FairTax points of interest.

Congressman Linder's website ^ | August, 7, 1006 | John Linder

[pigdog]

A couple of points:

The GAO (Congress's auditing branch) found that all of the exemptions, exclusions, and special favors in the current tax code drain federal receipts by $728 billion each year. That is almost as much as the nation spends on Medicare and Social Security combined and 60% more than the nation spends on national defense. The FairTax eliminates all deductions, credits, and carve-outs to ensure that everyone pays his or her fair share.

and:

The Department of Commerce reports in its most recent Economic Census that just 688 retailers (0.03%) in the U.S. make 48.6% of all the sales. Just 3.6% of retailers collectively make 85.7% of all U.S. sales. Fewer points of collection will mean higher compliance with the FairTax than with today's complex system.

[ancient_geezer]

I mean, let's at least call it a tax increase.

Considering the rate is lower and is to be set to recover the same amount of revenue to government as the current system, it is certainly not a tax increase.

It is however a change in how taxes are collected and spread over a much larger taxbase, assuring that every person rich and poor nominally participates in the payment of those taxes. Every citizen should participate and be nominally aware of the burden that larger govenment imposes upon every one in the nation.

In reguards comments of James DeMint (R-SC)
United States House of Representatives
APRIL 5, 2001

• "There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government."

 

Walter Williams hits the head of nail to the real problem with current tax system:

"It's like me in the restaurant: What do I care about extravagance if you're footing the bill?"
- Walter Williams

[Principled]

No.

The rate of tax for HR 25 is 30% added onto a pre-tax price, which is 23% of the total incuding the tax paid. BTW, the latter method (23%) is how income taxes are figured.

THe plan is indeed revenue neutral, but you are wrong to conclude as you do. The tax base for the nrst is much, much larger than the base for taxable incomes. Hence, the rate can be lower.

Plus since its an inclusive tax it won't appear on the receipt.

EH? That one may choose to express the rate inclusive of tax is not related to whether it will appear on the receipt. Indeed, the bill requires the amount of federal tax to be explicitly stated in $ and %.

And since all workers get back a tiny portion of their taxes each month ...

This is also wrong.

All legal residents with a valid SSN may choose to receive the prebate - paid in advance... not just "all workers". And it is surely subjective whether you see it as "tiny". The amount, to be objective, is 23% of the poverty level for each family size. The prebate amounts can be seen here. Note that an increase in prebate means a tax cut for us and less $ to the gov't. Should the gov't increase the rate too far, their tax receipts will fall. Ask anyone. Read the federalist papers. Under the nrst, people may choose ways to legally avoid tax if it is higher than they want to pay.

In a few years we could have a 150% hidden sales tax, the poor will get higher prebates than everyone else ...

No. The law is to explicitly show the amount of tax on each receipt, it is today's tax burden that is hidden in higher prices, lower wages, or reduced ROI. The nrst takes existing federal taxes out of prices, out of wages, out of ROI and puts all of them into RETAIL prices, listed on the receipt. Years ago and still today, everyone says watch out for people making assertions when they are quite obviously ignorant of the facts. You have no idea what the plan is.

[StJacques]

"its 30% actually"

I wrote "23% of what they consume," which is correct. If you want to use the 30% figure you have to rewrite the language of what I wrote to "30% above the base price of what they consume." In that event, the 30% figure works. And you yourself described it as "an inclusive tax" which means that you must use the 23% figure in describing the rate. It's either 23% inclusive or 30% exclusive of the base prices of consumpiton.

"Since the poorest workers are no longer paying their portion of social security and medicare and are getting prebates, that means someone else is paying for it."

As a revenue-neutral proposition, those who once received the $728 billion in exemptions, along with those who consume at high rates, will pick up the slack. In reference to individual taxpayers, they will be among the wealthy, but only those who do not save or invest at high rates, and among businesses they will be those who have traditionally had the political power. Taking away the exemptions means that those businesses will have to survive by satisfying real demand, rather than avoiding that reckoning by getting a free pass from the government.

"And since all workers get back a tiny portion of their taxes each month "christmas day monthly" . . ."

As opposed to every income tax payer getting his "christmas bonus" for the "personal deduction" for dependents, which must be replaced in some form under a consumption tax.

"In a few years we could have a 150% hidden sales tax"

By this logic we could also say that "in a few years we could have a 100% income tax, because there is no limit upon the power of taxation, regardless of the type of tax, except those which the people place upon it. My real-world response is that if the bills are paid, which they are not now, then the likelihood of tax increases are less. Right now they are not getting paid and the proponents of tax increases are back on the march. The income tax is simply not paying the bills. Deficits are a fact.

"the poor will get higher prebates than everyone else for "fairness" and perpetural leftist control of government."

Then why do we not see the poor getting higher dependent deductions right now? The logic is the same. The "prebates" cover basic living expenses, so does the dependent deduction. It is not outside the realm of possibility that the left could come into power and raise the prebate rates, but then it also is not outside the realm of possibility that they could come to power and raise the dependent deduction under the income tax too.

