Skip to comments.The 2013 Sword of Damocles (Fairtax)
Posted on 11/09/2012 8:08:31 AM PST by Hostage
In the aftermath of a surreal election shock, those that ponder how to organize their way forward should heed this plea to familiarize themselves with every detail and nuance of the most innovative and inspirational legislation that has more support in Congress than all other competing proposals.
Here is an easy intro link: http://www.fairtax.org/site/PageServer?pagename=FAQs
Like the Sword of Damocles in Greek mythology, the FairTax can be held over the heads of those that have ascended the throne of the most powerful nation under God that has ever existed in human history.
To give you but one example among myriad salient political issues:
Roberts wrote. "That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it. In this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of ***income***, but choose to go without health insurance. Such legislation is within Congress's power to tax."
With passage and enactment of the FairTax, the Supreme Court decision on Obamacare regarding it as Constitutional under Congress' broad discretionary taxing authority, GOES AWAY, BECOMES DEFUNCT.
The above is but one of hundreds of powers the federal government and its 3 branches will be deprived of to intrude upon the lives of freedom loving Americans.
There are many many aspects of this legislation to consider but hear now that every criticism of the FairTax is fraudulent. It wins hands down in every debate. There is not one flaw in it that the Income tax does not already contain.
So please take time to study, ponder, meditate, think and reason about this incredible legislation that represents REAL CHANGE to our beloved America.
And here is the good news to help you understand that it is possible. It only takes on average 3000 committed FairTax activists in each congressional district to turn the representative towards sponsoring the FairTax.
To get an idea of how long it takes from scratch to acquire 3000 committed activists, start today by reaching out to three people you know and ask each of them to do the same to 3 more people each week. In about one year you have your 3000 activists and your congressional representative will be sponsor.
2013 marks the 100 year anniversary ot the legalization of the Income Tax in American government. It has grown like a cancer to rob Americans of the freedom they once enjoyed and took for granted. The FairTax code replaces this cancer with an organ that keeps government funded but in check.
We are not against our government, we are not against granting our government powers over us, we are against those that would use government to rule over us at the expense of our God-given rights as Americans.
The FairTax, please 'get it' today. Once you do 'get it' there is no way of seeing reform in any other way, and there is no turning back.
surreal election shock?
Please stop with this crap.
There was nothing surreal nor shocking about this.
Romney was a crap product with an owners manual that was pretty undecipherable.
The only thing that should be disturbing about this election should be an instructive lesson that if you serve a top ticket doggy shiite, the lower tickets will suffer too.
It was a shock to many. As for me it was expected. I have posted hundreds of times this past year that Romney was going to lose.
Now please stop cluttering this thread with your side issues and stick to the point of the issue it contains.
We are not against our government, we are not against granting our government powers over us, we are against those that would use government to rule over us at the expense of our God-given rights as Americans."We"?
Typical Fairtaxer, can't keep your story straight with lunacy and contradictions all over the place.
If you Fairtaxers want to know why the Fairtax isn't a viable proposal, look in a mirror.
You squandered a republican house, senate and presidency trying to convince people that a 30% tax is really 23%, 100% take home pay, 23% price reductions, a government handout every month and other pie in the sky nitwittery...Oh yeah, and "it's revenue neutral". The government won't have to do with one penny less.
No Way in hell the Fair Tax will ever get passed, it will be bastardized into so much “social justice” claptrap that before you know it there will be an exemption for the takers and double rates for the makers....
Not with the way the population has been fed the cheap kool-aide of socialism...
Under the FairTax the income tax goes away and the 16th Amendment is called for repeal. Once the 16th is repealed, any social justice tinkering is impossible because the Constitution falls back to its uniformity provisions.
If you understood constitutional basics, you could easily see this.
What are you advocating? A continuance of the Income tax under the 16th amendment which permits ‘social justice’ tinkering? The FairTax won’t allow for that. Just what are you advocating then?
[ Under the FairTax the income tax goes away and the 16th Amendment is called for repeal. Once the 16th is repealed, any social justice tinkering is impossible because the Constitution falls back to its uniformity provisions.
If you understood constitutional basics, you could easily see this.
