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.
all larger ticket items will be transacted outside the USA for an instant savings of 30%.
They tried similar nonsense in 1991 with the luxury tax. Yet the Fair Tax Scammers, (like Huckabee) want the public to think doing the SAME thing will get a DIFFERENT result.
(...and the IRS will go away because the same bureacrats will have a new sign on the building)
The hundreds of existing sales taxes in America use honestly stated "exclusive" rates. Apples to apples.
Fair Taxers and honesty don't mix.
Seriously? You’re not aware of the universal monthly “prebate” entitlement payments for which the Fair Tax would be created to fund?
control!?
HA!
States go insane over the fact internet avoids their sales taxes.
30% is a HUGE incentive to find EASY means to avoid a tax.
Only “little people” pay taxes. especially a 30% sales tax.
Signing up for the prebate is optional. If you don't want it, don't sign up.
the draconian record keeping,
No more so than under the present system for merchants who already collect sales tax. The taxpayer, who chooses to file for a rebate, only has to keep track of his dependents. Government record keeping will be eliminated.
the criminal penalties for not giving or havin a reciept (ala europe)
So what's new? There are usually penalties for those who don't follow the law.
The TAXABLE interest
Investment income is not taxable under the Fair Tax.
the more you read of the actual proposal the more insane it becomes.
Actually, the more I learn about it, the more I like it.
I had almost forgotten about that fiasco.
What an incredibly lame argument.
Signing up for the NEA grant money and welfare payments is optional. If you don't want 'em, don't sign up.
Fair Tax does not replace excise taxes imposed on imported goods.
REGISTRATION WITH THE GOVERNMENT is for ANYONE selling ANYTHING.
If you sell in a tax exempt step you are STILL required to keep track of each transaction to prove you are tax exempt.
you are confusing registering for the prebate with registering as a “vendor”.
SINCE YOU MENTIONED IT:
The GOVERNMENT decides what is a family for the wealfare prebate. It is the GOVERNMENT that decides what is or is not a family. The government does NOT adopt a “natural family” definition.
Just wait for the sexual politics to infest that debate.
For me the purpose of federal tax reform is to reduce the power the federal government wields over our economy and our lives. Their power stems largely from how much money overall they take away from people through taxes and how they spend that money and this is the factor that is specifically not reformed through the fair tax "revenue neutrality" assumption. Yes I know they also wield power through tax incentives, etc but I believe that is insignificant compared to what they spend on entitlements and everything else. To me, any reform that does not reduce overall revenue to the federal government as part of its primary aim is not reform.
Second, I fear that the federal bureaucracy that would be needed to calculate, disburse and adminster a monthly "prebate" of sales taxes to citizens could well dwarf the IRS in intrusiveness, size and control. It seems to me, to be fair, the government would have to have detailed information about people's incomes and purchases and life circumstances such as illnesses to correctly figure out how much each citizen deserved to be prebated. Such intensive and personal monitoring of individuals would be no improvement over the IRS which most people now only deal with once a year. Any reform needs to simplify and reduce the need for government to have detailed, personal information about each of us and it needs to reduce the government's monitoring of our lives. I do not see how the fair tax meets that test.
Not for those who value their privacy enough.
Actually, the information you would give the government in order qualify for the prebate pales in comparison to what you give them now when you file your Form 1040. And, the information about your dependents, including their SSNs, is readily available to anyone who digs hard enough.
easy to deal with or minimize. It still pays to avoid the 30% sales tax.
nice try.
How does it compare with other welfare programs?
Why must you continually repeat a LIE that you have been called on numerous times? The "luxury tax" you speak of was nothing at all like the Fairtax and you damned well know it as you have been called on it MANY times already.
I guess , come to think of it, since all your side has is LIES then that is what you must depend on!
Both schemes are federal sales taxes imposed on retail sales. The difference is that the "fair tax" would be far more massive.
As long as the government spends as much as it does, no tax system will make anyone happy, unless they pay less than they collect in benefits.
No, the difference is that the luxury tax was levied in addition to the taxation of income. With an across the board sales tax on all new items at the retail level, luxury items like yachts etc. would not be singled out and feel an industry-wide crunch.
Me too. I’m going to make a fortune teaching businesses how to legally avoid the fair tax.
You could even save money on a house by buying a kit overseas, and assembling it on your vacant lot. At one time Sears used to sell house kits just like that.
I haven’t been able to figure out a way to buy real estate overseas and import it into the U.S., but I I’m sure someone’s cogitating on that. and will come up with a way.
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