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.
Learn some HONEST history instead of the propaganda they feed you in public school these days!
You notice how they all act like skunks at the feed bin? Give them the slightest nudge in the wrong direction and they spread stink all over the thread... I think its a plan on their behalf to make sure anyone with serious questions/reservations about the FT won’t stay around long enough to give them any trouble...
That is it?
That is your best shot?
it tickles.
The fact is we have shown you and yours to be big government marxists with this fair tax scam. Again and again it is clear you have not even READ H.R. 25 or understood the legal implications contained in it, OR the tried and true methods for legally avoiding the 30% sales tax. (offshoring, finance shifting, internet puchasing, leasing vs purchasing, staw sales to create “used”, demo model aging...)
You call the IRS marxist, but it is more a case of you the Marxist advocate calling the kettle black.
Nobody here has ever expressed love to the IRS, you only use that pathetic retoric as a goeblesesque desperation to cover your repeated failure to address reality. The IRS must go but the blind incompetence of the scammers like bortz, prevents a truly viable solution being put forth.
You constantly obfuscate past history which documents this will not and can not work in any way shape or form. That similar such programs have been ecconomic and social catastrophies. (jobs and business lost form 1991 luxury tax, social fiasco of the Great Society socialism, etc.)
Na zdorovia Comrade, enjoy your Kool-aide.
For about the 40th time, get over yourself.
..blaming the MSM for your failure to evangelize the most pitiful propaganda campaign ever.. I can't wait for the tears... oh wait.. you already did that sthick..
1. Limit spending
2. Pay off the national debt.
3. Repeal the 16th amendment.
4. Amend the constitution to forbid social engineering.
5. Replace all legislators that ignore the constitution, especially the bill of rights.
Now any tax system would theoretically work.
What do you think?
Do all that and leave tax collecting to the Salvation Army...
Hey.. it would work better than the unfair tax...
Ever hear of the Whiskey Rebellion?
1. Limit spending
2. Pay off the national debt.
3. Repeal the 16th amendment.
4. Amend the constitution to forbid social engineering.
5. Replace all legislators that ignore the constitution, especially the bill of rights.
Now any tax system would theoretically work.
What do you think?
Limit borrowing, and demand Congress include funding for any new spending bill (either a cut somewhere else, or a plan for raising the necessary revenue). Any changes to a bill that includes spending pushes back the voting date to give all in Congress time to revue the bill. Believe it or not, the founding fathers were not adverse to a little social engineering via taxation, neither are FairTaxers.
I do like your suggestion to replace legislators that ignore the Constitution and assume that wouldn't go into effect until after your amendments are passed. However, because the Constitution gives the SCOTUS the job of resolving Constitutional issues, don't you think your plan gives them too much power?
It's the raising of revenue that starts the increase in taxation or deficit spending. The spending should be set to a maximum rate not to exceed say 10% of GDP. The founding fathers may not have understood the extent that libs were willing to go with social engineering. I dare say they wouldn't have thought it necessary to capture votes vs the good of the people.
RE: Hamilton "I have learned to hold popular opinion of no value."
“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.”
Is that why every independent analysis has shown that compliance costs continue to rise year after year?
Tax returns aren’t merely “signed off on” by CPA firms. Tax return preparation involves a substantial amount of billable hours. That does not even count tax planning, which can often dwarf the actual tax return preparation. For example, I did some consulting for a manufacturing operation a few years ago. They were a subsidiary of a foreign company whose US sales had been increasing to the point that they decided to bite the bullet and build a plant here, rather than continue to ship stuff in from overseas to meet sales demand. They were not yet profitable, but hoped to be in another couple of years as sales continued to ramp up. For the previous year, they had reported a $2.3 MM loss. As I was looking over their financials, I noted that they spent about $500K on consulting. I was told that that was primarily for tax planning with their Big 6 CPA firm. So here was a company which didn’t even have profits to shelter from taxation (yet) spending that kind of money. They would have “only” lost $1.8 MM without that expense. Some on these threads have stated that only profitable companies incur expenses of our tax system. That is simply not true. And your assertion that computers can handle all tax related matters and that compliance costs are dropping as a result is demonstrably false.
“The fact is we have shown you and yours to be big government marxists with this fair tax scam.”
No, you haven’t. You have made that assertion, but you have offered nothing except your own opinions. That’s fine; this is an opinion board. However, as my tagline says, my posts aren’t restricted by those opinions and neither are the other FT supporters on here. I know that is a difficult concept for you and your SQL buddies to grasp, but that’s my story and I’m sticking to it.
Ever heard of John Dillinger?
Yep! In fact, I actually know something about it unlike you apparently!
Was it a consuption tax, or an inscome tax?
It was an excise selectively imposed on growers of certain grains which had been converted to distilled spirits in order to ease transportation and other such concerns at the time. The rebellion was about the SELECTIVE nature of the imposition in that it taxed growers of this type of commodity while growers of other commodities went untaxed.
I thought it was an excise paid by the distiller, who was often the grower too. Small distillers were required to pay a tax per gallon while large operations paid a lower flat rate.
The point is that the tax was an excise tax, not an income tax.
No! The point is the SELECTIVE nature of the imposition in that it taxed growers of some commodities while growers of other commodities went untaxed.
I suppose you're correct in that it taxed growers who converted their grain into whiskey, but it only taxed their "commodity" when it was converted to whiskey (isn't that why it was called a "whiskey tax").
Or, perhaps you're claiming that the citizens of our new country would have happily accepted a tax on all transactions, but objected to a tax that fell on a single item? But, does that make sense? Certainly Americans could easily avoid the whiskey tax making it entirely a voluntary tax.
Liberty, Property, and NO SALES TAX!"
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