Posted on 12/17/2004 4:38:48 AM PST by JOHN W K
ANSWERING A FAIR TAX QUESTION
During yesterday's show a caller asked what would happen to her 401K funds if the Fair Tax bill became law. No income taxes had ever been paid on that money residing in her 401K. If, by the time she starts drawing that money out, the income tax is history, will she have to pay some sort of penalty? One month ago I would have rattled off the answer. No. No penalty. No taxes. You take the money and run. Yesterday, however, I was a bit more cautious. I've spent many hours over the past weeks studying the history of the income tax, the history of withholding, and various schemes for tax reform including, of course, the Fair Tax. I wanted my answer to be dead-on accurate, so I deferred until I could dive into the bill.
(Excerpt) Read more at boortz.com ...
I am saddened to learn that the infamous radio talk show host Neal Boortz seems to support the so called fair tax proposal. I suspect Neal simply has not had time to really study the proposal in depth. In an article titledANSWERING A FAIR TAX QUESTION Neal Boortz wrote:
“It doesn't matter that paying taxes will be voluntary under the Fair Tax plan. It doesn't matter that nobody pays the retail sales tax on the basic necessities of life.”
But the truth is, all consumers pay the tax on the basic necessities of life under the so called fair tax, and, the authors of the tax plan concoct what they call a family consumption allowance, a monthly check given to each American, which is intended to be earmarked by each consumer to offset taxes paid on the basic necessities of life.
In essence, the so called fair tax rations tax-free basic necessities of life, and rations them by the size of the family consumption allowance allotted to each family!
Instead of making every American family dependant on a monthly government welfare check [family consumption allowance], and ration tax-free basic necessities, why don’t the architects of the so called fair tax simply prohibit taxing the necessities of life [food, shelter, clothing, medical expenses, etc]?
Perhaps Hamilton explains why inFederalist Paper 79 A POWER OVER A MAN’s SUBSISTENCE AMOUNTS TO A POWER OVER HIS WILL.
Could it be that the architects of the so called fair tax intentionally want to make every American Family dependant upon government for its subsistence?
In regard to Neal’s comment that “It doesn't matter that paying taxes will be voluntary under the Fair Tax plan , let us explore this concept a little bit further.
As a basic rule, there are but two kinds of tax___ direct and indirect. The former could be described as an involuntary tax which is collected when folks in government go directly to the people to raise a revenue and is un-avoidable; while the latter, or indirect taxation, is a kind of voluntary tax which is paid in consequence of a person’s own voluntary actions and is, in general, avoidable!
Impost, duties and excise taxes are of the latter kind and fall under the category of voluntarily paid taxes, such as an excise tax on a particular article of consumption. So, if a revenue is raised by Congress taxing articles of consumption, it would appear at first glance to be a system which fills the treasury by voluntary contributions, just as Neal suggests. But in all fairness to the meaning of the word voluntary, a tax imposed on the essentials of life [food, shelter, clothing, medical costs, or tools of production and supplies necessary to conduct business, etc.] could not truthfully be said to be a voluntarily paid tax!
This brings us to what Hamilton explained with regard to taxes on articles of consumption, they:
__ may be compared to a fluid, which will in time find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be by his own option, and can be regulated by an attention to his own resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions__ 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 can not be exceeded without defeating the end proposed, that is, an extension of the revenue__ see: No. 21 of the Federalist
So, it is possible to avoid the oppressive nature of taxes on consumption by choosing articles which makes the tax a morevoluntary type of contribution, but such a tax would not include the basic necessities of life, and ought not include the tools of production, supplies necessary to conduct business, etc.!
I would say, as our founding fathers practiced, a consumption tax plan ought to be limited to articles of luxury, and each article must be individually selected by Congress and the appropriate amount of tax must be determined for each specific item chosen, just as was done in the first revenue Act of our country
NOTE: those interested may use the PREV IMAGE and NEXT IMAGE buttons at the above link to study the bill___it is refreshing to study statesmen speaking in Congress as opposed to politicians acting in their own self interest!
