Posted on 08/27/2007 7:53:49 AM PDT by Turret Gunner A20
This is what The Wall Street Journal had to say about the FairTax.
http://www.opinionjournal.com/extra/?id=110010523
And boy did they get it very, very wrong.
Evidently the FairTax is making some people nervous. The attacks are increasing, and there's a striking similarity in the fabrications being offered by columnists and pundits from coast to coast.
The heaviest, and possibly the strangest, attack over the weekend came from Wall Street Journal columnist Bruce Bartlett. Bartlett's column was titled "Fair Tax, Flawed Tax," and by Sunday morning it had generated hundreds of emails. When I finally read Bartlett's column I was completely stunned. I've referred to his commentary dozens of times in the last few years on the show, so for him to be so far off – so bizarrely wrong – about the FairTax was stunning.
OK ... by now you've probably read the column, so let's deal first with what I feel to be Bartlett's libelous assertion that the FairTax was " ...originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service,"
Where in the hell did that come from?
This assertion – that the FairTax was developed by the Church of Scientology – is flat-out false. I suspect that Bartlett allowed someone else to do his research for him on this issue; someone with an agenda. Perhaps he blindly accepted some information from a Washington insider, perhaps a K Street denizen who fears the loss of power and income should the FairTax become law.
What Bartlett did was very simple, and astonishingly careless. He mistook a group called Citizens for an Alternative Tax System (CATS) for the people who developed the FairTax.
Now CATS did have a plan for a national retail sales tax, but it was in no way connected with Americans for Fair Taxation (AFFT) and the FairTax.
http://www.fairtax.org/site/PageServer
I was familiar with the CATS program. I had them on my radio repeatedly. As I've told you, I've been interested in this idea of replacing the income tax with the sales tax for some time.
The CATS idea was simply to do away with income taxes and replace them with a 17% sales tax. Payroll taxes would stay with you, as would many other federal tax levies. As you can see, this is substantially different from the program offered by the FairTax.
I'm going to lead you to several articles here. The first link will take you a document detailing the history of CATS.
http://www.fairtax.org/site/PageServer
If you read this carefully you will see absolutely no reference to the FairTax. There is no reference to Congressman John Linder or H.R. 25, the FairTax Act. All of the references are to CATS and their own idea of a national retail sales tax.
Moving right along here, next you have a list of articles detailing the connection between CATS and Scientology.
http://www.google.com/search?hl=en&q=%22Citizens+for+an+Alternative+Tax+System%22%2BScientology&btnG=Google+Search
That's right. It was CATS, not Americans for Fair Taxation with the strong connection to Scientology. In fact, here's another link setting for Scientology front groups.
http://www.google.com/search?hl=en&q=%22Citizens+for+an+Alternative+Tax+System%22%2BScientology&btnG=Google+Search
Scroll down the list a bit and you'll see CATS! You will not see AFFT or the FairTax mentioned.
The people responsible for creating AFFT and the Fair Tax are Houston Businessmen Leo Linbek and Robert McNair. Neither one of these people are Scientologists.
These men and their associates raised over $20 million for a study on finding an alternative to the federal income tax. That research was conducted by a coalition of market and academic experts from places such as MIT and Harvard, none of whom were associated in any way with Scientology. From that research came the FairTax.
Just an interesting historical note: When the research for a new tax system was commissioned with the $20 million raised by Linbeck, McNair and their associates, they made a commitment to accept whatever findings the research developed, strongly suspecting that their efforts were going to lead to the endorsement of some sort of a flat tax. The market and academic researchers came forth with an idea for a national retail sales tax instead, and the FairTax was born.
Bruce Bartlett owes Leo Linbeck, Robert McNair and the hundreds of thousands of FairTax volunteers across an America an apology. I suspect that apology will be forthcoming before too many days pass.
There were many other inaccuracies in Bartlett's column. As you know Congressman Linder and I, with the help of a brilliant analyst named Rob Woodall, are busy writing another FairTax book that will address virtually every meaningful criticism you may have heard or read. In Reader's Digest form, here are some quick response to other charges by Bartlett:
Bartlett jumps right into the middle of this nonsense over what the real tax rate is; 23 percent or 30 percent. He correctly points out that we don't quote the FairTax rate the way conventional sales taxes are quoted. The reason is simple; the FairTax will replace the embedded taxes and already exist in every item or service we purchase; and secondly, the FairTax will replace the income tax. Both the embedded taxes in the prices of what we buy now and the income taxes we pay now are inclusive taxes. We're replacing inclusive taxes with inclusive taxes.
It's so very simple: When you see a lamp on the shelf marked $100, you will pay $100 for that lamp when you get to the checkout. You will receive a receipt which shows that $23 of the $100 you have paid represents the FairTax. You do the math for yourself, but every time I work it out it comes to 23%
Bartlett also joins other critics in another blatant falsehood about the FairTax. Here's a sentence from his column: "If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%." In another paragraph Bartlett also says "Imagine paying 30 percent to the federal government on top of the purchase price of your next house."
Wrong, wrong, wrong. If a product costs $1 at retail .... It costs $1, with the FairTax already included. This is so easy to understand, you almost get the idea that people are intentionally trying to confuse the facts here. That $1 item Bartlett is referring to costs $1 at retail today! But instead of including the FairTax in that price, all of the embedded taxes from every business and individual involved in bringing that item to the marketplace are included. You remove one, you add the other. And that bit about 30 percent to the federal government on top of the purchase price of your new home?
Another lie. The embedded taxes are so high on the price of a new home today that when they are removed and the FairTax added, that home could be a percent or two cheaper! Come on, Bruce. This really isn't that hard. Let's try to spell this out plainly for everyone:
In another astonishing falsehood Bartlett says that the cost of providing the prebate to every household in America is not factored into the FairTax rate. He says it would cost at least $600 billion the first year. Again, Bartlett is just flat wrong. The cost of the rebate most certainly was included in the 23 percent rate. Congressman Linder tells me that if the rebate had not been included the FairTax rate could have been lowered to 18 percent.