What are you advocating? A continuance of the Income tax under the 16th amendment which permits social justice tinkering? The FairTax wont allow for that. Just what are you advocating then? ]
What I am saying is that the Fair Tax will never come into fruition in it’s proposed form with weenies like Boehner and a court that doesn’t even rerspect the consitiotion they are supposed to be protecting, if the Fair tax were to pass as a consitutional amendment it would either be ignored or they would interpret the “good and plenty clause” to undermine it at every step...
The same way they can ban certain firearms, jail certain filmmakers, ignore states rights, even though the first 10 amendments are still in place....
I am very pessimistic right now, I know how Ayn Rand felt whe she wrote Atlas Shrugged, but we can’t do Atlas Shrugged anymore, the rules have changed, we need to go beyond Atlas Shrugged, Atlas Shrugged was written when currency was bound to something of value it has become unbound ad in a manner of speaking we must do the same....
Start using their tools actively against them....
They want “Occupy Wallstreet”, we should give them “Occupy Social Programs”
> “What I am saying is that the Fair Tax will never come into fruition in its proposed form with weenies like Boehner and a court that doesnt even rerspect the consitiotion they are supposed to be protecting, ... “
If you had read what was written in the post, you would have seen that an average 3000 committed FairTax activists in a congressional district can turn the representative to become a sponsor. This can happen despite Boehner or anyone else getting in the way.
The FairTax has more than ten times more sponsors than any other tax reform proposal. It has more sponsors than the last tax reform in 1986 under Ronald Reagan.
> “if the Fair tax were to pass as a consitutional amendment it would either be ignored or they would interpret the good and plenty clause to undermine it at every step...”
The FairTax is a tax code not an amendment. The FairTax calls for repeal of the 16th Amendment. The FairTax does not need the 16th Amendment because it is never a tax on income.
You seem to be advocating against the FairTax because you are frustrated with how the government spends and interprets its power to spend. But it is precisely the income tax code that is causing such what you seem so frustrated about.
Are you advocating no taxation at all? Why would you want to leave the Income tax in place when it is the root cause of the socialism advances in America? Did you read what was written in this post regarding Roberts deciding Obamacare was legal under the power to tax incomes? If the 16th Amendment is repealed, the income tax becomes illegal for most purposes. How then can something so foundational to socialism as Obamacare survive?
So you advocate the income tax?
> “The same way they can ban certain firearms, jail certain filmmakers, ignore states rights, even though the first 10 amendments are still in place....”
Under the FairTax the 16th Amendment will need to be repealed. The 16th Amendment won’t be in place for you to worry about.
> “I am very pessimistic right now, I know how Ayn Rand felt whe she wrote Atlas Shrugged, but we cant do Atlas Shrugged anymore, the rules have changed, we need to go beyond Atlas Shrugged, Atlas Shrugged was written when currency was bound to something of value it has become unbound ad in a manner of speaking we must do the same....Start using their tools actively against them....They want Occupy Wallstreet, we should give them Occupy Social Programs
That sounds like heated rhetoric bordering on nonsense, sorry no insult intended. But if you really want to do something, how about educating yourself to the links in the post of this thread. You may find something real and tangible that can make the changes you desire to see.
There is no way that the Fairtax scheme can work. Economists tell us that at sales tax rates above 10%, illegal evasion as well as legal tax avoidance start to increase significantly. And at 30%, the Fairtax plan becomes unworkable. No other nation has ever successfully funded their central government with such a broad based national sales tax. Six have tried, failed and switched to a VAT which has significantly less evasion at higher rates. There is no dual reporting under the Fairtax, and our 10 million retailers would be sorely tempted to cook their books in order to avoid remitting the tax revenue.
In addition, HR25 proposes that the Federal government tax State and Local government purchases of all new goods and all services, including a significant portion of State and Local government employee payrolls as representative of services provided. Under the long held Supreme Court doctrine of intergovernmental tax immunity, this taxation would be found to be inappropriate. Sovereign government powers can not tax each other. The 30% exclusive sales tax rate could easily rise to 43% or higher.
Although Fairtaxers claim that the Family Consumption Allowance (FCA) or prebate is similar to a tax refund, it is not! The FCA is an income supplement that can be spent (and taxed), or saved as financial circumstances allow. The FCA would be scored by CBO/OMB as a cash grant entitlement costing $600 billion annually at a time when entitlements are squeezing out discretionary spending in the federal budget. We do not need any more entitlements!
There is much else wrong with the Fairtax, but, fortunately, it isn’t going anywhere.
