The FairTax -- The Truth By Neal Boortz

Townhall.com ^ | November 27, 2007 | Neal Boortz

[Your Nightmare]

Notice how practically everyone of Boortz’s rebuttals is based on these mythical “embedded taxes.” He’s basing this all on one study by Dale Jorgenson. Don’t you think if these “embedded taxes” really existed there would have been much more study on the issue? I don’t know about you, but I’m not ready to risk the economic future of this country based on one theoretical study from one economist.

[Filo]

We have to get rid of the prebates.

And the unfair double-taxation on pre-taxed money.

[K-oneTexas]

 [Actually wrote this for another post Fred Thompson Plan for Tax Relief and New Economic Growth ) but the data we use will be factual)



Actually  let's use the official documents to make this calculation.

 

2007 HHS Poverty Guidelines

Persons in Family or Household	48 Contiguous States and D.C.	Alaska	Hawaii
1	$10,210	$12,770	$11,750
2	13,690	17,120	15,750
3	17,170	21,470	19,750
4	20,650	25,820	23,750
5	24,130	30,170	27,750
6	27,610	34,520	31,750
7	31,090	38,870	35,750
8	34,570	43,220	39,750
For each additional person, add	3,480	4,350	4,000

SOURCE:  Federal Register, Vol. 72, No. 15, January 24, 2007, pp. 3147–3148

 
Also, the Prebate is a portion annually, Therefore if 2007 has a prebate it would be:

Source: Frequently Asked Questions - Answers - How does the prebate work?

Please use these table, official tables from HHS and The FairTax. org to apply tour calculation. As I see the tables, if 2007 were an actual year under the FairTax:

per HHS - 2 person household Poverty Level $13, 690. Based on number of persons in a household ... husband & wife, parent & child - two people.

per FairTax consumption allowance for 2 adult household is $20,420. A 2 adult household would be a husband & wife or a couple. However there is a 1 adult household and 1 child that is not a couple.

I believe you have used incorrect calculation to show a marriage penalty that does not exist in fact. There is no exemptions in a consumption tax as there is for an income tax. If you want to compare the exemption that was under an income tax you would have to compare it to the consumption allowance under a consumption tax. As you see you see there is no such penalty as the prebate for a 2 adult household is exactly twice that of a 1 adult household.  Therefore 'No Penalty'.

You can not compare apples to oranges ... you are mixing tax types (income and consumption). There is no penalty when you are not paying tax based on that figure, an income tax. If you want to compare a marriage penalty then you'll need to compare it to the Flat Income Tax Proposal also before Congress. You need to re-think tax when moving between kinds of tax, the terminology of one does not fit the terminology of the other.

Let's get one thing straight here, as I said (just in the paragraph above) when talking about an Income Tax or a Consumption Tax we should not mix terminology ... and you are doing just that. Some givens, some fact(s):

1. Income Tax (and VAT) rates are inclusive ... meaning they are removed from the amount, in this case income.
   
2. Consumption (or Sales) Tax rates are exclusive ...  meaning they are added to the amount, in this case sales price.
   
3. Income Taxes (and VAT) can and usually do have multiple rates ... Consumption (Sales) Taxes are a flat rate.
   

By their very being thay are different. Lets talk apples to apples. Get off the inclusive and exclusive. Don't mix termonology. Do you do it on your yob? Does your a mechanic, talk like a nuclear physist.? Does a structural engineer talk like a oil well roustabout? How many mix differnt industries jargon on a regular basis. Why here? Do you go around every day and purchase an item pay its cost and the added sales tax at the store and talk/compare of it it some way to the income tax you pay every April?

Approximate all you want inclusive to exclusive but remember it does one thing for people ... confuses them. Thirty years a a tax collector and tax auditor have proven this to me ... you must be honest when talking with people regarding their tax and how it effects them. You can make the comparison but at the end of the day a sales tax is a sales tax and can never be an income tax. 

Thoughts: Are we better off with all the exemptions in an income tax, various stratafacations of rates, government receiving its 'share' before you receive yours, large bureacracy, massive convoluted tax code ... or ... no exemptions, everyone taxed at same rate, government not getting its 'share' until you decide to consume goods or services, smaller bureacracy, simpler tax code.

[manic4organic]

Anything that abolishes the IRS is good for this country. If the Fair Tax does that, I’m all for it. The CPAs, attorneys and everyone at the IRS can find other employment. I doubt it can actually come to pass but I can dream.