In any event, by limiting the tax to articles of luxury, and requiring each article to be specifically chosen and the appropriate amount of tax for the article determined by Congress, a self regulating check and balance is imposed upon Congress! If Congress does its job properly and the nation as a whole is productive and prosperous, the purchase of articles of luxury will undoubtedly increase, and with it, the flow of revenue into the common treasury. But, if the policies of Congress become burdensome and its regulatory requirements upon business, industry and our nation’s labor force inhibit a hearty economy, or any particular article is excessively taxed, the first sign would be is a decline in the flow of revenue into the national treasury, a self regulating check and balance upon Congress.
Thus, the market place, in a larger degree, determines the limit of taxation for each article selected by Congress under the Founder’s internal consumption tax plan, and it establishes a self regulating gauge beyond the reach of Congress' manipulation!
But what happens if Congress spends more money than what is brought in from indirect taxes? Our founding fathers agreed upon a solution called direct taxation, but adopted a strict rule governing direct taxation to prevent the most obvious oppressions associated with direct taxation, the rule being: ___Representatives and direct taxes shall be apportioned among the several states___ as set forth in Article I, Section 2, clause 3, of the United Constitution.
I call this clause of the constitution the FOUNDING FATHER’S FAIR SHARE FORMULA, and it is explained inEXPOSING THE FAIR TAX HOAX ___ scroll down and start reading at:
American Constitutional Research Service
Before the
Committee on Ways and Means
United States House of Representatives
June 1995
I also suggest those interested in the adverse effects of the not so fair tax proposal study:
The Fair Tax: A Trojan Horse For America
John William Kurowski
American Constitutional Research Service
Help educate Neal! I believe he means well!
He was supposed to meet with Rep. Linder yesterday and discuss FAIRTAX on his show today (?).
BTTT The only fair tax is the flat tax.
I hope you weren't surprised. He's been stumping for a national retail sales tax for a while.
Instead of making every American family dependant on a monthly government welfare check [family consumption allowance], and ration tax-free basic necessities, why don’t the architects of the so called fair tax simply prohibit taxing the necessities of life [food, shelter, clothing, medical expenses, etc]?
How does the government determine what these are? Do they have a limit of quality or quantity for them? Would Murdoch get his recent $44 million penthouse purchase tax free? Do people who buy lobster and those who buy rice and beans get the same tax deduction? Are fur coats considered clothing? Will Coke and Pepsi rent a few congressmen to get onto the food list?
By far the fairest, simplest, least intrusive and least susceptible to political games is the rebate of taxes on a certain amount of spending. That keeps the government out of social engineering by deciding what are good purchases and what are bad ones. You buy it, you pay taxes on it and you get a rebate for a base amount of taxable spending.
The biggest problems I have with a NRST is how to handle people who have paid taxes on income but lived below their means so they have a nest-egg they would have taxed again when they spend it versus profligate spenders who borrowed tax-free to spend now and pay it back with untaxed income after the NRST starts.
According to a Harvard econ. study, every product you buy has a "built in" tax.ie The cost of complying with tax code, employers portion of payroll taxes, etc. This cost ranges from 20 to 40 percent of the value of the product(food products have a different tax load than say...tires) . With the fair tax plan that cost is no longer needed to produce a product. Competition will quickly drive the cost of products down by that percentage. Thus the person with the nest egg would be paying lower prices plus the sales tax. In the end the total cost would be roughly the same depending on what type of product it is.
___ with all these blessings, what more is necessary to make us a happy and a prosperous people? Still one thing more, fellow-citizens—a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities__. Thomas Jefferson, First Inaugural Address
I support the Founding Father's original tax plan, see EXPOSING THE FAIR TAX HOAX ___ scroll down and start reading at:
American Constitutional Research Service Before the
Committee on Ways and Means
United States House of Representatives
June 1995
Briefly please, what exactly is youre opposition to the Fair Tax?