> “Economists tell us that at sales tax rates above 10%, illegal evasion as well as legal tax avoidance start to increase significantly.”
What Economists? Can you provide links? Now here are the facts. Tax enforcement under the FairTax is much easier, more efficient and more effective that under the Income tax.
Fundamentally, everyone should know that only retail level transactions on new products and services are taxed. There is no taxation on sales of used items. There are no taxes on business to business (B2B) transactions.
The Facts on enforcement:
1. Over 70% of all retail level sales are handled by a little over 3000 corporate chains. And these corporate chains are highly advanced in their electronic transaction processing. It is easy to trace any and every item sold through these chains and that makes it easy for tax enforcement to monitor, audit and test tax compliance. There’s a lot more on this but the message is clear, tax enforcement under the FairTax is clear and manageable as opposed to the enforcement nightmares under the Income tax.
2. Under the FairTax it takes *two* parties to cheat whereas under the Income tax it takes only *one* party to cheat. This is a very important distinction. Any one person can lie on their IRS tax return and no one will know unless they are audited and caught in the lie.
But under the FairTax it takes both a buyer and a seller to conspire to evade the retail sales tax. For example, if I go to an appliance store to purchase a new washer and dryer for $500 and there is a $150 National Retail Sales Tax (NRST) that is due on the final sale, I may ask the seller to look the other way but the seller has to agree to participate in the tax fraud. What’s to day the buyer is not a tax enforcement agent conducting a sting operation?
So it is not even worth debating that the FairTax code is eminently more manageable and simple to enforce than the monstrously complex Income tax code.
> “And at 30%, the Fairtax plan becomes unworkable.”
30% is the exclusive rate and 23% is the inclusive rate. The actual rate is set at 14% and then surcharge rates are added to maintain revenue neutrality. Revenue neutrality is designed in so that the FairTax does not get bogged down in spending fights on the floor of Congress. Although we as conservatives want to curb out of control spending, we want the FairTax to get passed first, why?
Because as soon as it is passed and enacted, the FairTax will make the true cost of government transparent to the retail consumer. Every time the retail consumer makes a purchase at the checkout stand, they are hit with the true cost of government by looking at all the government taxation that was formerly hidden under the Income tax. Fairtaxers are betting when Americans see how much the federal government taxation has increased prices of consumer goods and services, there will be unity among Americans to get the taxes lowered and that will entail cutting government spending unless the Fed prints easy money for the federal government. So there needs to be reform at the Federal Reserve as well.
> “No other nation has ever successfully funded their central government with such a broad based national sales tax. Six have tried, failed and switched to a VAT which has significantly less evasion at higher rates.”
You have confused the transparency of the FairTax with the obscurity of a Value Added Tax (VAT). The FairTax is not a VAT, not even close to a VAT. Under the FairTax a VAT could never exist. A VAT is levied from business to business (B2B) in the production chain. The FairTax never does this; the FairTax only applies to NEW RETAIL goods and services, never to businesses. Every business is linked in a chain to move products and services to a retail end consumer.
The FairTax only taxes the consumer and therefore is not even close to being a VAT. As consumers we want to see in all our purchases what our government is costing us. A VAT keeps everything hidden and away from public scrutiny.
Many confuse the FairTax with being a VAT. This is a result of people not taking the time to understand what the FairTax really is. So such criticism and in fact all criticism of the FairTax stems from confusion over just what is the FairTax. Again for the benefit of those learning, the FairTax is a *retail level* consumer sales tax on new goods and services.
So you have exposed yourself as the person or a person connected to Hank Van Gieson who is said to go by aliases Linda, Linda Little or can Linda and is said to be a lobbyist paid to derail the FairTax. For the readers, you can believe there are disruptors and hecklers in every thread on the FairTax.
So I am not surprised but will continue on to raise awareness of this issue.
> “There is no dual reporting under the Fairtax, and our 10 million retailers would be sorely tempted to cook their books in order to avoid remitting the tax revenue.”
As I explained at the top of this post, it is easy for a tax enforcer to visit a business and make a purchase, receive a receipt and then trace that transaction to its tax detail. Should a retail business risk prison for tax evasion because they tried to hide taxable transactions? As I pointed at the top of this post, tax compliance is much easier to enforce under the FairTax.
And again one of the key facts is that 70% of all new retail transactions are handled by only about 3000 corporate retail chains. Your figure of 10 million retailers is misrepresenting the fact that most transactions are handled by relatively few retailers.