[Hostage]

They are rebates, not prebates.

And no we don’t.

[untrained skeptic]

The Fair Tax does not reduce taxes, it shifts them. It even tries to make it so that most people pay about the same in taxes as they do now.

It's advocates talk about how there are already embedded taxes that we all pay that show up as a portion of the price we pay for items. That's fine. Then they try and say that because the taxes are being paid at the point of sale, businesses will earn more. The businesses won't pay as many taxes directly, but their customers are still paying the taxes, so that money is still being siphoned out of the economy by our government.

They make comments about the destruction of the IRS that get a lot of people worked up because everyone hates the IRS, but taxes are still being collected by other means, that the government still pays for, so the actual cost savings are tiny at best.

So why are people that really understand the Fair Tax pushing for it? The only reason I can see is protectionism.

You see with all the tax burden being placed on domestic sales, exported items don't get taxed, which acts as a huge export subsidy.

Since the sales taxes are on all domestic sales, imported goods bear an equal tax burden in the US as domestic goods, as well as any embedded taxes they face in their home countries. This acts just like a huge tariff on imported goods.

The other thing that gets left out is what happens to when we switch to a sales tax from an income tax? Well, we get a lot bigger paycheck, but it is evened out by what items cost. Your purchasing power on your income stays pretty much the same (due to higher take home pay), but now each dollar buys less.

Anyone who has been following the effects of the sliding dollar should have some idea of what that might cause.

Anyone want to guess what all of our creditors that have lent our government money would think of getting paid back in US dollars that are now worth 20% less? How do you think that would effect our continued ability to continue to finance our current massive national debt? A large portion of that debt isn't long term debt. It is short term debt that we continuously refinance.

If we are unable to continue to refinance that debt at low interest rates, we will have to pay higher rates, and the national debt will soar even if our government was able to exhibit fiscal responsibility.

Who is going to lend us money at a few percentage points when we showed a willingness to drop the value of our currency by 20+% which means we effectively defaulted on 20+% of that debt?

The Fair Tax is really a protectionist tax. It doesn't cut taxes, and it doesn't simplify taxes any more than a flat tax would.

Implementing it also has a serious detrimental effect on people's cash savings, and on our nation's ability to continue to finance our debt that we have foolishly accumulated.

So if they aren't trying to get the US to effectively declare bankruptcy and start over with a more protectionist economy, what are they trying to do with the Fair Tax?

[Hostage]

Your comments show you have no understanding of the FairTax.

The IRS will be dissolved and they will not be mailing rebates. The SSA will mail them.

The rest of your comments have holes big enough to drive a Semi through.

Do yourself a favor and read the legislation and the website before appearing as a yammering mollusk with an IQ of Zero.

[Your Nightmare]

Thanks for the info - this shows my point. The "annual consumption allowance" for a couple with 2 children is shown as $27,380. The FairTax on $27,380 worth of consumption would be $27,380 x 29.87% (the exclusive rate), or $8,178. But the prebate for this family would only be $6,297. Why? Because the FairTax calculates the "prebate" by multiplying the "annual consumption allowance" by the inclusive rate, $27,380 x 23% = $6,297.

Under the FairTax this family could not consume $27,380 worth of goods and services without paying net FairTax.

[Your Nightmare]

They are rebates, not prebates.

Tell it to the Americans for Fair Taxation. They seem to think they are "prebates."

[Hostage]

Your commentary wanders to the weakness of the dollar.

The current weakness in the dollar is caused by a difference in interest rates. People are dumping dollars for Euros and other currencies that have higher yields on deposits. This has been explained ad nauseum in the financial press.

But now Airbus and other Euro concerns are crying foul to the weak dollar, stating that the weak dollar threatens their very existence. Eurozone economic growth is slowing thereby applying pressure for Eurozone banks to cut interest rates. Thus, the dollar will bottom and then rise to a new equilibrium as interest rates stabilize.

The bottom-line is this has little to do with the Income tax or the FairTax. Interest rates and inflation are monetary in nature, and are connected with taxes only insofar that taxes are used to pay interest on national debt and thus take dollars out of circulation.

Simply put, your wandering to a discussion of the dollar is irrelevant.

Your other remarks are shallow and lack depth of understanding. For example, the FairTax will task the States to collect the NRST and deposit it in a federal account. For those states that do not wish to collect or who have trouble collecting in the manner prescribed, the FairTax has a backup collection provision.

