A Georgia FairTax

The following is an editorial written by State Senator John Douglas on the Georgia FairTax.

The “Georgia Fair Tax” & Illegal Immigration

During the course of the 2006 Georgia legislative session, your state House and Senate passed a strong anti illegal immigration measure in Senate Bill (SB) 529. The bill puts the burden on not only those here illegally, but also those who employ them. I was pleased to vote for the bill and enthusiastically support it.

However, illegal immigration continues to be primarily a federal problem. We cannot round up illegals in Georgia and deport them do another state or country. We can also not afford to shut down our state economy by forcing these people out overnight. We didn’t get into this situation overnight and wont get out of it in that time period. Homebuilding, agriculture, chicken processing and carpet production are four areas that would suffer greatly if there was a sudden outflow of Hispanic labor. All of those industries are vital to the economy of our state.

So with that in mind, what are we to do? First, the US government must get control of the border. A continual flood of illegal immigrants negates everything we are trying to do here in Georgia. Secondly, there can be no amnesty for those breaking the law. “Illegal” means just that. No fuzzy areas, no doubt, no waffling on the law. Enforce it.

At the state level, while these illegal immigrants are still here, they continue to use public facilities just as honest taxpayers do. Roads, schools, hospital emergency rooms, parks and other areas suffer wear and tear from everyone, not just American citizens. Unfortunately, under our current tax laws, its only honest American paying for the benefits of our society. That has to change. Those being paid in cash to avoid government scrutiny and income taxes must be brought into the system.

As a result, I am proposing the “Georgia Fair Tax” which would eliminate the state income tax and replace it with a 4-5 cents sales tax. There are two great reasons for the proposal. First, it brings everyone in Georgia into the equation for paying their share of the upkeep of our state. No longer would working for cash exempt you from the taxes honest citizens are paying. No longer would those living within the law carry the financial burden for those outside the law. Everyone, from the illegals to drug dealers to the most honest citizens would immediately begin paying their fair share.

The second reason a Georgia Fair Tax would be important is because it coincides with what Congressman John Linder is doing in Washington. For several years, Linder has worked to eliminate the federal income tax in favor of a national sales tax. What better example for us to set than for him to be able to point to Georgia and tell the country, even my own state has now gone to a fair tax.

The time has come to make this change. Ten states currently have no income tax. Georgia has to become number 11.

However, being a Senator means I can’t introduce the legislation myself. Our Constitution requires all revenue bills begin in the House of Representatives. As a result, what I intend to do is use my Senate position as a “bully pulpit” to push this idea and work to see it implemented. Just as John Linder has encountered steadfast, entrenched bureaucrats in Washington, so too will I in Atlanta. But I intend to keep working and get the idea across to my colleagues at the capitol that the time has come for this and the burden of paying for Georgia has to be shared by all.

128 comments

  1. Joeventures says:

    So.. we should overhaul the entire tax system due to a few people who get paid “under the table.” And we should do that regardless of the consequences (rich people paying less in taxes, the rest of us paying more, no one knowing how much we really pay).

    That seems totally fair to a grandstanding politician.

  2. UGA Wins 2005 says:

    Finally, a proposal that is fair and just. Its about time we bring in everyone who uses our facilities and let them start paying for that priveledge. Honest Americans have about had enough. And seeing these law breakers marching in the streets demanding this and that has backfired on them. I would remind you they had to be told to carry American flags after their first marches were covered in Mexican flags.

    I for one support this proposal and wish Douglas and John Linder in Washington well on their efforts.

    Of course, the Dims might squeel, but hey, what else is new. The sky might indeed fall one day…..

  3. JaseLP says:

    (rich people paying less in taxes, the rest of us paying more, no one knowing how much we really pay).
    The idea is based up the the FairTax proposed by John Linder. Read The FairTax Book. Unless you’ve made an real effort to understand it, then don’t criticize it.
    This benefits everyone, not just a specific class.

  4. jacewalden says:

    Joeventures,

    Are you honestly saying that our current tax system DOESN’T need an overhaul?

    Unless you can point out to me a specific example of why our current tax plan doesn’t need overhauling, and how this tax plan isn’t effective…then I would suggest you stop whining.