[pigdog]

tYou may be surprised to discover that even if you're "not poor", the FairTax will allow you to come out much better than at present. We'll get into that just below.

The sort of misinformation that you and others have been putting forth repeatedly is, simply, wrong and you do a disservice to both yourself and someone genuinely trying to learn about the FairTax benefits.

Let's take a normal "not rich" family that is M2K (married. 2 kids) with a comprehensive household income of $51,900. For this analysis we'll use the 9% figure for price reduction that many of the FairTax opponents have stipulated will occur, rather than the 12 to 15% (or higher) price reduction that many Fairtax supporters believe will actually occur. We'll also assume that everything purchased under the income tax yields full value for each dollar spent (e.g., there is no reduced value of the things purchased due to embedded income tax costs).

We find that under the income tax the purchasing power of the family drops to $45,413 (an effective tax rate of 12.5%), Using this same $51,900 of income under the FairTax, we find the purchasing power is $50,588 (an effective tax rate of 11.3%) or an improvement under the FairTax of more than 11% in purchasing power. There are several things to take note of here that even show that this analysis is greatly biased AGAINST the FairTax (which we'll mention just below), but the point is that even with all the pro-income tax assumptions, the FairTax nets a lower tax rate while still paying the S/S & M/C amounts and the prebate amounts (as well as the payments to the retailers and the states involved in collecting the tax - which, it should be noted, the income tax does not pay for). Rather than "hurting" the "not rich", those very folks are greatly helped by the FairTax - as are most other taxpayers.

Some of the obvious bias against the FairTax is that we've assumed that every single cent of the $51,900 of income is spent on FairTaxable items - something that is virtually impossible in real life. For example, debt repayments (credit cards, mortgages), church and charity donations, education tuition, state and local taxes, gifts to others, political contributions, etc. ... all these things go to reduce the amount taxed and thereby - if we assume $8,800 is spent in that manner - lower the effective tax rate down to 8.91% - a substantial drop.

That's why the claim that "everything will be taxed at 30% or 23%" (depending on whether you use tax exclusive or tax inclusive rates are used) is so hollow, untrue, and misleading since it is the effective tax rate that is the true measure of your taxes paid (and not the 23/30% marginal rate). Pretending otherwise is merely a case of misstating the facts perhaps with the inenion to mislead. The example uses t.i. so that the results are directly comparable to each other and comparable to the income tax.

[StJacques]

"Try to get "ONE" answer or anyone that will take any responsibility for any answer that they give you."

Been there, done that, got the ulcer.

Sorry TT, I'm not biting!

LOL!

[Uriah_lost]

Dude, did you just come up with that yourself? 'Cause it's really good! I mean it's total cockeyed, fallacious, doggy doo-doo but it's wrapped in such a colorful candy shell that it really looks GREAT! I can't contain myself.....that's some of the best crap I've been offered in a long time! Trouble is I can still smell the crap through the candy shell of faux financial theory you've wrapped it in.


(this is so much fun).....DUCK!

[Principled]

If $728 billion dollars is going to be coming out of someone's pocket that didn't used to be?

It will be a tax increase on people who are not a legal part of our income/payroll tax system.

It will be a tax increase on illegal immigrants
It will be a tax increase on those who fail to report or underreport income

Again, LEGAL participants in today's income/payroll tax system will experience a significant gain in purchasing power- because the tax base is much larger to include those who are currently evading taxes.

[Principled]

I'm just guessing here but it doesn't seem to be too much of a stretch to figure that a tax on CONSUMPTION would be a good way to get a little more acurate share of what he ACTUALLY makes......ya think?

I agree with everything you say, but I'd like to change one thing...

a tax on CONSUMPTION would be a good way to get a little more acurate share of what he ACTUALLY SPENDS...

[pigdog]

Your "analysis" is hardly that at all, but a servies of misstatements strung together with a misunderstanding of how either the FairTax (or the income tax for that matter) works.

Study #24 for a better understanding.

The tax inclusive rate DOES appear on the receipt BTW along wih other specified information. It's called out in the bill.

[StJacques]

On your "Every day . . . I see . . ." post -- sorry, almost missed it.

The FairTax will not eliminate the undergound economy, because nothing will, but it will give the government a share of what the underground economy now produces when its proceeds are laundered spent. That's one more aspect of its "fairness."

[StJacques]

Sorry guys I gotta go right now. Forgive me if I don't respond until much later. Stuff to do . . .

[Principled]

I haven't seen something so fubar-ed in a looooooong time!

[Uriah_lost]

Can't quibble with that really, as that is part of the idea, this is an actual, entirely voluntary tax. Once you have gotten your necessities out of the way, you choose how much to spend and thereby choose how much tax you will pay. I guess you could avoid the tax by buying 30k in cheese and trading for a 2 year old Escalade but, c'mon who wants to walk down the street in a St Louis summer with 30 thousand dollars worth of Camembert? really, who?
But seriously, the make/spend ratio would be much closer, because I can guarantee he won't be denying himself that new platinum and diamond grill to cover his meth rotted teeth and putting it in a savings account would mean we'd get if for his restitution payment for the "ho" he messed up.

