Posted on 02/11/2008 4:19:28 PM PST by xcamel
Feb. 10--One of Mike Huckabee's most attractive qualities -- at least for conservatives -- is his all-out support for something called the FairTax, which would do away with the Internal Revenue Service and focus on the collection of sales taxes.
The FairTax Book, co-authored by Neal Boortz and John Linder, was published on Aug. 2, 2005, as a tool to increase public support for and understanding of the FairTax plan.
The Fair Tax Act was introduced as a bill in the United States Congress some time back for changing tax laws to replace the Internal Revenue Service (IRS) and all federal income taxes (including Alternative Minimum Tax), payroll taxes (including Social Security and Medicare taxes), corporate taxes, capital gains taxes, gift taxes, and estate taxes with a national retail sales tax, to be levied once at the point of purchase on all new goods and services. The proposal also calls for a monthly payment to all households of citizens and legal resident aliens (based on family size) as an advance rebate of tax on purchases up to the poverty level. The sales tax rate, as defined in the legislation, is 23 percent of the total price including tax, which is comparable to a 30 percent traditional sales tax (30 cents on top of every $1).
It has no chance of becoming law, in the same way that expresidential candidate Steve Forbes, back in 2000, proposed a national flat tax as one of the main planks of his platform.
Why? Consider: the United States Congress has passed an economic "stimulus" package that George W. Bush will sign into law with alacrity. The package is built on tax rebates, $600 for individuals earning up to $75,000 and $1,200 for couples earning up to $150,000, and $300 for those earning too little to pay taxes.
Think that over. Those who pay no taxes at all will nevertheless receive checks for $300. Total cost? An estimated $168 billion, and guess who pays? Ah yes, the "rich," the producers, who are already being soaked for about 90 percent of all individual taxes paid to the government.
You're wondering, no doubt, what this has to do with tax reform, either approval of the FairTax or approval of a flat tax. Here's why: those people who will receive checks for $300 as part of the "stimulus," as we said, pay no taxes at all. They are a huge block of voters, large enough to swing any election at just about any level. So why would they vote for a candidate who wants to remove their tax exemption from any support they provide to the United States government, or, as it turns out, to state or local government?
A FairTax would expose them to a 23 percent tax on all their point-of-purchase consumption, while a flat tax would impose a similar amount of taxation on their individual income. Only those who want to pay more taxes -- or any tax at all -- would vote for either plan.
Who would vote for those plans? Only those who earn enough to put them in the "rich" category (usually those paid in excess of $100,000 a year, before taxes). They usually vote in favor of a return to some semblance of fairness, but of course they fall far short of a majority.
And so it is that the Democrats and the liberal left are able to keep castigating the "rich" and shelving any tax reform plan that would prevent them from continuing their incredibly cynical game. They know where the votes are, and they're all too willing to strum the politics-of-envy guitar to stay in office. Barack Obama and Hillary Clinton are typical of the breed.
Those who pay the vast majority of income taxes know full well they have no chance to receive any kind of fair financial shake from government -- at any level. If they thought they had one, Steve Forbes or Mike Huckabee would get all of their support.
On second thought, if such reform had been approved a couple of decades ago, there would now be a political system comprised of candidates competing for election based on important policy issues -- free trade, foreign policy, our military and how necessary it is, our infrastructure needs and the like -- instead of on how they can continue to pluck the tax goose so as to cause the least amount of hissing and still remain in office.
Our politicians are masters at such cynical manipulation of the electorate -- and not much else. But then, they don't have to be, do they.
FYI / Good read..
Last year, my federal tax return was 31 pages long and cost me $1,200 to have a CPA prepare it. Aside from that extra tax, above and beyond what taxes I paid, I was also taxed about one full week of my time, time I was not able to use to be productive.
Now, it should go without saying that one week is about 2% of my annual time. Government thinks nothing of taxing away a full week of my time, yet gets real excited trying to “stimulate” the economy by borrowing about 1% of the GDP to give to the people who are taxed to repay the loan.
Politics and political calculations are strange indeed, and certainly not connected with the reality of how wealth is created, and how prosperity is wantonly destroyed.
I am pessimistic as well. Corporations and lobbyists with their hands in politicians pockets will make tax reform never happen. The only thing that will change it is a revolution, I am not kidding.
well you could combine a flat tax with a EITC. The bottom line is that there is one low rate (or fewer than what we now have) and you don’t have 5 zillion loopholes.
Fair Tax is NOT serious tax reform. The arguements that the kool aid drinkers (KAD) can’t defeat are:
1) Its not comprehensive
2) It ignores OASDI trust fund unfunded liabilities
3) Expands government
and oh boy the cost for small businesses and corporations
Amen..