I've read that piece of crap. They accuse the proponents of the Fair Tax of being deceptive and then make their case by taking every possible objection to the FT and driving it to its worst possible scenario. They use fear and deception. I guess I'm going to have to write a point by point refutation of that piece of garbage to post every time it pops up. At work now, dont have time.
No personal insult intended.
Instead of making every American family dependant on a monthly government welfare check [family consumption allowance], and ration tax-free basic necessities, why don’t the architects of the so called fair tax simply prohibit taxing the necessities of life [food, shelter, clothing, medical expenses, etc]?
You wrote:
How does the government determine what these are? Do they have a limit of quality or quantity for them? Would Murdoch get his recent $44 million penthouse purchase tax free? Do people who buy lobster and those who buy rice and beans get the same tax deduction? Are fur coats considered clothing? Will Coke and Pepsi rent a few congressmen to get onto the food list?
ANSWER
Surely there is a clear enough distinction between such foods as caviar and chicken eggs, between wine and milk, between silk and cotton underwear to truthfully say one is a luxury and the other a necessity. I believe in such cases the people’s perception will prevail in Congress to a larger degree and help to diminish the factions crying for “exemption“. But in the final analysis, it is far better to have Congress spend its time selecting specific articles of consumption for taxation as was done inthe first revenue Act of our country
We need to study and get back to our founding father’s original tax plan!
Sincerely,
JWK
What objection(s) do you have, if any, with our founding father's original tax plan? It contains the necessary checks and balances necessary to control the actions of Congress, which the so called fair tax does not contain.
What I object to is our current tax code. It is a tool for social manipulation. It's a tool used by congressmen for engineering favors for their big contributors in business and banking. It needs to be burned to the ground and replaced with something transparent and simple.
The Fair Tax supplants the RIGHT of the government to reach into my pocket before I've tithed, saved for retirement, or taken care of my family. The Fair Tax substitutes a RESPONSIBILITY to cut me a check.....
Gee......I sure like the way that river flows.
You quote the Federalist Papers but nonetheless overlook a critical passage: "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." --Federalist No. 21
Swing and a miss........The Fair Tax will remove power from Gobbermint, and restore it to the people. I guess you've not considered the financial privacy implications of removing the Income Tax from the backs of the American People....further, you've not considered the international implications of removing the cost of taxation from our goods. You need to rethink you position and stop using, MIS-using the Federalist Papers to try to make your Marxist points.
You need to rethink you position and stop using, MIS-using the Federalist Papers to try to make your Marxist points.
ANSWER
How have I mis-used the Founding Father's quotes? Surely you jest. And why do you suggest I try to make Marxist points? A tax on income is Marxist, not the Founding Father's original tax plan which I support. What are your objection(s) to the founding father's original tax plan as explained inEXPOSING THE FAIR TAX HOAX? ___ scroll down and start reading at:
American Constitutional Research Service Before the
Committee on Ways and Means
United States House of Representatives
June 1995
My objection is this- Time has proven that if you leave Congress a tool by which to manipulate the people with regards to money, they will use it. The FF's plan as you describe it leaves that ability open.
The FT treats EVERY one exactly the same.
The FT treats EVERY one exactly the same."
ANSWER:
Is that so? What is the definition of income in your flat tax?
How does the founding father's direct apportioned tax among the states allow Congress to manipulate such a tax?
Fact is, taxing income is a tool of despotic governments, and used to tax by economic class via the definition of income.
Regards,
JWK
In essence, the so called fair tax rations tax-free basic necessities of life, and rations them by the size of the family consumption allowance allotted to each family!
How in the world anyone could call completely untaxing the poor, as the FairTax, and ONLY the FairTax, surly would do, a device for rationing anything is beyond me. Not only is nothing rationed but the consumer, not some government bureaucrat, gets to decide what HIS necessities of life are and gets to pay for them COMPLETELY without tax!
Misunderstanding. By FT I was refering to the Fair Tax not the Flat Tax. The Flat Tax would be better than what we have but it still leaves to much room for manipulation.
I would enjoy reading the refutation. I read the article too and although I believe it is fear-mongering it certainly makes some points that are based on real possibilities that need to be addressed.
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