    And “rich people paying less”…Sales tax is sales tax Joe. When you walk into a convenient store to buy a coke, the cashier isn’t going to ask what income bracket your in. Now, I haven’t read the Fair Tax Book–but I do believe in Common Sense.

    Sounds like Senator Douglas, and Representative Steve Davis (who proposed this plan at the end of the 2006 session) actually have their heads in the game…instead of up in the clouds, where is the only place the current tax plan seems logical.

  5. Bill Simon says:

    Actually, as someone who sells items to an end-user, and is therefore responsible for collecting sales tax, I can tell you that not everyone plays fair in this market.

    While you folks “think” you would reap huge benefits by not having to pay income tax, I’ll bet if you added-up the stuff you buy in a year that is currently a sales taxable item, and you go back and apply the “fair tax” percent sales tax to it, you will find that you will be paying a WHOLE lot more via the sales tax than you would have paid via the income tax.

    To my comment of everyone not playing fair, there are loads of companies outside of Georgia who sell stuff to people inside Georgia that are my competition. Only the big national companies go to the trouble of setting-up sales tax departments to make sure they comply with state laws, and collect the sales tax to submit to the government.

    You enact an increase of 5% sales tax, and BUYERS (i.e., you folks) will increasingly shop outside the state of Georgia to avoid paying the extra sales tax.

    I have read the Fair Tax, and, while I first agreed with John Linder, I was not in this business where I am responsible for collecting sales tax at the time. Now that I am, I know it would cause more of my customers to shop outside the state to avoid paying the sales tax, and this, in turn, would cause businesses like mine to likely close.

  6. JaseLP says:

    Bill,

    People that go out of state to avoid the sales tax will only have two places to go…Alabama and South Carolina. Tennessee and Florida have a comsumption tax and no income taxes.

    Just a thought.

  7. Bill Simon says:

    Jase,

    Ever heard of the Internet? You increase the tax burden enough, and more people will decide to go online to shop for a variety of things, and the merchant, as I said before, may or may not abide by the reciprocity laws requiring them to collect Georgia sales taxes from the purchaser and sending that money back here.

  8. Nate says:

    Wow, this is a great idea that needs to be looked at and discussed. I think there would be a lot of positive results from switching to a sales tax. I also think that it should coincide with a taxpayer’s bill of rights (TABOR).

  9. Three Jack says:

    Buyers can already shop on the internet to avoid paying sales tax in Georgia and yet it hasn’t caused mass dissolution of retail businesses in the state. If modeled like Linder’s federal Fair Tax, there would be provisions (prebataes) to compensate for essential items. The measue needs to be debated because there is no doubt the current system has many flaws both on the state and federal level. I applaud Senator Douglas for getting the issue out front, here’s hoping it gets a fair hearing.

  10. ugadog says:

    I know that Fair Tax proponents don’t care that sales tax are much more regressive than income taxes. According to the Georgia Budget & Policy Institute, Georgians in the lowest 20% pay approximately 12% of their income in state taxes while Georgians in the highest pay 6%. 8% of what Georgians in the lowest 20% pay is attributed to state sales taxes, while the top pays 1%. The Georgia BUdget & Policy Institute says that sales taxes are the most regressive compared to property and income taxes. This all seems pretty common sense. You can argue all you want about whether or not Georgians highest earners need a tax cut that would shift their tax burden onto lower income workers, but you can’t argue that that’s not what will happen by getting rid of the state income tax and increasing the sales tax.

  11. First of all, I believe a huge switch to sales taxes instead of income taxes runs counter to the GOP mantra of attracting retirees to our low tax state. What good is cutting income taxes for the 65+ set if they have to pay increased sales taxes at the register?

    Are you going to tell me that every store in Georgia will set up a tiered sales tax collection scheme to collect one amount from 65- and one from 65+ Georgians? And what if these people move to rural Georgia (where many choose to live). Are country shops, some who don’t even use a computerized cash register, going to be able to comply?

    On another note, I think it is hysterical that people say “read the Fair Tax Book”. The Fair Tax Book is premised on the fact that the tax rate will be 23%. HOWEVER, you and I would call this a 30% tax. So the whole book is premised on a tax rate that is only 3/4 the actual rate, and even that number is looked upon with a lot of skepticism by tax experts who think the real number would be closer to 45%.