And there are much better ideas out there - tried, tested, and true.. all around the world
Very good read. Thanks.
“Corporations and lobbyists with their hands in politicians pockets will make tax reform never happen.”
That is a ridiculous statement.
Corporations pay barely 3% of their revenue in income taxes, and as long as it is fairly uniform amongst their competitors, they can pass it along to the consumer in higher prices. They lobby to try to get advantage in the tax code over their competitors and to prevent the mobocracy from shifting so much of the tax burden onto corporations that they cannot compete against imports. Lobbying is the only form of “voting” they can do since Corporations don’t get to vote in elections.
Any proposed tax reform that simply eliminated ALL corporate income tax would get the support of Corporations, and it wouldn’t cost individuals a dime, since the removal of all the Corporate overhead associated with the income tax system would allow prices to fall by a little more than the additional tax on the individual. People’s purchasing power would IMPROVE slightly if all Corporate income taxes were eliminated and shifted to the people where taxes belong.
Indeed. The FairTax is to the Federal Income Tax as pneumonia is to cancer. One of Reagan’s best moves was setting up the Grace Commission. Not to be a goldbug since I think the gold standard is just as faulty, but perhaps it’s finally time to rethink our entire tax and monetary policy.
I think the author is a little off-base. Most people that don’t pay any taxes, THINK that they do. There ought to be a way to trick them into supporting tax reform ;=)
Forbes and his 17% flat tax naturally sounds very high to people that think they pay taxes, but know it isn’t that much. Same with the 23% FairTax. The people that don’t pay any net taxes aren’t bright enough to actually figure out what the deductions or excluded items or prebate will do for them. What they need to see is LOW RATES, and they won’t think too much beyond that.
So ... we leave the SS/M taxes out of our tax reform plan, and focus on how low the NEW income tax rates can be. We tell everyone, “By eliminating all the tax dodges and shelters the rich use to avoid paying their FAIR SHARE, we can make it so the COMMON MAN pays taxes only at the LOWEST tax rate ! That’s right, folks ! We are going to SLASH all those higher rates that hardworking Americans pay now ! By getting all those scheming tax accountants the RICH use out of the picture, you can pay JUST TEN PERCENT in income taxes ! One thin DIME out of every dollar, folks ! And that’s not all ! We’re going to force greedy American Corporations to lower prices by 5% in exchange for getting rid of all the tax rigamarole they have now ! Yep ! You’re taxes are going to be just 10% and prices are going to be 5% lower ! It’s a twofer, folks, making your NET tax on what money you earn and spend just 5% ! But that’s not all ! You’ll also get a CASH BACK bonus at the end of the year equal to 1% of all the taxes you paid !! And if call RIGHT NOW, we’ll throw in free shipping !”
See ? The US Treasury just needs to appeal to people with no impulse-control by using late-night infomercials to sign them up for the new tax plan. Maybe with Oprah as the host. And once they opt for the new plan, they aren’t allowed to go back.
That reminds me of the “yesterday we were campaigning, today you voted” joke...
Agreed. Taxes should be paid by individuals. The thing is that taxing corporations creates a conveneient illusion for politicians to attract uneducated or thoughtless voters.
Oh, BS.
Read one of the books.
Or listen to Boortz.
Or visit Nealz News.
Or, you can take others word for it, as you already seem to have done.
Of course, they probably know as little, or less, about it than you. But don't let that bother you, no sense in getting educated about something you know all about already.
we could start a pool on the “closest to the post number” ...
/not really sarc..
Not so fast. They’d get EXACTLY what they were promised — a 10% flat tax — without them realizing it was more than they used to pay. If we could get everyone to actually choose that exact tax reform plan, the government would be collecting as much revenue as now, and we’d have killed off 60,000 pages of tax code. We’d also have broken the tax lobbyist groups, since there’d be no corporate tax to lobby over. Corporations get off the hook for $400B in income taxes plus all the overhead ? And they get out of the healthcare insurance business, since that bene is now income to the employee and he shops elsewhere for his insurance. Corporations should rush to agree to a 5% price reduction in exchange for those tradeoffs.
The 10% tax on individuals brings in $1.5T and the CASHBACK BONUS costs $15B. The NEW INCOME TAX nets more than all the existing indidivual and corporate income taxes would.
And infomercials might be the best way to reach the voters in this idiocracy we call America.
oops.. game over.
Any one thread needs some focus. What did the author claim? That the Great Untaxed (those that pay no Income or FICA), and they are numerous, would never vote to have themselves taxed.