> “In addition, HR25 proposes that the Federal government tax State and Local government purchases of all new goods and all services, including a significant portion of State and Local government employee payrolls as representative of services provided.”
Now it becoming clear that you are not only misrepresenting facts, but you are deliberately doing so. No where does the FairTax say it will tax State and Local government purchases, In fact the legislation makes it clear that State and Local governments will not be taxed. Here is a link:
and the relevant section and provisions of the above link are here:
SEC. 102. INTERMEDIATE AND EXPORT SALES.
Sec. 102 (a)(3)
STATE GOVERNMENT FUNCTIONS.No tax shall be imposed under section 101 on State government functions that do not constitute the final consumption of property or services.
> “Under the long held Supreme Court doctrine of intergovernmental tax immunity, this taxation would be found to be inappropriate. Sovereign government powers can not tax each other.”
Again, you appear to be attempting to confuse the distinction between a corporate body such as a state government and a consumer.
In Collector v. Day (1871), a case holding that the federal government could not tax the salary of a state judge, the constitutional structure and the Tenth Amendment were invoked as the basis of a reciprocal state immunity from federal taxation. Because of the different sources of immunity and the structure of the federal government, however, the immunity of the federal government differs from state immunity from federal taxation. The Supremacy Clause of Article VI and the representation of the states’ interests in Congress have led the Court to conclude that the two types of intergovernmental immunities are asymmetrical.
In the example above, taxing a state judge’s consumption in his personal life is entirely legal and acceptable. Taxing his purchase of petroleum for a car from the state motor pool.
> “The 30% exclusive sales tax rate could easily rise to 43% or higher.”
This above is false. You haven’t even studied the FairTax or if you have, then you misunderstood, or you are aiming to raise uncertainty in order to attack the credibility of a person that advocates for the FairTax.
The FairTax is tied to the consumption component of GDP and is not allowed to drift upwards to 43% without a vote. The large tranparency given to Americans will be enough to stop any member of Congress from raising the NRST.
< “Although Fairtaxers claim that the Family Consumption Allowance (FCA) or prebate is similar to a tax refund, it is not! The FCA is an income supplement that can be spent (and taxed), or saved as financial circumstances allow. The FCA would be scored by CBO/OMB as a cash grant entitlement costing $600 billion annually at a time when entitlements are squeezing out discretionary spending in the federal budget. We do not need any more entitlements!”
The Prebate or Rebate is indeed a tax refund and the reverse of an entitlement. An entitlement is sourced from payrolls usually and from many wage earners to one beneficiary. For example the Social Security tax is a payroll tax that is transferred to benefiaries. Social security was initially seen to tax 14 wage earners for every recipient. Today it is more like a tax on every two wage earners for every beneficiary.
Further, the Rebate is quite different from an entitlement. The Rebate credits taxes intermingled with spending and is specific to an individual whereas an entitlement is drawn from the payroll taxes of many other working individuals.
The Rebate a one-to-one credit from a person’s tax spending to themselves and no one else. The Rebate effectively establishes that there is no federal taxation in the United States on spending for the essentials of living. This level is taken as the federal poverty line. The FairTax effectively says that no American is subject to federal taxation until they spend above the poverty line. The way this is implemented is via tax rebate checks, something the federal government is very capable to do.
And most importantly the Rebate is opposite in its nature to an entitlement. A Rebate represents a tax cut whereas an entitlement represents a tax increase.
Raise the Rebate and this reduces the tax burden on all Americans. Lower the Rebate and this increases the tax burden on all Americans. This action is exactly opposite to what would be expected under entitlement spending.
Many issues to discuss, but first, I am Hank Van Gieson, a retired Air Force pilot, aged 78, and I was shot at and missed in two wars defending your right to write any fool thing you wish. I am not a paid lobbyist, just a conservative citizen interested in the truth. Save your insults for another time and focus on the facts. First, let’s talk about enforcement.
My source is a very good and unbiased book named “Taxing Ourselves” by Joel Slemrod and Jon Bakija. Get a copy from your library and be prepared to learn.
