FairTax.Org HR25

WWW.FAIRTAX.ORG ^ | Last Week | Thomas Leser

[ancient_geezer]

I'm curious where you're getting your 10% figure for states.

It comes from the table in #626, which provides effective total tax rates as % Net National Product for Federal and State tax systems. The table is extracted from the Tax Foundation's information in their paper on Tax Freedom Day calculations providing several historical data series tax statistics nationally and by state.

[OHelix]

Thank you.

[Eoin]

Trade deficits don't matter unless they are purchases by the US Government. Private transactions that cause such deficits are voluntary made by those on each side of the transaction: I choose to buy a good because I'd rather have it than my money; the seller of the good would rather have my money than his good. Net transaction means that I have something, and he has a few pieces of paper.

[Eoin]

I'm completely in favor of having a national discussion on FairTax, but I'd be much more in favor of seeing it passed if, instead of recommending that states tack on additional sales taxes, they recommended the states raise revenue from a property tax on land value only.

AFT claims that homeowners will enjoy a ~23% jump in home value. As we have seen from the last few years, more credit, through artificially low interest rates, in the hands of more people has driven property values up, triggering fears of a real estate bubble. This NRST would do quite the same thing. While new construction might drop from ~$200/s.f. to ~$140/s.f., the land prices, which are the only things that appreciate anyway, will fly through the roof.

Since income from land sales isn't taxed, and there's otherwise no holding cost for land, we'll wind up with quite a few valuable lots being held on to, exacerbating sprawl and transportation issues.

With sprawl we spend more and more time commuting, farmers lose their farms to developers, and we all wind up losing in the end.

With a land value tax, we encourage valuable lands to be used, we recover public improvements, and our cities generally grow up rather than out, leaving the hinterlands to the farmers and those who'd rather be alone.

Such a tax reduces our need for foreign oil by condensing population centers, allows us to produce our own foodstuffs, and actually increases the lands available for intensive development, for manufacturing, etc.

Consider this: to open a new factory, you generally need to buy or lease the land from the current landowner. If the landowner must pay an annual tax on the land value, he'll sell for less. In fact, the owner will sell less by approximately the present value of future taxes, so the buyer winds up paying the same, just less in cash, and more in future taxes. This requires less credit, so more credit is available to purchase capital. Because land is less valuable for a purely speculative investment, more land is available for productive use.

[lewislynn]

I choose to buy a good because I'd rather have it than my money; the seller of the good would rather have my money than his good.

Simplistic idiocy.

Net transaction means that I have something, and he has a few pieces of paper.

The globalist mantra.

[Eoin]

Simplistic idiocy.
OOOH, you really GOT me with THAT one!

The globalist mantra.
try forming an argument.

[lewislynn]

try forming an argument

Net transaction means that I have something, and he has a few pieces of paper.

The subject is trade balance, the operative word is TRADE. All you have to do is look at oil/gasoline prices to see the result of sending "a few pieces of paper" in only one direction.

Can "a few pieces of paper" produce more "pieces of paper" here after they're gone? If the other countries dropped their barriers of our products wouldn't that produce more "pieces of paper" here?

Did you get your "few pieces of paper" out of thin air or are they the result of producing a product you could sell to the country that puts a heavy tariff on or doesn't even allow?

Is the country you freely give your "pieces of paper" to going to use them to expand their operations here?...or there?

I'll send you my address. You can send me all the "pieces of paper" you want.

[OHelix]

I'm completely in favor of having a national discussion on FairTax, but I'd be much more in favor of seeing it passed if, instead of recommending that states tack on additional sales taxes, they recommended the states raise revenue from a property tax on land value only.

I don't think the FairTax recommends anything in regards to how the states raise revenue. It just benefits from the fact that most already have some sort of sales tax collection system in place. I don't think it attempts to influence states in terms of how they collect their own taxes at all.

