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. Bowyers 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. Yesthe 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 dont 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. Isnt it true that the rate is not really 23% but 30% at least, because its 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. Bowyers questions, I would like to turn to the more fundamental issue of context.
A contextual question that shapes a persons 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 Americas 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.
Merchants who sell taxable goods and services are already registered under existing sales tax laws. In states that have sales taxes, most merchants are already registered.
If you sell in a tax exempt step you are STILL required to keep track of each transaction to prove you are tax exempt.
Keeping records of sales transactions is a normal part of bookkeeping for a business. Nothing new here.
you are confusing registering for the prebate with registering as a vendor.
No. I understand the difference.
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.
True, but this argument applies just as well to the present system and to so many other parts of our lives where government does not belong.
That's not why it failed.
The idea of a National Sales Tax advocate calling someone else a liar. Russians have a saying, “It makes a cat laugh.”
so now we give it easily without need of a cause the government would need. It also belys the fact that the government decides what is or is not a family.
not a lie. It is a pure and simple fact.
The fair tax scam is 100% spot on like the luxury tax with its impact. It is a dead certainty that people SHALL move the transactions outside the USA to avoid the 30% tax.
it is a history, it happened, IT HAPPENS TODAY,
deal with it.
I really don't know. But, if you apply for food stamps, for example, I'd bet that you have to let the government come into your kitchen to check your cupboards.
I'm sure I don't have to tell you about the extent to which the current income tax code opens every taxpayer, and those who the IRS thinks should be taxpayers, to invasion of almost every aspect of their businesses and personal life. Applying for the prebate (for taxpayers) and remitting the tax due (for merchants) is nothing like the burden of the current tax code.
I'm not sure what you mean. You're thinking about taxation in terms of success and failure?
Can any tax be considered a success?
You left out reporting your income for Social Security purposes.
I’m no fan of Huckabee. I despise some of his positions, but none of the other candidates have given me ANY reason to vote for them. I might just have to hold my nose and vote for Huckabee.
I believe Hunter and Paul also support HR25.
Wrong on ALL counts! The "luxury" tax was imposed on top of ALL already existing taxes and was imposed only on certain items - the ones some government puke thought to be "luxury" items. The FairTax repeals virtually ALL other federal taxes thus EVERYONE would have more spendable income and the U. S. Economy would be booming like no one alive today has ever seen.
I know you will keep right on with your lies because it is ALL you have but others have figured it out rather easily and will continue to do so.
BTW: I DO appreciate all your help in drawing attention to the FairTax!
I noticed in the article the question and answer pair:
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.
Where exactly on the FairTax website is that explained? I have looked at the FAQs, and I don't see any mention of this provision under section 801 of HR 25.
I also read through the document Promoting Home Ownership: How the FairTax's Benefits For Homeowners Exceed the Mortgage Interest Deduction. It nowhere mentions this FairTaxation of mortgage interest paid --- in fact, it shows a computation putatively comparing the cost of home ownership under the income tax versus the FairTax, and nowhere does it mention that FairTax will be assessed on mortgage interest in excess of the section 805 "basic interest rate."
BWAHAHAHAHA!
Plus another 100 miilion individuals who will legitimately start up their own side business in order to purchase tax-free goods and services.
That new Mercedes and computer and iPhone and HDTV will be for "business" purposes, resulting in a savings of close to 40% (Fair Tax plus state and local taxes).
A tax on consumption will certainly fund our socialist programs more efficiently and with less political risk than a tax on income. Matter of a fact, HR25, like HR2525, and its prebate provisions, makes socialist programs accessible to more people than ever before.
You are right. Fair Tax would eliminate the withholding for Social Security (and Medicare), but the employers would still have to report the income. What we need is a big dose of Social Security reform. Something like phasing it out some day. I'm not holding my breath for that one.
Fully aware of it. But how does it have anything to do with 30%? The exclusive FT rate applied to a shopping cart of the ‘basics’ establishes the prebate, subject to a few other notions. Your choice of the word ‘entitlement’ includes the concept of selecting recipients based on some criteria that entitles them to the funds/assistance. That’s not the case with the prebate, as you likely are aware. The prebate is not means tested.
FWIW, I don’t agree with the idea of the prebate, although I’m an FT supporter. I’d be more than happy to settle for a slightly lower FT rate and eliminate the prebate idea.
He has no real claim to fame. And if pressed, he would have to disclose his firmly held belief that the government acts within its proper authority when it uses the income tax to toy with and manipulate the citizens. He thinks we need to be made less selfish by the income tax....ie....he thinks it is perfectly appropriate for the government to take from the rich and give to the poor. He supports the use of government force in the redistribution of wealth.
Gee, now where have I heard that concept elucidated before?!?!?!?!?
BTW if you do not have a business under the current code you are wasting money foolishly.
Your point brings up an interesting effect that US manufacturers and exporters deal with today- namely, the instant disadvantage they have in competing with foreign import products. A US manufacurer has the cost of the present tax scheme and compliance built into their product before it ever leaves the factory.
There’s a convincing case to be made that repeal of the tax code and levying a retail sales tax will beef up America’s manufacturing base once again.
By the way, under the FairTax, the US would also become the world’s most attractive tax haven for foreign investment.
Just saying.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.