This is a standard straw man argument; present an inaccurate statement then poke a hole in it. The price of a $1 candy bar, whether bought by somebody that ‘pays no taxes,’ or anybody else is $1. That $1 includes the cost to make it, the store’s profit, plus all of the taxes paid by the corporations and individuals that produced/sold it. The Fair Tax first eliminates all income and corporate taxes (subtracting an estimated 22%), so the $1 candy bar becomes 78 cents. Then an estimated 23% is added and the sale price is @ $1.01. So, in the first place, the Untaxed pay approximately the same price, not some bogus 30% on top of the prices they are used to.
Besides, all households (including the Untaxed) receive an advance rebate (Prebate), monthly, for all purchases of goods and services up to the household expenditures at the poverty level. All households. That means the price at the store appears to have gone up from $1 to $1.01, but the Untaxed and those living before the poverty level actually (and all other households) are Prebated on all of their expenditures, up to that level. Everybody is.
The legislation has a lot to it, but just that single issue is very easily read and understood. Failing to point out that the legislation requires that the Fair Tax only would take effect on January 1st of the year after the repeal of the Income Tax/16th Amendment is what allows people to ignore that first you have to subtract all of the existing Federal taxes, then add the sales tax.
I know some of this makes folks go cross-eyed, but here’s my point. The article was very well written and used careful and exact language to describe the proposed legislation; this guy knows the legislation. As such, he didn’t accidentally leave out an important part, the required subtraction of all existing Federal taxes. He did that on purpose to scare certain voters into believing that their retail prices were going to go up 30%, plus they would lose their Income Tax subsidies (Earned Income Tax Credit, etc). This guy’s a huckster; clever, but scum.
The author simply and eloquently regurgitated reality. You don’t have to like it. The FT is never going to play in Topeka, or anywhere else for that matter. Flat taxes will to an extent, because they have a proven track record. Nothing good in America has ever come from the “pitchfork and torches” crowd, and the intense emotionalism that’s being used to sell the B&L ‘snake oil tax’ plan. Even the name is misleading, and thinks that start with a lie, usually end in abject disaster.
well with a corp tax you’d be taxing capital at the source vs taxing capital on the transaction with a capital gains tax. You’d have a much more efficient market if you taxed capital only once and at the source.
it’s so important not just to have lower rates (to lower disincentives to work and invest) and less revenue (which means smaller govt) but to get the govt out of picking winners and losers with the tax code. It messes up the whole economy.
In any case, enforcible spending control would be the first step.
It’s not infinite wisdom, it’s finite. That’s the point. The proposed legislation is written down on paper. It clearly requires the repeal of the 16th Amendment, first.
First, you subtract all embedded Federal taxes. Simply regurgitating reality implies simply presenting the premise, not selectively omitting the key provision. I heard Thompson say the FairTax would never work, because it would require the repeal of the 16th, which is circular: the Fair Tax requires the repeal of the 16th, before it can take effect.
Oh, BS.Ok they mention it. Mention is not repeal and the Fairtax does not legislatively mention the 16th amendment, nor does it "trigger" any other bill to bring the repeal to a vote....Yes there is a bill to repeal the 16th, so what? It has less than no direct connection to the passage of a Fairtax bill.
This is the text of H.R. 25; a simple search or ‘find on page’ will take you to Title III, Section 2, (f); the 16th Amendment is specifically discussed in the legislation, not some anonymous, unrelated bill:
http://www.govtrack.us/congress/billtext.xpd?bill=h109-25
I’ve read it many times in past 9 yrs. Saying the 16th “should be repealed” is not legislative language.
Now that’s a fine point, but it’s a Resolution, not a Bill; H.R. 25, not H.B. XXXX. There are many sponsors, but it hasn’t reached the floor, yet.
All the same, it’s written based upon the repeal of the 16th.
All the same, it’s written based upon the repeal of the 16th.No it isn't.
it’s a Resolution, not a Bill;Maybe you should read your own link.
To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the StatesI didn't see anything in that title that mentioned the 16th., did you?
You made my point for me, thanks! Lobbying to get advantage of the tax system. They know as good as I do it isn’t going to change so work it to their favor. it makes good sense to me. That is why we have to junk it all for a more fair system, so they rich don’t have to subsidize the poor, in our communistic heavy and progressive system we have now.
People’s purchasing power would IMPROVE slightly if all Corporate income taxes were eliminated and shifted to the peopleNow THAT is a ridiculous statement. IOW, there's nothing like a good tax increase to IMPROVE one's purchasing power.
The Fair Tax first eliminates all income and corporate taxes (subtracting an estimated 22%), so the $1 candy bar becomes 78 cents. Then an estimated 23% is added and the sale price is @ $1.01. So, in the first place, the Untaxed pay approximately the same price, not some bogus 30% on top of the prices they are used to.Speaking of bogus. Adding 23% to 78 cents = 96 cents, not $1.01. Where did the other 5 cents come from? You also forgot to calculate the individual income and payroll taxes the Fairtax claims to replace in addition to the embedded taxes...IOW, you're way short on your tax collections.
