Posted on 01/12/2008 1:06:53 PM PST by SeekAndFind
http://www.townhall.com/columnists/JerryBowyer/2008/01/09/questions_for_the_fair_tax_crowd
Questions for the Fair Tax Crowd By Jerry Bowyer Wednesday, January 9, 2008
Why do you think that a sales tax is less prone to corruption and complexity than an income tax?
When the income tax was originally promoted by William Jennings Bryan and other populists it was labeled as being fairer, since it would not hit the poor. When initially implemented it was very simple. However, over time special interest groups were able to lobby for exemptions, deductions, and other special treatment. Why would a sales tax not undergo the same process? Does the fair tax somehow magically abolish selfishness?
Are sales taxes, where they are currently in operation, simple and free from special interest lobbying?
The Europeans have a sales tax, called the VAT, which is extremely complex. Why wouldnt that happen here? States have sales taxes, which, even despite their low rates still have long lists of items which are exempt or not exempt, and they still have people who cheat on them. If this happens at low rates, why wouldnt it happen at much higher rates? Does moving the concept from Europe to the U.S., or from the State level to the national level, somehow render the legislative process more pure? If so, why is our income tax so riddled with complexity and special pleading to begin with?
Does it apply to non-profits?
If so, then theyve become taxable and it would discourage charity. Also, wouldnt churches become taxable? Arent there constitutional issues here? If not, then the tax advantage of non-profits disappears. If theyd be taxed the same way as businesses, wouldnt this remove a great deal of tax encouragement for non-profit enterprise and shift talent and treasure away from that sector?
Are used goods, non-taxable?
If so, this means less goods production, more yard sales, eBay stuff, etc. Wont this hurt traditional retailers and goods producers? Why wouldnt this encourage evasion through rehabilitation? After all what exactly constitutes New vs. Used? If I repair a car, its used, but what if I upgrade it? New engine, but old chassis, is that new or used? Computers, too. New hard-drive, but old CPU; is that new or used? How does this not get complicated?
What about the transition period?
Before the sales tax takes effect, wont there be a buying binge? Afterwards, wont there be a buying drought? If so, doesnt that cause a debt spike to finance purchases before the sale ends? The implications for banking and currency policy are way too complicated for me to foresee.
Isnt it true that the rate is not really 23% but 30% at least, because its tax-inclusive?
And even this does not count dynamic effects in which changed behavior and evasion narrow the base and raise the rate.
How do we determine the interest portion of mortgage payment?
If non-specified, business will simply give big discounts on price and then make up for it in the interest calculation, as interest is deemed non-taxable. These calculations are highly malleable and can become very complex. Homes will be financed with low-ball prices and high interest rates, and sup-prime mortgages will skyrocket.
If a cap is put on excludable interest, then at what rate? Federal rates? That makes the Fed a tax-setting agency and hyper-politicizes monetary policy.
One man, one vote, one tax bill.
No rates, no schemes, no nonsense.
Simply equally under the law.
Everyone should get a tax bill for the same amount.
Now if you believe “from each according to his abilities”, tax rates are just dandy.
Other issues to consider. The fair tax rate automatically adjusts based on the needs of social security. In other words, the rate will go up as social security costs increase. Also, much of the revenue generated by the fairtax is the government taxing itself. I have news them, that is not revenue.
You forgot on Government Check per Person Every Month.
Under the “fairTAX” every man woman and child would be issued an EBT card (welfare benefits) from the government. They would get their “prebate” deposited there. It is a massive entitlement program that would make FDR proud. And Democrats will be happy to discover how easy it is to tweak the “prebate” amount in the name of “social justice”, giving the “rich” smaller or no “prebate” and a progressive “prebate” for everyone else. Perhaps the “poor” would get a $5,000 “prebate” every month. Paid for by the “fairTAX”.
I wish the author would have mentioned at least what section of the FairTax bill he is discussing here.
The word "mortgage" does not appear in the FairTax bill at all, so this cannot be a mortgage-specific provision in the bill, and I don't see where in the general provisions about interest where this "reasonable" rate applies to anything about paying mortgage interest, so I don't think he is correct about having to pay FairTax on the interest paid each month on mortgage loans made at a relatively high interest rate.
But he does have a good point about that this is indeed a viable tax avoidance mechanism: you buy something at a large markdown from the market value (a circumstance which I did see mentioned in section 804, but that is in reference to a leaseholder option to buy at the end of a lease term, not to original initial purchases at a discount when compensating financing is provided by the seller), and then the borrower pays an interest rate enough above prevailing rates to compensate the seller who is doing this self-financing.
That would indeed seem to be legitimate tax avoidance under the FairTax since the seller could then try to offload the mortgage for a premium over the principal. Whatever premium he can generate there is not subject to the FairTax, and thus whatever value you created by agreeing to these terms is untaxed by the FairTax.
“One man, one vote, one tax bill.
No rates, no schemes, no nonsense.
Simply equally under the law.”
You are describing a per capita tax. Now you’re talking.
WOW it seems the Fair Tax proposal is the BIGGEST POWER GRAB attempt since hillarycare!
(s)I demand a living prebate. Enough to pay for more than mere poverty rent. The prebate should be the ENTIRE poverty dollar amount from the US government. (horray free money!!!)(/s)
It has never occured to Mr. Bowyer that there is nothing to keep the Congress from raising the max tax rate right now to 100%...other than we still are an armed population.
It also probably has never occured to Mr. Bowyer that the defination of a slave is someone who turns over 100% of the fruits of his labor to someone else...and as things stand right now....just in income taxes alone, we who work, and in fact pay income taxes, are anywhere from 15% to 38% slaves.
I want to be free once in my lifetime. I really don't care if the tax system is a "fair tax" or a simple NRST.....freedom being the objective here....and I don't want to become a criminal just because I don't "volunteer" to pay up.
Under the Fair Tax....you don't have to pay if you don't want to....just don't buy anything new!
Should the Millionaire be able to vote a thousand times in the same election?
I wish the author would have mentioned at least what section of the FairTax bill he is discussing here.
No schemes? Nonsense. Humans always look for loopholes in taxes. That’s part of the reason the income tax is so convoluted, foiling tricks, schemes and manipulations. The National Sales Tax will have its own cumbersome regulations. It’s the nature of taxes. No one wants to pay taxes, they’re always looking for ways not to pay taxes. It will be the same under the National Sales Tax, which will be imposed in this universe, not the “fairy tax” universe.
Simply equal under the law? Dream on. Taxes are always unfair to someone. And people are always looking to shift the burden to someone else. That's really what the National Sales Tax is all about. Some people figure they'll come out ahead under this scheme.
I too am on the fence about the Fair Tax. Clearly the current system has got to go. Way too many attempts at social policy through taxes has warped it seriously out of shape.
However, like the Bowyer, I see that there are a lot of unexplained things in there. The current FAQs are insufficient.
I’d love to believe it is the right way forward, but for now I am skeptical.
And food is what, tax free? Until when?
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