[RobFromGa]

Since the FairTax won't be 30%(e) [23%(i)] but much higher, your numbers are meaningless fantasies.

FT Rate = Revenue Required divided by Taxable Base

If you get 23% with your calculation, using the current government revenue as sufficient, and using the current revenue base as rock-solid.

Using conservative estimates, if the Revenue Required is understated by 15% (due to the higher cost of government having to pay FairTax on purchases and salaries) and the Taxable Base is overstated by 20% (by evasion and changes in bahavior that would occur under a huge sales tax), then the real FairTax number when calculated properly is 1.15/0.8 times 23% = 33%.

This makes the actual FairTax Rate 33%(i) which is 50%(e) when expressed as a normal sales tax. Do your purchasing power numbers with a 50% FairTax rate, and see where it takes your numbers...

You buy a loaf of bread at the store, the shelf price is $1.00, plus $0.50 FairTax plus state and local taxes makes the price...

[Conservative Goddess]

"Years ago conservatives used to say watch out for those ideas where the government takes all your money and decides how much to let you have back."

That's what we have now....through the miracle of withholding. They only allow us to have what is left after they've taken Federal Income Tax and FICA and Medicare from our paychecks. The FairTax completely reverses the flow of that river....allowing the American worker to keep everything they've earned.

[Uriah_lost]

Who among us has never checked the "already previewed" box out of false confidence or simple impulsiveness? Everybody raise your hand if you've fat fingered the keyes a few times......I'll wait.....everybody bow your heads, no looking around....now raise your hands.....it's just me and God looking now and he already knows.....good, thank you ....alright, you in the back, thank you.....Whoa....Emma, Honey you should have told me.....aw crap Amen you can all go home now.....



Sorry, I'm in one of those moods tonight....I really do respect all y'alls' opinions. I just seem to be suffering from a seriousness deficit .

[TommyC1]

Just a caution. Whatever the bill says now is fine, but it won't look at all like the pristine virgin bill it is now but more like a French whore when it's finally enacted. All you have to do is look at what is happening to the estate tax repeal or the Pension Act that was just passed. Dozens of ancillary provisions are added at the last minute, last minute changes are made at 2:00 am, etc.

If this proposal ever sees the light of day, I predict that we will have the worst of all worlds: the income tax will be here, the estate tax will be here and this "national sales tax" will be here.

IMHO, we are better off with the devil we know, rather than having to learn about the devil we don't.

We pretty much know how the current tax system works. If we go to a new one, you can believe we will all pay for it.

I also predict that the party that succeeds in getting this "fair" tax enacted will be frozen out of power for a generation, because everyone will be angry with them. The people who aren't paying now will be mad because they are now paying when they didn't before; people who thought their taxes would be going down will be mad when their purchasing power doesn't rise as promised. Bad juju all around.

Get over the utopian scheme and start your own business if you want favorable tax treatment.

[pigdog]

You've been reading too much of the nonsense from Bill Gale, your base-shrinking hero.

Nothing you say there makes any sense at all but is only a salesman's daydream. With your track record, why should anyone choose to buy into your spin?

There have been a number of reputable economists (of which you're not in that category) who have ALL found the revenue neutral rate to be from 22 to 24% tax inclusive so go peddle your trash elsewhere.

Since the consumption tax base is about twice the income tax base, your rate nightmares are the ones that are meaningless - as were your former vanity posts trying to show all FairTax supporters as liars ... when it was YOU doing the lying just as at present.

[pigdog]

"... we are better off with the devil we know ..."

I would hope you're kidding!!! The devil we know my arse. NO ONE KNOWS the income tax and if you think that you're truly batty.

You seem to be of the "let's rewrite the FairTax bill so it's not recognizable, not workable, and won't pass" boys. Sorry, but it's not going down that way. As the grassroots support continues to build for the FairTax there will be ever more pressure to pass it as written - and that's exactly what the intent of the supporters is. Adding in all of the wonderful exemptions and exceptions and little bits and pieces of he income tax --- won't happen.

It's interesting to see all of the fanciful notions the opponents of the FairTax bill dream up to "defeat" it (in their minds) but more and more people out there realize the bill benefits them greatly as post #24 shows by giving them more disposable personal income (purchasing power) and kicks up the economy a notch or two as well.

You're just whistling past the graveyard like so many others who wish it ill. This bill is going to become our tax law - very likely in his next legislative session.

[lucysmom]

The FairTax completely reverses the flow of that river....allowing the American worker to keep everything they've earned.

Sure, you keep everything you've earned...until you spend it, then federal government takes a whopping 30%. I don't know how many people you know that can get by without spending money.