point to any examples where a sales tax as high as 28% was ever successful? I think the FairTax needs to be about 10% or 12% if it is to work. Therefore, there is an intermediate step. Before we institute a 12% sales tax we have a lot of spending to cut.

49 posted on 02/11/2004 1:52:37 PM PST by Texas Federalist
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To: kevkrom; lewislynn
The tax is 23% of the total, or 29.87% of the pre-tax price. Both work out exactly the same.

Heck, that's exactly the same as it was 4 years ago.

Posing as "tax reform", the NRST (HR 2525) also represents a "land grab" where business interests are favored over individuals purchasing for their own use:

This a significant inequity between individuals trying to buy their own new homes and landord/investors looking to buy the same single family dwelling as a rental investment. This disparity has long term implications affecting the distribution of private property. The American tradition favoring individual property rights is reversed. The NRST would discourage individual "consumption" of real property.

"... legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children,...

But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state."

-- Thomas Jefferson to James Madison, Oct. 28, 1785 -- PROPERTY AND NATURAL RIGHT


So as you can see, I'm very familiar with the 23% vs. 29.87% disparity in how the NRST is presented to a gullible public.

The thing is, the article doesn't say 23%, and it doesn't say 29.87%
It says 28%.
28 is NOT 23 and 28 is also NOT 29.87.

So what IS the rate suppose to be nowadays anyway?
Surely you can't keep it at 23% all these years and still claim that it's "revenue neutral",
Not after all of Dubya's tax cuts...
So what happened?
Did they raise it from 23 to 28% without notifying you shills?
(Jumping the 29.87% method of calculation up to a whopping 38.88% ???)

What are the updated numbers anyway?
How're you gonna pay for Dubya's Medicare prescription drug giveaway?

50 posted on 02/11/2004 1:58:17 PM PST by Willie Green (Go Pat Go!!!)
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