    Since I know overreaction is a typical response on this site, I will give you a simple example. If the sales tax rate were currently 30%, and I bought something that cost $100, my total cost would be $130.

    $100 x 30% = $30.
    $100 + $30 = $130.

    However, in the Fair Tax world, they call that 23%.

    What? How’s that possible.

    $100 x 30% = $30
    $130 x 23% = $30

    Every single person I have ever met calculates sales tax, tips at restaurants, and the like by taking the pre-tax total and multiply it by the sales tax rate. Only Linder and the fair tax crowd take the post tax number and calculate backwards to get the tax as a percentage of the post-tax amount instead of the pre-tax total. And they do this because they are being deceitful. 23% sounds better than 30%. And my guess is that a lot of people don’t know how much taxes they pay and think it is north of 30% on their income. So they here 23% and it sounds like a deal.

    The truth is, the average Georgian who makes about $25,000 a year probably pays (state and federal, including social security and medicare taxes) about 23% of his total income in taxes.

    Since the average American saves no money each year, under the fair tax, they would now be paying at the very least the same amount JUST to the federal government, plus the 6% they’d have to pay to Georgia. But that’s just if they spend what they earn. If they go into debt, they’d also now be paying income level taxes on money they never earned in the first place. Sounds like a great idea — lets tax debt like income! Was this fair tax thing written by the title pawn industry?

    This Republican fair tax mindset — people cheat the current system so we have to completely replace it — is so wrongheaded I don’t even know where to begin. The bottom line is that replacing income taxes with a fair tax would make my total tax haul (because I am not in the top 10%) increase enormously.

    That’s great, I can just see the political calculus of the poor, who already are angry about immigration — the Republican plan was to increase your taxes as a way to try and penalize illegals instead of actually doing something about them being here in the first place. If that is really your message to Georgians, then go right ahead.

    In summary:
    Businesses hire illegal labor.
    Republican proposal: Cut taxes on those businesses, and raise taxes on everyone else through a fair tax to penalize the illegals, instead of the businesses who hire them.
    Result: illegal immigrants still here, still working for businesses.
    Illegals pay slightly more in taxes than they previously did, 90% of Georgians pay more in taxes than they previously did, businesses, who would be exempt from taxes on their transactions in the fair tax world, get a huge tax break.

    Go for it guys.

  12. UGA Wins 2005 says:

    There has not been developed a better way to bring the underground economy above ground than a Fair Tax. Law abiding Georgians are sick and tired of paying for those who choose not to live within the laws. I agree with them and hope Sen Douglas is successful.

  13. JaseLP says:

    I will give you a simple example. If the sales tax rate were currently 30%, and I bought something that cost $100, my total cost would be $130.
    If the FairTax were passed the all taxes that come along with each stage of production would be eliminated. If you spend $100 on groceries today and the FairTax is passed tomorrow you’d still be paying $100. The FairTax is an inclusive tax. The price of goods and services would stay at about the same level. While you get 100% of your paycheck.
    Forgive me for being “hysterical” but…read the book because you don’t understand the idea.

  14. I don’t know what you learned at UGA, but why do you think an underground economy that operates illegally will all of a sudden comply with a new *law*? They will merely find new ways to close that gap (assuming they pay anything in the first place).

    The Fair Tax is a tax cut for businesses. Since the Fair Tax authors promise us that it will be revenue neutral, that means if one sector is paying less than another sector of the economy will be paying more to make up for the short fall.

    I am not an incorporated entity, are you? If not, then your taxes (just like mine) would go up. Your solution to illegal immigration and the underground economy is to raise your own taxes. That makes you about as Republican as Gary Black.

  15. Basically, Jase, without me needing to read a book, please explain to me how my income taxes go to 0%, my income stays at 100% same level, goods and services (which would be taxed instead of income) stay at the same price, and the government continues to collect the same revenue?