AFT claims that homeowners will enjoy a ~23% jump in home value. As we have seen from the last few years, more credit, through artificially low interest rates, in the hands of more people has driven property values up, triggering fears of a real estate bubble. This NRST would do quite the same thing. While new construction might drop from ~$200/s.f. to ~$140/s.f., the land prices, which are the only things that appreciate anyway, will fly through the roof.

I enjoyed speculating how the FairTax would effect the housing market, particularly the new construction market. Many of those opposing the FairTax suggested that the fairtax would smother the construction industry because of the increased tax burden... that seems to be the direct opposite effect of what you are pointing out. I think pretty much everyone agreed that there would be an initial increase in value for existing real estate (and used cars as well) but like everything else would eventually find equilibrium. Our discussion was not considering the dynamic you are bringing up... particularly the value of land verses the value of improvements.

I'm not sure I share your favor for property taxes. I recognize they can be used well and have arguably good effects for the community, and I won't argue the dynamics you point out, but I realise that property tax effectively undermines property rights and makes the government effectively the only "owner" of property, and makes all of those who are "legally" owners, effectively renters. I expect I would be vehemently opposed to a federal property tax.

[Eoin]

FairTax doesn't go into depth about state revenue, merely mentioning that without the IRS most states wouldn't have much of an income tax system, and they could piggyback onto the FairTax.

I'd be just as vehemenently opposed to a federal property tax. I also agree on the nature of ownership of property v. paying a rental fee (property tax) to the government. It's a moral argument agains taxes on wages and capital. I feel that a similar argument exists for retail transactions, that FairTax wants to collect. You are basically begging permission from the government to be able to engage in a voluntary transaction that is mutually beneficial to both yourself and the other party. It's almost back to the slavery issue with income taxes. One could make the argument that manmade property is different from God-given property. There's also the practical aspect of the fact that we can build more housing units, and more factories, and more 'wealth', but we can't build more land, more sky, etc., and therefore need to conserve it through taxation, and the taxation thereof doesn't decrease it's production.

[Eoin]

Thank you for forming an argument.

Would you also say that a shark, at the top of the food chain, suffers a trade imbalance because it consumes more than it is consumed?

The pieces of paper are a marker, a chip, a measure. When I buy something from overseas, I do it voluntarily, because the trade is beneficial to ME. When we, as a people, through the combined but individual actions, choose to purchase overseas products more than we purchase domestic products, it's because WE want to, and each of those transactions benefitted those who engaged in it.

Oil prices rising is the effect of our demand for oil outpacing expected supply for oil. When prices rise, the flow slows, until an equilibrium is met.

The few pieces of paper can't do anything but be traded for something. The product that came over did something or will do something, maybe something worthwhile that can be traded for more pieces of paper. The object isn't to collect pieces of paper, it's to trade those pieces of paper in order to fulfill needs and wants.

The little pieces of paper more or less came from the thin air of fractional reserve banking, lent in to existence at a cost of 1/10 face value in national debt. Look into it.

If a company tarriffs our products we'll have fewer pieces of paper with which to buy theirs. It's more their loss than ours, because we can find other consumers for our products, and their citizen's have to pay more for their tarriffed products, even if produced domestically to them.

If their industries are protected by tarriffs, they'll likely waste much of their pieces of paper building inefficient production capacity, and we'll continue to enjoy cheap imports.

If tarriffs are such a good idea, why don't we implement a few between the states?

[spreadsheet]

Since the "Fair Tax" is based on consumption, it would be useful to examine how Americans spend their money. This follows since some of these expenditures would be taxed under the "Fair Tax" and some would not. The Bureau of Labor Statistics has a good summary of this. However, it is not clear which of these would be taxed from the book.
1) Putting excess money into CD and other savings methods.
2) Mortgage payments on primary residence.
3) Rental payments on place of residence
4) Medical insurance
5) College expenses
6) Contributions to charities
If you know the answer, please respond. After clarifying this, it will be possible to determine the varying tax burden for the various income classes.
PS - We know, from the book, that investments (stock, real estate, etc) would not be taxed.