Posted on 01/13/2008 5:16:11 AM PST by Man50D
In a piece published on January 9th for Townhall, economics writer Jerry Bowyer posed some common questions about the FairTax. The FairTax would replace personal income taxes, payroll taxes, capital gains taxes, corporate income taxes, and the death tax with a national retail sales tax. The FairTax has become a prominent subject for discussion as Mike Huckabee, its leading advocate among the presidential candidates, has risen to the top of the national polls.
In politics, as in life, “context” (which could also be called, “basic point of view” or “the framing of the issue”) trumps “content” (in this case, the specific factual questions asked). However, let me first address the “content” of Mr. Bowyer’s questions.
Q. Why do you think that a sales tax is less prone to corruption and complexity than an income tax?
A. There are three major reasons that the FairTax would be less problematic than an income tax:
1. It applies to actual transactions where money changes hands, rather than “income”, which is a concept so abstract as to be almost ethereal. Most of the 60,000-page U.S. tax code deals with the definition of “income”. 2. There would be only about 20 million entities that would need to file FairTax returns, compared with 140 million who must file income tax returns now. 3. At the proposed 23% (inclusive) rate, the FairTax rate is much lower than the current 35% top tax rates on personal and corporate income. The lower the rate, the less incentive for avoidance, evasion, and special pleading.
Q. Are sales taxes, where they are currently in operation, simple and free from special interest lobbying?
A. Nothing in the manifested universe is perfect, but sales taxes are, in practice, simpler and less prone to special interest lobbying than income taxes. Right now, the huge Washington lobbying industry on K Street gets half of its revenue from lobbying the income tax code.
Q. Does it apply to non-profits?
A. The FairTax applies to retail sales of new goods and services. If a non-profit sells new goods and services, it will collect the FairTax on them. However, in general, charity involves giving things away, not selling them. Also, the FairTax would eliminate the payroll taxes that non-profits pay under current law.
Q. Are used goods, non-taxable?
A. Yes—the FairTax applies only to sales of new goods and services. However, the nation as a whole obviously cannot replace newly-produced goods with used goods. If I sell you my car, I don’t have it anymore. All of the new parts and labor that would go into “rehabilitation” and “refurbishment” of used items would be subject to the FairTax. This having been said, the FairTax would shift U.S. GDP from current consumption toward investment and exports. Most economists would applaud such a move.
Q. What about the transition period?
A. People respond to incentives, and there would be an incentive to delay income and accelerate spending ahead of the FairTax effective date. This could well result in a short-term increase in debt. However, debt will be easier to repay under the FairTax because people will have more take-home pay. This aside, America has been around for 232 years. There are many things that could be done to ease the transition, and it makes no sense to avoid a change with huge long-term benefits because of one-year transition effects.
Q. Isn’t it true that the rate is not really 23% but 30% at least, because it’s tax-inclusive?
A. Yes and no. Both the FairTax and the income tax can be stated as either an “inclusive” or an “exclusive” rate. For an “apples to apples” comparison with the rates of our existing tax system, the 23% “inclusive” FairTax rate is the correct number to use.
Q. How do we determine the interest portion of mortgage payment?
A. Interest above the rate on 10-year Treasury bonds is subject to the FairTax. This will prevent suppliers from discounting prices and making it up with high interest rates on financing. The 10-year Treasury rate is a market-determined interest rate that is not targeted by the Federal Reserve.
Having addressed the “content” of Mr. Bowyer’s questions, I would like to turn to the more fundamental issue of “context”.
A “contextual” question that shapes a person’s entire experience of life is, “Is the glass of life half empty, or is the glass of life half full?” Think about the people you know and you will see that this is true.
The analogous political question is, “Is the glass of America half empty, or is the glass of America half full?” The FairTax is an expansive, optimistic, “half full” concept. It has a natural appeal to people for whom the glass of life, and the glass of America, is half full. The FairTax speaks to “possibility” rather than “fear”.
I do not know Mr. Bowyer personally, so all I can say is that his questions about the FairTax struck me as coming from a “half empty” point of view. This was not surprising to me. Most “elite opinion”, including virtually the entire Mainstream Media, has embraced the “the glass of America is half empty” point of view and has dedicated itself to proving this position right.
The FairTax is about America’s future. When it comes to matters pertaining to the future, facts and logic cannot bridge the gulf between hope and fear, the chasm between “half empty” and “half full”. All we can do is to pose the question to the American people and let them decide.
The way they act, I’m beginning to think if historical circumstances were different, the founders would be taking up arms against the FT’s as insurrectionists, bent on creating a second front to divide the attentions of the real war at hand...