  16. JaseLP says:

    How is it possible that my income taxes would be eliminated, my income would stay the same, and yet $100 of groceries would still cost $100?
    At every stage of production there is taxes. With the passage of the FairTax, that taxes would be eliminated. Not only would those taxes be eliminated but payroll taxes, corporate income taxes and so on would be eliminated as well.
    The price of goods and services would drop anywhere from 22% to 30%. The FairTax would be put in the place of those taxes, therefore the price would be about the same as before…with you keeping 100% of your paycheck (medicare tax, social[ist] [in]security, and so on would be eliminated).
    Here is an article by Boortz to get you started, but you need to read the book to get an understanding of it.

  17. atlantaman says:

    You have to remember Corporations that provide goods and services don’t really pay taxes. Any “tax” they have to pay such as social security, income, etc.. is simply built into the price of the goods and services you buy. So when you buy say a Chevy, that car has GM’s taxes, overhead, etc.. built into the price. Increase the amount of SS that GM has to pay and the price of the car goes up – decrease the SS and the car becomes more affordable. Now if you buy one of those new KIA’s there is no hidden tax built into it since KIA is a Korean company and does not have to pay SS, etc… KIA receives a competitve advantage in the USA from our tax code.

    This post doesn’t even begin to explain the devasting effect our tax code has on manufacturers that actually still try to export goods around the world.

    The fair tax would place companies like KIA and Sony on equal footing with what few American manufacturers still produce in the USA. Our current tax system gives huge breaks to foreign manufacturers. With the amount of jobs that are going overseas, shouldn’t we have a tax code that incentivizes companies to make capital investments in the USA?

  18. Bill Simon says:

    Senator Douglas needs to answer the question of how a Fair Tax, whether for Georgia or the U.S., will fix the illegal immigration problems.

    Besides that, let’s say, for argument’s sake, if an illegal spends $5000 total per year here, and pays an average of 6% in sales tax, that means he actually spends $4717 on goods and services. ($5000/1.06).

    Increase the tax burden an additional 6%, and the illegal will still have only $5000 to spend, but his contribution to buying goods and services (which, by the way, is what makes this economy run…the buying of goods and services, not the paying of sales tax), but now his net purchase of goods and services is only $4464 ($5000/1.12)

    SO, while the state will collect more in taxes under this plan, there will be less purchasing power available for everyone.

  19. Bill Simon says:

    That last statement should have read “less purchasing power for the illegals who currently live here and do spend money here.”

    Ang, again I ask, for those who pay income tax right now, please compare the average amount of state income tax you pay, compared to what MORE you will pay in sales taxes on all of your purchases of goods and services that you currently buy. Betcha that, on the average, you will pay more in a new sales tax than you will pay in income tax.

  20. John Douglas says:

    OK, good conversation. I’m here now.

    Chris Hardcore: “I don’t know what you learned at UGA, but why do you think an underground economy that operates illegally will all of a sudden comply with a new *law*?”

    Unless there is some way to stop paying sales tax that I dont know about, everyone will pay. Everywhere I go, people want these immigrants sent home, but they know that wont happen any time soon. The next best thing is for them to begin to help pay for the services they are getting here. Thats where this sales tax comes in. Unless there is a better way to finance their stay here, the sales tax is the way to go.

    I believe it is likely that some of you Democrats understand that eliminating the federal and/or state income tax would lock in Republican control for the foreseeable future. I also understand that many of your constituents dont pay income tax now and a sales tax would indeed be a tax increase for them. But its not just income tax payers using public facilities in Georgia, its everyone. Therefore, everyone should help pay.

    Bill Simon: The new sales tax would be as nearly equal to the current income tax as it could be made. In no way would this be a tax increase. Unless as I said earlier, you arent currently paying income tax. And I didnt say it would “fix the illegal immigration problem.” I said until the problem is fixed, they should pay the same taxes American citizens are paying. I would remind you that legal residents are paying the 7% sales tax now AND income tax.

  21. Bill Simon says:

    Good to have you here, Sen. Douglas. Two things:

    1) What about my point that if you increase the sales tax burden on fixed income people (i.e., illegals, seniors, people who work for Delta Airlines, lots of other companies who are struggling to just maintain wages right now, etc.) who are unable to automatically raise their income, you reduce the available amount of purchasing power of goods and services?