Failing to point out that the legislation requires that the Fair Tax only would take effect on January 1st of the year after the repeal of the Income Tax/16th AmendmentThere is no such requirement. You can't fail to point out something that doesn't exist to begin with...Where do you people get this stuff?
You'd have to remove more than that to make up for the 30% added by the Fair Tax.
Why the prebate under the Fair Tax? As you say, the poor are paying 22% today and we're not giving them a monthly check to offset it.
Now, I may be wrong, but it sure does look like the Fair Tax supporters are trying to buy votes.
Yes, but the effect on the economy is not something the current crop of non-taxpayers can grasp. Let’s face it, if these people were bright enough to be productive members of society, they’d be bright enough to earn a taxable income.
The ONLY thing they understand is that when people talk about tax rates, they are always talking about rates above 10%. They are just barely bright enough to recognize that lower is better.
Oh, come on, Lewis. Are you really saying that there is ZERO corporate overhead involved in paying corporate income taxes ? Or are you saying competition doesn’t exist that will end up handing at least SOME of that overhead savings to the consumer ?
The 22% embedded cost argument is bogus, but there definitely IS a $350B price component (3%) that is corporate income taxes remitted, and there definitely IS a few hundred billion in corporate tax compliance costs. So there is roughly $600B of price improvement possible, but only $350B tax collection shifted to consumers. You must not believe in free market competition to believe that eliminated waste doesn’t lower costs and that lower costs have ZERO effect on prices.
Where did I say anything about the FairTax ?
I said tax reform that eliminated all taxes on Corporations and shifted them to individuals. I didn’t say anything about replacing the taxes individuals already pay, or giving out a Prebate, or leavings huge chunks or income/spending untaxed as the FairTax does.
I was saying that, all else being left as-is, eliminating the $350B corporations pay in income taxes and shifting that $350B in taxes onto individuals would leave the individual better off. Simply because there is a significant overhead cost to corporate tax compliance that would be removed from businesses, and would not shift to individuals. That includes incidental costs like lobbyists, and the inefficiencies of planning around tax issues like depreciation and R&D costs. Unlike the FairTax which assumes that businesses will pass along a 20% price reduction, I think passing along a 5% price reduction is much more likely.
In fact, I think if you offered American corporations the option of going tax-free including all compliance costs, in exchange for a price reduction of 5%, you’d have an awful lot of takers.
Sometimes lower costs are translated into bigger profits, not lower prices. Sometimes market competition (I'm thinking about real estate and oil specificly) drives up prices regardless of costs.
Neither of those constitute free markets over a short term. A free market is one in which supply can adjust to demand. For real estate, where locationlocationlocation is so important, and oil is largely under OPEC control, supply is not free to adjust to demand.
I agree that 5% would be available, sure. 3% in corporate income tax and another 2% in tax compliance costs.
As to whether the corporations would actually pass the saving along is questionable. They may want to keep it as retained earnings or pay it out as dividends to their shareholders.
You can't force a private corporation to reduce their prices.
Here is another definition of free market
Investment Dictionary: Free Market
A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sells are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.
In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability.
In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency.
Would you agree that a 30% tax on goods and services qualifies as state intervention according to the definition?
Why? Consider: the United States Congress has passed an economic "stimulus" package that George W. Bush will sign into law with alacrity. The package is built on tax rebates, $600 for individuals earning up to $75,000 and $1,200 for couples earning up to $150,000, and $300 for those earning too little to pay taxes.
As mentioned in a related thread, this post (<-click) explains how our federal taxes are being used to pay for constitutionally unauthorized federal spending anyway. The people need to wise up to a federal government that is not operating within the restraints of the federal Constitution, particularly where unnecessary taxation as a consequence of illegal federal spending is concerned. The people need to petition lawmakers, judges and justices who are not upholding their oaths to defend the Constitution, demanding that they resign from their jobs.
Real reform instead of faker-tax-reform
and there definitely IS a few hundred billion in corporate tax compliance costs."Definitely IS"? Because you say so?
So called compliance costs are real employees or real businesses providing real employment also purchasing equipment, computers, programs and supplies. Or maybe you thought it all gets sucked into a vacuum.
Cutting a few hundred billion in payroll etc. from the economics can't be overlooked if your intent is to do an honest assesment
How long would your price controls be in effect?...Forever? How would you enforce it? Price contol police?
You must not believe in free market competitionThat's rich coming from you. As I recal you're the one who wants to determine business owners needs.
You advocate forcing 5% price reductions (price controls) and you have the gonads to say "I" don't believe in free market competition.
Look up the word hypocrite, you might find your picture there.
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