Skip to comments.Why Republicans Should Support the FairTax
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.
phil_will1 wrote:Actually, I'd agree with your last sentence if you had written: "The trend toward increasing complexity and spiralling compliance costs with any federal tax is inescapable."
Our history is just the opposite. The Tax Reform Act of 86 flattened the rates to 3 levels, I believe, and eliminated many of the deductions in the name of simplicity. The lobbysists thought that they had died and gone to heaven. They immediately went to work reinstating all the old preferences (and then some) and billed their clients for that time, of course. The 86 TRA should have been labelled the tax lobbyists full employment bill. The mess that we have today is the 86 TRA amended hundreds of times and it is far worse than the system before 86. The trend toward increasing complexity and spiralling compliance costs with an income tax is inescapable.
Do you honestly think all those lobbyists are going to just evaporate or go find other work after the Fair Tax is implemented? If you believe that, I have a bridge to sell you.
Give those lobbyists a few years lobbying the social engineers and class wariors we have in the Congress and we'll have a really complicated, screwed up sales tax system to replace our really complicated, screwed up income tax system. That will be some improvement there.
That's my first major issue with the so called "Fair Tax".
Unless we throw out the bums in Congress who have foisted this unwieldy income tax code on us, changing to what will become an equally unwieldy sales tax code probably isn't a good solution. The compliance costs for businesses to sort out what will ultimately be different tax rates on different goods could easily far exceed the compliance costs we have today with the income tax system.
Fair tax supporters ignore the history of our Congress and of the lobbyists in Washington and fail to project the effects of those groups on their proposed "fair tax" system.
No. Nor do I subscribe to a static model that says a 23% NRST will remain magicly "revenue neutral" year after year after year...
The economy is much too dynamic for that...
As screwed-up and convoluted as your snake-oil tax "reform" scam is, I'd think that you'd at least put SOME effort into adjusting the numbers to reflect changing economic conditions.
I suppose, but seriously, who just sits on piles of bills? The money is usually invested in some way, shape or form, with any gains on that investment currently subject to tax. Without an income tax, you would have an increased buying power with the same investment because you would get all of it -- no cutting the IRS in on a share -- when you cash in on it.
I suppose someone who just stuffs money in their mattress won't get those benefits, but even still, they are not hurt by the plan.
kevkrom wrote:In the currently proposed legislation, that's true. How long before the lobbyists and social engineers in the Congress change that?
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.
kevkrom wrote:And explain to me again how sending a check to every household in the nation advances conservative principles.
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.
You are proposing making everyone in this country at least somewhat dependent on the federal government for their monthly income. The amount of those checks will be a political football. DemocRATS and their leftist friends will insist that it isn't fair that the checks are so small, especially during an economic downturn. They will also point out how unfair it is that Bill Gates and all of Dick Cheney's rich friends at Haliburton get "refund" checks that they don't really need.
This is my second big issue with the so called "Fair Tax" proposal.
kevkrom wrote:You haven't detailed exactly how that can of worms is going to be closed. Does part of the so called "Fair Tax" plan make lobbying illegal? Is there a provision that expells all current members of Congress and all current Senators and prohibits any future members of those bodies from any "social engineering" activities?
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.
You're overlooking the fact that regardless of the dynamics of the economy, consumption is very stable year-in and year-out. In lean times, people dip into savings or borrow -- in better times, they retire debt and save. But consumption shows much less variation than the economy at large. This is how the 23% rate can still be within a narrow enough window to stay revenue-neutral. It would take a trend lasting longer than a couple of years to change that materially.
Nope, it's up to all of us outside the Beltway to make sure that it stays that way. The NRST provides a blank slate to start from -- but there's no point introducing problems now just because Congress may be able to do so later.
That would make business owners a natural constituency to fight any such tinkering. Congress loves to tinker, but they also like their own jobs better.