The fact that there are vastly fewer points for collection under the FairTax, and the fact that the collection is almost entirely computerized, and the fact that 3,000 large retailers will be collecting more than 50% of federal government revenues leads to an enormous savings in processing revenue collections and in compliance.

[Your Nightmare]

Anyone want to guess what all of our creditors that have lent our government money would think of getting paid back in US dollars that are now worth 20% less? How do you think that would effect our continued ability to continue to finance our current massive national debt? A large portion of that debt isn't long term debt. It is short term debt that we continuously refinance.

In Kotlikoff's "Taxing Sales under the FairTax: What Rate Works?," he calculates that this debt would lose $1 trillion of it's real value (assuming, and he says it's likely, that the Federal Reserve fully accommodates the introduction of the FairTax and permits consumer prices to rise by roughly 30%). I think the holders of this debt might have something to say if it's value is going to be reduced by $1 trillion.

[Hostage]

Read the legislation and think for yourself.

[Your Nightmare]

Simply put, your wandering to a discussion of the dollar is irrelevant.

He wasn't discussing the current value of a dollar - he was discussing the value of a dollar pre-FairTax compared to the value of a dollar after the FairTax and it's very relevant. If a dollar bought a dollar's worth of goods before the FairTax, it would only buy $0.77 worth after. Likewise, a dollar's worth of debt would only be worth $0.77 in real terms after the FairTax.

As I mentioned above, Kotlikoff estimates the government would see a one-time $1 trillion windfall in real terms due to price changes. Their windfall would be the debt holder's loss.

[Your Nightmare]

Read the legislation and think for yourself.

Who do you think wrote the legislation? Read a dictionary and think for yourself.

[camle]

so the IRS wopn’t be mailing the ‘prebates’, eh? the SSA will do it. OH THEY have that kind of resources? It doesn’t matter which beauracracy grows to handel this, only that it will MORE than offset the loss of the IRS, which contacts us once a year.

the prebate is lunacy - you’re returning taxes BEFORE they’re paid?

your position shows that you have no understanding of how government works. The government WILL fix this so that they get MORE revenue. otherwise there would be little reason (to them) to make such a sweeping change.

and your plan favors the super rich. the little guy will get screwed.

how about proving me false before name calling, or do you like being sophmoric? (I’d match IQ’s against you any day, buster)

[Hostage]

Total complete BS so deep that this response is an act of charity.

On average, a dollar has the same purchasing power pre and post FairTax.

As far as your references to Kotlikoff, you and I know you have been discredited with your interpretations of those references numerous times on FR. Your only purpose to again quote deceptively is to attempt to dupe someone new to learning about the FairTax that hasn’t seen your previous folly.

For newcomers, here’s a link to the actual Kotlikoff study group where you can digest and form your own perspective:

http://www.fairtaxblog.com/20061002/kotlikoff-study-23-fairtax-revenue-neutral/

[Hostage]

You got called on your crap and told to sit in it.

And close the door where you sit because it stinks!

[Hostage]

The legislation call for REBATES not prebates.

Read it!

[Hostage]

Trying your best this morning to cause confusion?

While you are sitting at your altar of the Income tax at work realize this:

“You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”
— Abraham Lincoln

Today’s 22% federal EMBEDDED taxes in each product and service purchased is INCLUSIVE. The FairTax replaces these INCLUSIVE EMBEDDED federal taxes. Therefore, the consumption allowance is treated inclusively!

Keep trying to stir up confusion!

And keep failing!

[Your Nightmare]

On average, a dollar has the same purchasing power pre and post FairTax.

The post-FairTax value of a pre-FairTax dollar depends what the Fed does. Kotlikoff say it "seems likely" that "the Federal Reserve fully accommodates the introduction of the FairTax and permits consumer prices to rise by roughly 30%." If consumer prices rise by 30%, then a pre-FairTax dollar would be worth $0.77 post-FairTax.

As far as your references to Kotlikoff, you and I know you have been discredited with your interpretations of those references numerous times on FR.

This is where I ask for links to the "numerous times on FR" where I "have been discredited with [my] interpretations of those references" and you refuse to produce them. It's an old and tired FairTaxer game.

For newcomers, here’s a link to the actual Kotlikoff study group where you can digest and form your own perspective: http://www.fairtaxblog.com/20061002/kotlikoff-study-23-fairtax-revenue-neutral/

For newcomers, this is a link to a blog, not "the actual Kotlikoff study group." This blog entry simply discusses and links to the exact paper I referenced.