As for your”facts”, 70% of retail sales of goods may be tied up in 3000 Corporate chains, but the service industry is a very different animal. There are millions of service providers, and it is the Services industry that causes sales tax schemes to fail. No nation has ever been able to tax all services successfully, and that is the Achilles heel of the Fairtax scheme. Furthermore, it is absolute nonsense to claim that it takes two to cheat under the Fairtax. Think about it! You may pay the sales tax, but unless you are willing to report every dime you spend and to which business, there is no dual reporting. The retail sales merchants can take whatever risk they feel is warranted depending on the rate, and you will never know the difference. It only takes one to cheat, and that one could be the retail merchant, or perhaps the Treasurer of any given State who might feel the revenue is better spent within his State without washing the sales tax revenue through the Federal government.
You wrote: “30% is the exclusive rate and 23% is the inclusive rate. The actual rate is set at 14% and then surcharge rates are added to maintain revenue neutrality.” Balderdash! I don’t know where you came up with your 14%, but it is nonsense.
As for the VAT, you clearly have no idea what you are talking about. Both are consumption taxes and a VAT and a national sales tax are identical other than the Vat is collected in small chunks at each level of production and the retail sales tax is collected all at once at the retail cash register. At the same rate, both collect the same amount of revenue, and both can be displayed on the retail sales tax receipt. The VAT has proven to have much lower evasion rates due to the “self policing” nature of the collection process. Read all about it in the book I recommended.
More to follow!
A government enterprise would be AMTRACK or USPS.
`(12) TAXABLE EMPLOYER-
`(A) IN GENERAL- The term `taxable employer' includes--
`(i) any household employing domestic servants, and
`(ii) any government except for government enterprises (as defined in section 704).
`(B) EXCEPTIONS- The term `taxable employer' does not include any employer which is--
`(i) engaged in a trade or business,
`(ii) a not-for-profit organization (as defined in section 706), or
`(iii) a government enterprise (as defined in section 704).
`(C) CROSS REFERENCE- For rules relating to collection and remittance of tax on wages by taxable employers, see section 103(b)(2).
`SEC. 703. GOVERNMENT PURCHASES.
`(a) Government Purchases-
`(1) PURCHASES BY THE FEDERAL GOVERNMENT- Purchases by the Federal Government of taxable property and services shall be subject to the tax imposed by section 101.
`(2) PURCHASE BY STATE GOVERNMENTS AND THEIR POLITICAL SUBDIVISIONS- Purchases by State governments and their political subdivisions of taxable property and services shall be subject to the tax imposed by section 101.
`(b) Cross References- For purchases by government enterprises see section 704.
Ignorance is bliss.
Thanks for the clarification, lewislynn. I was going to address that gross misstatement by Hostage, but you beat me to it. HR25 is quite clear, and it will lead to a major constitutional crisis, imho. There is no precedent for the federal government taxation of State and Local government consumption. It would be totally improper, and I don’t believe it would stand. Over $2 trillion of the AFFT approved tax base was Government consumption. If that gets thrown out, the new sales tax rate would approach 43%. Add the typical State sales tax and we would be looking at a 50% sales tax rate. Never happen!!!
I've been on Fairtax threads since at least 1998 or 1999...Long before he ever showed up. He's all about wishful thinking and make it up as you go along to make it sound good...AKA lying.
> “Many issues to discuss, but first, I am Hank Van Gieson, a retired Air Force pilot, aged 78, and I was shot at and missed in two wars defending your right to write any fool thing you wish. I am not a paid lobbyist, just a conservative citizen interested in the truth. Save your insults for another time and focus on the facts.”
People can say whatever they want on the internet and even say they are Hank Van Gieson, a retired Air Force Pilot etc. Such statements do not mean anything nor count for anything because they may not be true and usually aren’t. You said yourself that you are/were a lobbyist here:
Whether what you say is true or not I am inclined to think after reading your internet activity that you are not qualified to be a lobbyist and that you are a person of self-delusion.
Your moniker and others that you use are reported all over the internet. Your arguments have been rebutted over and over again. Your ‘facts’ and positions have been debunked, shown to be false and are devoid of an educated demeanor. Yet you continue to seek out websites including LGBT websites where a discussion of the FairTax is being held and you have repeated the same diatribe again and again.
Further, you were asked politely for the names of the economists that you referred to in your previous post where you referred to them saying “at sales tax rates above 10%, illegal evasion as well as legal tax avoidance start to increase significantly”, and you have not supplied these references. Any researcher worth something would have provided links and citations. When a poster resorts to “Economists say” etc. most readers here at FR take that as shoddy cover knowing that “Economists have called nine of the last five recessions”. In other words your references and arguments are shoddy and substandard. That’s not an insult; that’s a fair critique of your research ability. Even if you were pro-FairTax I would not hire you for any reason as a researcher.