    2) This concept of changing the entire system to (perhaps) solve one problem sounds suspiciously like the line of thinking that went into Governor Perdue’s decision to increase the tax on tobacco products sold in Georgia.

    Hear me out, please: According to the Governor back then, we needed more tax revenue. In order to increase tax revenue, Perdue decided to raise the tax on tobacco products, and in the same breath, he spoke about wishing to reduce the consumption of tobacco products. Yet, the only true solution to stopping the consumption of tobacco was to ban the sale of it entirely.

    He didn’t do that because…why? He needed the increase in tax revenue from selling the tobacco products, and he had to be hoping that, not only would people continue to buy tobacco, but there might actually be enough of an increase in the number of buyers to offset the number of people who would reduce their purchases.

    So, to your column, Senator: You discuss the fact that illegals don’t pay income tax and until we can get rid of them, we should tax them in some way, right? What happens if you (as a member of the government bureaucracy) get so hooked on the sales tax revenue from everyone (illegals, legals, tourists) that you won’t mind illegals being here at all?

    In fact, with your scenario, the state will want to encourage more illegals to come here and pay for goods and services to contribute more to the state tax coffers, right? All you care about is collecting more sales tax to pad the budget, so, the state will want more and more users to come here and buy to their heart’s content.

    In short, just like Perdue not really wanting tobacco users to reduce or stop their consumption for their “health” because he needed that extra revenue, YOU, as someone responsible for figuring out how to spend a state budget, will want the illegals to continue to reside here because they will continue to feed the state sales tax coffers.

    Kinda like a massive circular formula on a spreadsheet, isn’t it Senator? 🙂

  22. Senator,
    Under Linder’s scheme, corporations would not be taxed for B2B transactions. Sophisticated citizens, like those who are executives, would choose to be compensated in part by goods and services they would otherwise purchase. So if I am the CEO of a company (or I incorporate my own dummy company) and want to get a new car, I will have the business purchase it from another business (no taxes will be paid) and give me $XXX money less that year in salary in exchange for getting paid by a car that costs $XXX.

    In order for the system to stay revenue neutral, if large consumers and businesses are essentially opting out, the tax rate will have to be higher than advertised (30%/23% whatever you prefer). And unsophisticated citizens who can’t afford to incorporate themselves will be stuck with the bill.

    Let’s think about what kind of underground economic activity there is. Let’s group it into illegal immigrants, drug trade and illegitimate businesses that are trying to avoid paying taxes.

    Well, under the fair taxes, businesses don’t pay taxes on B2B transactions so there is no longer a need to operate in an underground economy AND the government won’t be getting any increased revenue because they won’t collect taxes on those transactions. Drug dealers and illegal immigrants will be paying higher sales taxes on the transactions they make that are legitimate, but research indicates that most drug dealers don’t actually make that much money and even if there are 1,000,000 illegals in Georgia spending $10,000 a year that would only come out to between $400-$500 million a year, or about $60 for ever legal Georgian.

    Finally, its true that a lot of poorer Georgians (my “constitutents”) don’t pay much in income taxes. They pay 7.625% on all of their income in FICA (social security + medicare) taxes (and another 7% if they are self employed) and then they might pay some state income tax and federal income tax. Let’s say they pay a total of 10%. Since they don’t save anything, they also pay sales tax on 100% of their income. I’d say in total they are facing a tax rate of 15% on their income.

    The well off who live mostly on investment income might pay a slightly higher total share of their annual income in taxes, lets say 20%. The people in the middle really get squeezed. They may be looking at paying somewhere in the low 30’s over the course of a year.

    Businesses don’t pay that much taxes to operate anywhere in the US, unless they are a small business and that lumps them in with the middle class.

    So your/Linder’s proposal:
    Eliminates what little taxes large coporations already pay.
    Reduces some of the tax burden for small businesses.
    Keeps middle class tax burden about the same.
    Doubles the tax burden for poor Georgians.
    Increases the tax burden for immigrants and drug dealers.

    Sounds like a great deal for “your constituents” in Newton County who are raking in a millionaire like per capita income of $19K/year as of the 2000 census. I look forward to you explaining to them why they have to pay higher taxes so that illegal immigrants can stay in this country and compete with them for their jobs.