Don't get me started...
check out the last exchange on the “new” thread..
Its too bad, but that is the way things work in the private sector as well as in government.
Would like to know what your solution is. Stay the course?
Honestly, I think getting our financial house in order is top priority.
...and it’s easier to fix it than blow up half of washington, not that that would be so bad for many other reasons.
I totally agree. Deficit spending is a political decision that has nothing to do with the normal operation of a taxing system. One can only compare taxing schemes on the basis of how they are supposed to work without political tinkering. But fair tax supporters are making arguments that the fair tax revenues will raise and fall with decisions made by consumers (see discussion of Hamilton's analysis of consumption taxes in previous posts). Obviously, the revenue neutral policy means that fair tax revenues will not be allowed to fall no matter how much citizens cut back on consumption and of course there is nothing to prevent Congress from deficit spending even after converting to a fair tax.
"It's The Spending, Stupid!"©
In othr words, same old leaky boat that we can't row even with new oars.
There is no doubt that is true and some of them are so heavily invested in income tax that they will tell literally ANY lie in order to preserve what they see as their meal ticket.
oh joy, another pro-tax scam article from a nowhere site.
should this not still be in chat and NOT in news.
The real bill and not the BS propaganda on this entitlement program scam is at http://www.thomas.gov by searching “fair tax”
The Fair Flat Tax popus up but the one to look at is H.R. 25. That has the unspun, uncessored bill with all its incidiousness.
What the h*ll does that have to do with the FACT that Marx and Engels CLEARLY endorsed a heavy progressive income tax as one item on a list of things that would aid them and their fellow travelers in taking over developed countries?
ANYONE who doubts that they did so need only read it for themselves in the Manifesto of the Communist Party (second section toward the end).
(Typical FT/TP - Doesn’t know history, and doomed to repeat it)
It is not Fairtaxers who don't know history but those of your ilk instead!
If your knowledge of history were HALF what it should be you would know that income taxes have NEVER been well received by taxpayers and that MANY tax collectors and other public officials have lost their lives in trying to enforce them!
here they go again...
A democratic election brought Hitler to power... maybe we should throw out that idea too..
/sheesh.
Do you believe that the USA was laid out as a democracy?
The Fairtax scam is pure “from each according to their ability to each according to their need.”
It takes from producers to give to the nonproducer.
you have a MASSIVE entitlement program with FAR MORE lobbiest points than anything we have now.
The 1991 luxury tax already proved this concept a failure so now the tax scammers want to do it again but with a “great society entitlement” ON TOP of state sales and state income taxes.
It is really easy, large ticket purchases move overseas, done deal happened before will happen again. The embeded BS has already been disproven since it is NOT going to result in lower prices.
30% savings for large items like boats and cars etc means only the poor and middle class will pay taxes. it also means all new items will become “paper used” (see european car sales tax avoidance)
This does NOT eliminate the IRS, (read a union contract some time) it only RENAMES the IRS and gives them different items to audit and MORE intrusion into our day to day lives. (See the HR 25 Fair Tax Scam’s penalties for not issuing or HAVING a reciept for whatever you buy. new meaning to your papers please)
You have an intrusive tax program, you have a marxist redistribution of wealth, you have mandatory registration of government approved family units, you have mandatory registration of anyone selling or buying, you have draconian documentation requirements, the list goes on and on and yet you say THIS is not part of a communist model.
This is not an either or proposition.
the IRS is bad, the Fair Tax Scam is BAD in fact VERY VERY BAD.
go back to the drawing board and come back with something that reduces the size of government not brings back LBJ’s great society fiasco.
Do you really believe Marx had anything to do with US tax policy?
Remain ignorant and continue with your delusion. I DON'T care!
Just PLEASE don't stop helping to promote the FairTax with you lunacy.
In the real world, software has replaced much of the work of the company CPA.
bookeepers compile the data for most of the year and the tax returns are simply signed off by the CPA firm as a means of double checking the work.
Software has reduced the need CPA billings significantly.
People to keep track of the numbes will always be needed even if we went to a flat tax but technology has progressed in the bookeeping realm. It is not unlike how a word processing program has replaced the old typing pool and carbon paper.
The IRS must go but it must be a “go” which reduces the tax burden not this absurd rearrange the Titanic’s deck chairs neutral revenue generating espoused by taxscammers.
Marx himself? No as he was DEAD but the tripe he and Engels published was WIDELY adopted here and particularly so by those in the halls of academia so, by influence, YES INDEED!
You are much more seriously deluded than I even imagined..
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