As for your representation of yourself, here’s what some others say about you:
Permalink Reply by Edward Ray McKee, Jr. on October 6, 2010 at 1:58pm
Hank Van Gieson is a notorious liberal FairTax hater. He uses every opportunity in virtually every blog to attack the FairTax. That he would be part of an education curriculum for FairTaxNation is incomprehensible. Mr. Van Gieson’s analysis as to every provision of the FairTax bill is always slanted in favor of the current IRS system. Mr. Van Gieson has even stated in the past that he would prefer a Value Added Tax on top of our current system before he would the FairTax. I encourage everyone to do their own research. I also reprimand FairTaxNation for allowing Mr. Van Gieson’s junk to appear on its website.
Permalink Reply by Phil Tuttobene on October 25, 2010
Hank Van Gieson served as a lobbyist. He served ten years as a lobbyist for Boeing Aerospace and now still “consults” as a retired lobbyist. IMO, Meaning he is still a lobbyist.
and further you have the aliases of Linda Little, Van Little all of which reveal your agenda and repeat the same near verbatim flawed assertions based on false premises.
There is the most revealing evidence about your true affiliations here:
where you are an ardent poster on a website that is democrat, that is anti-Sarah Palin, that is anti-GOP. I suggest you go back there for that appears to be where you belong because it is easily seen by gleening from all your internet postings that nothing is going to turn you to the FairTax. This is evident from having spewed all over the internet your laundry lists of false premises, disingenuous questions and unsupported or deceptive assertions. As one poster said of you that “you “
Other postings under your moniker reveal you to be a “Flat-Taxer” which means you are for the Income tax.
These are not insults hurled at you, whoever you really are, and you are free to post just about any view you wish on this website forum but it is fair to let others see where come from and what others say about your views.
So I think most will agree that your views here on this website do not require any response as they have been smattered all over the internet and others have already responded to your repetitious diatribe.
I will ask others who post here and that seek learning and understanding of the FairTax to ignore your deceptions. I will refer back to this post if they have any desire to find out more about you and the responses to your laundry list of misinformation.
Typical Fairtax advocate response. If you can’t refute the message, attack the messenger. Shame on you!
To finish with your pathetic responses, let’s talk about the prebate. Calling it a tax refund is one of the oldest and disingenuous Fairtax myths ever put forth. Google “entitlements” and read the definition. HR25 does indeed authorize such payments. Here is a simple test to prove it is an entitlement (that we can’t afford). Entitlements add to your gross annual income, while tax refunds do not! Case closed!
Setting your character attacks aside, all you have to do is show that any of my claims are wrong. I have always been willing to learn, unlike the average Fairtaxer. So, anyone who wants to give it a try would be more than welcome. Here are my 15 criticisms of the Fairtax scheme. Taken individually, they may not seem overly important, but taken collectively, the Fairtax scheme can’t work. The income tax needs replacing, but the Fairtax is not the way to do it!
(1) The Fairtax plan just won’t work! Economists tell us that at sales tax rates above 10%, illegal evasion as well as legal tax avoidance start to increase significantly. And at 30%, the Fairtax plan becomes unworkable. No other nation has ever successfully funded their central government with such a broad based national sales tax. Six have tried, failed and switched to a VAT which has significantly less evasion at higher rates. There is no dual reporting under the Fairtax, and our 10 million retailers would be sorely tempted to cook their books in order to avoid sending off the tax revenue to the federal Treasury.
(2) HR25 proposes that the Federal government tax State and Local government purchases of all new goods and all services, including a significant portion of State and Local government employee payrolls as representative of services provided. Under the long held Supreme Court doctrine of intergovernmental tax immunity, this taxation would be found to be inappropriate. The 30% exclusive sales tax rate could easily rise to 43% or higher.
(3) Although Fairtaxers claim that the Family Consumption Allowance (FCA) or prebate is similar to a tax refund, it is not! The FCA is an income supplement that can be spent (and taxed), or saved as financial circumstances allow. The FCA would be scored by CBO/OMB as a cash grant entitlement costing $600 billion annually at a time when entitlements are squeezing out discretionary spending in the federal budget.