Easy -- by holding to the fact that the essentials of life are not subject to taxation by the government. But rather than have a one-size-fits-all draconion set of rules and regulations, give an across-the-board credit for what would be spent of subsistence spending and let people decide for themselves how to use it.
Sounds pretty conservative to me.
Yep. I've been a FReeper "Since May 29, 1998".
I've posted a total of 5,817 threads and 25,759 replies on a wide variety of topics.
Of all the threads I've started, I can't remember any that were specificly anti-NRST.
For the most part, I'm content to promote a relatively low (10~15%) flat-rate revenue tariff on imported goods in conjunction with a revenue neutral reduction in the corporate income tax. And there are many other issues that interest me as well.
I don't focus on persecuting you paranoid NRST shills as much as you imagine. But having wasted too much of my time wading through your bilge in the past, I feel an obligation to warn others about what a hoax it actually is.
The NRST would level that playing field. Domestic goods could cost 20% less and still keep their same profit margins against foreign goods. The same holds true for exports -- US goods would leave the country 20% cheaper than before, either providing a higher profit margin or larger market share in foreign markets.
Both cases mean more and better paying domestic jobs, particularly in areas near and dear to your heart, such as manufacturing.
Instead, you advocate raising prices via a tariff and keeping a hidden corporate income tax that makes American goods less competitive at home and abroad. Are you really an "America-first" type?
Completely off-topic, but where do you find that info? I'd be curious to see my own stats...
In a competitive free market, there is no guarantee of either sales or profit. Thus there is no guarantee that there will be a Corporate Income Tax obligation to "pass along" to the consumer.
NRST advocates who insist that corporate income taxes are "embedded" in the sales price of a product are just plain wrong. This assumes that companies can dictate market price in order to cover any costs that they incur when price is actually determined by supply and demand in a competitive market. Any attempt to raise the product price to accomodate the income tax would have to overcome lower priced product from competitors who did not incompetently attempt to incorporate such "costs" in their pricing strategy. The result would be that the company that attempted to "pass along" the tax would actually lose sales volume, possibly even to the point of losing profitablility. Conversely, the lower priced competitors who did not attempt to "pass along" the tax would gain sales volume and enhance their profitability.
The skewed logic utilized by NRST advocates to claim that corporate income tax is paid by the consumer is completely bogus. To accept their convoluted logic is to deny how businesses actually operate in a competitive market. Further evidence of corporations' inability to "pass along" their income tax obligation is published every day in the business section of our nation's newspapers: "ABC Corporation fails to meet 3rd quarter expectations" or "XYZ Inc. incurs 2nd quarter loss". Once again, with future sales and tax obligations (if any) being unknown, it is IMPOSSIBLE for companies to "pass along" their income tax obligation to the consumer.
The Ivory Tower "experts" who concoct this theory are in denial of how business actually operate in a competitive free market. Their fundamental assumption that companies can dictate the market price of their product to accomodate income tax liability is fallacious and reflective of marxist influence.
And your dollar bills, under the current system, are taxed both when earned and spent. No difference to you. You are not harmed in any way by the transition.
But to be against such fundamental reform that doesn't hurt you because someone else might do better off than you is a lousy attitude.
And your hypothetical is a bad example, no matter how much you're trying to simplify. It points out the worst possible case. And even in those conditions, the NRST still works out OK for you -- just because it works out better for others doesn't make it less fair or right. You have the same opportunity as anyone else under the new system -- take that lump of cash and invest it to see tax-free growth. Then you too will have new dollar bills that are untaxed when earned.
On the "Latest Posts" page, click on your own name at the very top of the page, next to where it says "My Mail" or "My Comments"
That is the funniest thing I've rad in a while, thanks.
NEWSFLASH: all taxes are paid by individuals in the form of higher prices, lower wages, or lower return on investment. Corporations do not pay taxes, they merely collect them. Plus, all of the additional costs involved in tax compliance and other activites related to minimizing tax liability.
Thanks! Pretty few new threads (34), but 7,493 replies... I have been busy from time to time.