The fact is that the rebate is projected to cost 5 percent, and that 5 percent is most certainly included in the rate.
Bartlett makes another huge mistake(?) regarding the prebate. He says that the FairTax sends monthly checks to every household based on income. Then he speaks of the "complexity and intrusiveness of tracking every American's monthly income .." Wrong ... completely and absolutely wrong. As anyone who has read the book knows, the prebate is not based on income, it's based on family size. There is no need to track anyone's monthly income. The only thing the government needs is a valid Social Security number and the number of people in the household.
Then, of course, Bartlett gets into the question of whether or not you can fund the federal government at present levels with a 23 percent inclusive sales tax rate. He cites numerous sources that say the tax rate would have to be much higher than 23 percent.
Know this ... in every case where some individual or organization has come forward to say that the tax rate would have to be higher than 23 percent, they have first changed the terms of the FairTax. That is, they have created exemptions. For instance, they assume that congress would never agree to tax food and medicines, therefore the tax would have to be XX percent, or that congress wouldn't tax transportation and housing, therefore the tax would have to be XX percent. Again .. the fact that the taxes are already there in the form of embedded taxes – embedded taxes to be replaced by the fair tax – is ignored.
Instead of me arguing about the sufficiency of the 23 percent rate, perhaps you would like to read it for yourself. Here's a link to a study by several economists titled "Taxing Sales under the FairTax: What Rate Works?"
http://people.bu.edu/kotlikof/Taxing%20Sales%20under%20the%20FairTax,%20What%20Rate%20Works,%20October%206,%202006.pdf
Don't take my word for it. I'm just a second-tier talk show host. See what several renowned economists have to say in a 34-page report.
Let's face it. The FairTax is a ripe target. It is easy to demagogue.
"Candidate Smith wants to add 30 percent to the price of everything you buy."
"Candidate Jones wants to add 23 percent to the price of your new home"
Can you imagine some uninformed voter (remember, most voters are government educated) hearing something like that? You just know how they're going to vote, don't you?
Is it possible that some of these irresponsible attacks are being mounted right now to prevent a new candidate, Fred Thompson, for instance, from running on this issue? Is a shot being fired across some political bows?
http://boortz.com/nuze/200708/08272007.html - fairtax
Anything that creates a NEW way for the feds to tax us is stupid. Yea, yea, abolish the IRS. Repeal the 16th. I’m holding my breath.
Anything that creates a NEW way for the feds to tax us is stupid. Yea, yea, abolish the IRS. Repeal the 16th. I’m holding my breath.
So just sit back and do nothing? That should produce a lot of results.
Read, agreed, shame on Bartlett
Nothing new here. Boortz spends 75% of the article refuting a non-point about CATS. It makes no difference to the debate. Boortz spends the next 25% of the article displaying his ignorance on what embedded taxes are. Bartlet does not get it right either. Boortz is wrong in that all of the embedded taxes will not be removed from the product and Bartlet is wrong to assume that none of them are removed. Out of the 18-23% embedded taxes, at most 8% can be removed without lowering wages and owners profits. Most likely it will be closer to a 5% reduction in costs, but then a 30% tax added on top.
Just as I thought, you really can’t read.
The bigger your income, the bigger your tax and your life insurance.
The bigger your house, the bigger your tax and your house insurance.
Size matters. What’s unfair about that?
All I read by Boortz assumes that the vendor will be forced by “the market” to reduce his prices by the amount of income and other fed taxes; this is fantasy.
I haven’t seen a Thompson position on the “Fair Tax”.
Fantasy?
Ok, you own a business. Your competitor across the street drops his prices. What do you do? Keep your prices up and lose customers and go out of business, or follow suit to remain competitive?
Or are you the first to drop prices to try and get his customers to come to you over him?
You don't believe cometition can and does affect prices????
That is truly amazing.
I am sure that models have been run on this, I have not done the research.
Read later. It’s gonna be a rough thread!
Simplify the existing tax code.
Great plan! Will work wonders.
Never mind that in the past 10 years there has been in excess of 10,000 changes to the tax code.
So, simply today, change tomorrow.
What is accomplished?
People who think the market doesn’t apply to prices post “fair tax” probably think that gravity doesn’t apply to airplanes.
This article quibbles about the percentage, when it’s the concept of eliminating income taxes that is the real issue.
It’s the same as the flat tax - as soon as you state a percentage, there goes the caterwahling about the rate, instead of the concept.
A large portion of the embedded taxes are the income and payroll taxes paid by the employee. One thing I haven't seen is the analysis on whether prices would drop by the amount of the embedded taxes along with a matching drop in pay, or will the typical pay stay the same requiring an increase in the after tax prices. I personally believe that the pay is "stickier" (I'm sure there's a real economic term for that) than prices. Thus even if you remove the employers' SS tax and profit taxes, you'll drop prices by less than 10% and after taxes they will go up by about 20%.
Even with that, I still like the idea of eliminating the tax on production and replacing it with a tax on consumption. I also like that it will treat imports and domestic production the same, unlike our current system which gives a disadvantage to domestic production.
So you basically will have a tax free salary of your current net salary.
I how much of each dollar is embedded taxes? How is getting rid of the income tax going to do away with the embedded taxes? Are those added costs to make up for the sellers income tax liability? I do find it amazing that their are americans that actually argue for the intrusive and confiscatory income tax. We have come a long ways from colonists times.
Please go to
http://www.fairtax.org/site/PageServer?pagename=about_faq
I think your questions will all be asnwered there.
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