Hoagland: FairTax legislation addresses many issues

Kansascity.com ^ | October 9, 2007 | Ken Hoagland

[Man50D]

Alexander the Great solved the riddle of the Gordian knot by simply cutting it down the center. When it comes to the income tax system, however, every attempt to untie the convoluted mess fails.

Instead of simplifying or making fairer, the tax code always becomes more complicated and more unfair. There is a better way and it

[Man50D]

Fair Tax ping!

[MrB]

Let’s see if I have most of the naysayers’ lines down:

“It’s regressive”
“It’s 30%, not 23%!”
“It controls what I spend my money on with the prebate”

OK, we hear ya.

Got anything else?

[groanup]

Bump.

[Man50D]

You forgot it taxes savings twice.

[camle]

here we go again. more snake oil

[groanup]

Got anything else?

The gov't taxes itself. (It does that now.)

It will harm those who have after tax retirement money. (It will also benefit them. It will be a boon to those with pre-tax money.)

It will be hard to administer. (What, 40 states do it already?)

It will destroy the economy and create massive inflation and dollar devaluation. (It will add 15% to the economy's growth rate. It will not increase the money stock which causes inflation except, of course, if the velocity of money skyrockets in the economic cycle that ensues. 75 economists have signed a letter to the President and Congress endorsing the FairTax. NO economist on either side of the debate has claimed it will cause inflation or rout the dollar. Many have, OTOH, claimed it will spur unprecedented growth.)

The prebate is a socialist program. (The income tax is specifically listed as part of the Communist program in Marx's writings.)

It is a cult. (If it is then I'm joining. LOL.)

It is a scam. (The income tax is almost a criminal enterprise. It violates the 1st, 4th, 5th, 6th and 9th amendments.)

Yet the SQL's continue to ponder:

[Always Right]

Except you missed the biggest one, the whole fairytale that paychecks go up and prices go down is a bold face lie. But dishonesty in pitching this scheme is nothing new.

[groanup]

Except you missed the biggest one, the whole fairytale that paychecks go up and prices go down is a bold face lie.

Yer right, Right. I forgot one. This was the Boortz bobble. It has long been settled (by the SQL's and FT's alike) that prices will go down somewhere between 9 and 15% and paychecks will go up by the amount of previous withholding.

Some have indeed claimed that prices will fall by 23% due to embedded taxes. That won't happen without wages falling.

[griswold3]

I watched Kudlow after the debate (I didn’t watch the ‘Are you smarter than a fifth grader’ show at all)

Kudlows guests have no idea what Huckabee was talking about. Idiots!
They said no one has a plan to ‘tackle the trade deficit’.
What a bunch of maroons! What a gull a bull...

[ari-freedom]

The prebate is a socialist program. (The income tax is specifically listed as part of the Communist program in Marx’s writings.)
-
you can have the fair tax without the prebate. I don’t know of any state sales tax with a prebate.
Also, where does the money come for the prebate if the tax wasn’t collected yet?

[groanup]

lso, where does the money come for the prebate if the tax wasn’t collected yet?

Anybody want to give this kid an answer? I'm through with him.

[xcamel]

Get smoked on one thread, and get paid to post another...some racket..

[ari-freedom]

fine. I’ll give the correct answer. The government will take a loan.

[untrained skeptic]

Got anything else?

Sure.

It will cause a price inflation spike that will devalue people's savings.

It has few benefits over replacing the current system with a flat personal income tax, while being highly disruptive in it's implementation.

It will discourage buying new goods because used goods are not taxed. That's good for the environment, but not good for the economy.

It is very protectionist in nature. Companies making products for export have no share in the tax burden. We would be effectively subsidizing all exports. Imported goods would not get the tax savings from no business taxes because the companies still pay taxes in their home countries, but their goods would have the same tax burden as domestic goods. Some will say that is a good thing, but it is effectively an import tariff and shares the same drawbacks of all import tariffs. The Fair Tax would protect US industries at the cost of higher prices for Americans buying items, and lead to the usual inefficiencies that protectionism inevitably leads to.

[groanup]

It will cause a price inflation spike that will devalue people's savings.

OK, I'll challenge that. How?

[untrained skeptic]

OK, I'll challenge that. How?

LOL! Here we go again. I gave you nice detailed answers with plenty of examples and you kept trying to change the topic to future earnings rather than savings.

So I gave you a detailed example using standard interest rate equations to show the effect and you said my equation modeling it wasn't valid, but couldn't explain why. I offered to run the numbers with different interest rates if you could explain why you thought the ones I used were invalid, and you basically said you didn't think things like interest rates and investments could be modeled using mathematical models. I guess that means we're just supposed to make random decisions and not bother to justify them.

The basics are simple. The sales tax adds to the costs of all items. Savings from businesses not paying income or payroll taxes are far smaller than the size of the sales taxes. That means items will cost more. For future earnings, that is compensated for by people taking more money home in their paychecks because they don't have payroll taxes taken out. However, the government doesn't refund the payroll taxes you already paid on your savings. Your savings simply buys less.

I've had this discussion with a number of people, you're the only one that doesn't seem to get it.

[xcamel]

That’s an easy one... too much cash in the peoples hands, and a supply chain drying up.

[groanup]

I've had this discussion with a number of people, you're the only one that doesn't seem to get it.

No I know that's not true but you surely wish it were.

Now: I make $100. I can spend only $75 because I'm in a 25% tax bracket and that's all that's left over.

Under the FT: I make $100. I can spend only about $75 because I will have to pay about 25% sales tax.

My spending power is the same either way.

Now you have been arguing that the value of all my assets will decrease if the FT is adopted. ONLY the value of my after tax savings may decrease. The real value of my pre tax savings will increase IF I chose to keep it invested. If I spend it the FT will wipe out the boon I have gotten from lifting the tax burden on the pre tax savings. I'll no longer have to worry about my growth, earnings, dividends, interest being taxable.

And I can spend it and pay taxes on it when I wish. At my leisure.

[groanup]

Please don’t post rows and rows of equations that most of us haven’t had in 40 years or so. I don’t want to take the time to figure them out and I don’t think anyone else does either.