(4) The Fairtax could destroy the new housing market! Banks typically loan the sales price or the appraised value, whichever is less. Appraisers generally do not include commissions or taxes in their valuation. There is no collateral value in a federal sales tax. In order to purchase a new house without mortgage insurance, buyers may have to come up with funds for not only a 20% down payment but also the 30% sales tax at closing.
(5) The National Governors Association opposes any federal tax that would intrude into a tax area that has traditionally been reserved for and relied on by state and local governments. The Fairtax would seriously threaten the ability of state and local governments to maintain their tax base. With this kind of headwind, the States may not be willing to act as the federal tax collector, nor are the States liable to approve repealing the 16th Amendment.
(6) The Fairtax plan would destroy our Social Security system as presently structured. (a) Today, workers typically pay FICA for 45 years or so. Under the Fairtax, everyone pays sales taxes on purchases for all their life. (b) Upon reaching retirement age, todays workers begin to draw benefits and make no further FICA contributions. Under the Fairtax, everyone, including retirees drawing benefits, continue to pay sales taxes for life. (c)Today, benefit amounts are tied to income earned during work years. But, under the Fairtax, that would be unfair because the Fairtax taxes both income and wealth. A major restructuring of Social Security would be necessary under the Fairtax.
(7) The Fairtax scheme throws middle class retirees under the bus. All after tax savings accumulated under current tax law would be directly double taxed when spent. Retirees would be forced to resume paying for their benefits with their sales tax dollars. Middle class retirees would see a significant increase in their federal tax burden along with a reduction in their purchasing power.
(8) The Fairtax rationale for treating all government agencies as consumers is that it would prevent unfair government competition with the private sector. But that issue was dealt with in Section 704 of HR25. Any government agency that sells $2500 or more per quarter would be considered a Government Enterprise, and would have to collect and remit the 23% sales tax. There was no need to tax all government consumption.
(9) Despite repeated claims by Fairtaxers that investments wouldnt be taxed, Section 801-806 of HR25 lays a large implicit service charge (tax) on both interest bearing investments such as CDs, and debt instruments such as mortgages and credit cards.
(10) HR25 provides for an inventory tax credit which would add about $350 billion to the federal budget deficit with no offsets in the first year of implementation.
(11) HR25 proposes to implement the national sales tax cold turkey, despite the fact that no other country has ever successfully funded their government with such a broad based sales tax. The Congress is basically conservative and would much prefer an evolutionary approach rather then the revolutionary one proposed in HR25.
(12) No list of Fairtax criticisms would be complete without including the disingenuous claim that the revenue neutral Fairtax rate would be 23%. In terms all Americans understand, the proposed rate is 30%, or likely even higher. According to AFFT, retail merchants will have to add a 30% sales tax to their costs in order to arrive at the 23% tax inclusive price.
(13) One of the most egregious Fairtax claims is that retail prices would remain about the same. The 1997 Prof. Dale Jorgenson embedded tax study assumed that employee payroll and income tax withholding would be available to employers for greatest cost reduction. Reducing employee gross pay/pensions by the withheld amounts will not happen for a variety of contractual, legal, and fairness reasons. The Fairtax Director of Research and other expert economists have written that the most likely scenario would be that everyone would get 100% of their gross pay and retail prices would rise. A best estimate, based on 2007 actual revenue data, is that business tax costs of 10% of sales could be removed and retail prices would rise by 17% on average after adding the 30% sales tax. (1.00 x .90 x 1.30 = 1.17)
(14) There is no data supporting the claim that there is $13 trillion in US owned wealth located offshore to avoid US taxes. According to the Tax Justice Network, an international organization which tracks offshore wealth, there was $1.6 trillion in offshore wealth owned by North Americans in 2005. There are 23 sovereign nations in North America, so the best estimate for US owned wealth offshore is $700-800 billion. And, lacking some sort of amnesty provision from IRS penalties in HR25, why would any of that wealth come rushing home?
(15) Fairtax savings from buying “used”, (tax previously paid), are highly overstated. There are no used services, which make up half of the typical family budget. No used groceries, no used restaurant meals, no used heating oil, no used gas for the family auto, nothing used at Wal-Mart, etc. etc. The opportunities to buy used would be limited to infrequent purchases of houses, cars, boats, etc. unless families choose to lower their standard of living just to spite the federal tax collector.