    As for Republican dominance via the Fair Tax, ask Max Burns how that went. He was up 20 points a month before the election last year and Barrow started hammering him for the “Burns Tax” (Linder’s Fair Tax) and the voters were smart enough to know that it was not a good deal for them. I look forward to Georgia Republicans replicating this winning strategy on a statewide basis instead of just isolating it to one Congressional District 😉

  23. jacewalden says:

    Chris,

    Here’s a hypothetical question for you in response to your “the tax burden on poor Georgians would be doubled”…

    Do you think it is MY responsibility to pay the way of poor Georgians?

    Because it seems to me like you assume that the middle class (and everyone else) should look out for the po’ folks. Last time I checked, my middle class family was struggling to make ends meet as it is…paying a shit load in taxes that go to other people! Is it my father’s fault that he has a higher paying job than a “poor Georgian”? Should be punish him by making him pay taxes that go to programs for poor Georgians?

    If we are going to pay taxes, why not pay taxes for what we buy? Why should I be punished for getting a well-paying job (as a result of a hard-earned college education), by having to give up more of my money in taxes?

    Believe me, I am sorry that there are poor people out there…

    If you’re worried about the poor, why not suggest raising the minimum wage, or forcing companies that hire illegals to pay them the minimum wage so they’ll stop depressing the wages of the “poor Georgians?” Heck, even the ultra-liberals should agree with that. Raise the minimum wage…but don’t punish the middle class because they make a little more…Hell, that’s socialist. (some would say minimum wage is too, but I don’t)

    It’s funny. I hear a lot of dems bitching about taxes, but none who are willing to actually solve the problem by paying people a little more.

  24. stephaniemills21 says:

    Atlantaman,

    Do you really think the that corporations will pass on their tax savings to the consumer. A little, probably, all, not a chance in hell.

    Just look at the profits that the oil companies are reaping now. Have their prices come down to reflect this, NO. Also, ask any doctor here in Georgia if their malpractice insurance rates have gone down that much. My guess, and i know it is right, is very little.

    And I cannot believe i am on the same side as Bill. The end is nigh, the end is nigh.

  25. stephaniemills21 says:

    Jace,

    I do not think Chris needs anyone to stick up for him, he is hardcore you know, but he has advocated for raising the minimum wage on this very website before.

  26. JaseLP says:

    Do you really think the that corporations will pass on their tax savings to the consumer. A little, probably, all, not a chance in hell.
    Why not? The free market will handle this, I have confidence in that, especially if it’s explained ahead of time to the taxpayers. They’ll know that these embedded taxes are going away that the FairTax will take the place and they should expect to pay about the same thing.
    It’s not being done in secret. But…dear God, those corporations are evil!

    Just look at the profits that the oil companies are reaping now. Have their prices come down to reflect this, NO.
    These so-called record profits are still in line with the profit margins from previous years. Simple economics…if the cost of business or making the product goes up then the cost of the product goes up and more money will be collected and profits will increase. This probably applies even more with oil/gas because it’s in such high demand and the market is ever changing.

  27. jacewalden says:

    Then maybe he should concentrate on that then. Because if he gets the minimum wage up, and Senator Douglas gets the fair tax plan in place, we might just have one hell of a system going for us here. But, I think both are necessary.

    A rise in the minimum wage will:
    (1) Give poor people more spending power
    (2) Put more money into the economy (believe me, if you don’t have a lot of money, any extra you get goes straight back into the economy in the form of purchases)
    (3) Take away the incentive to hire illegal immigrants over American citizens (but only if employers are forced to pay the minimum to illegals)

    I know a lot of people out there think that minimum wage is socialist…It is anything but. Minium wage laws are a direct result of capitalism–Supply and Demand. You want us to work–we’ll supply you with the work for a minimum amount of money.

    So, if you pump up the minimum wage AND begin the fair tax plan, you have a recipe for economic success.

    And stephanie, I agree with your comment earlier about corporations not sharing their profits–although, I never really thought it was much of a secret to begin with.

  28. Bill Simon says:

    Jace,

    Would you be kind enough to tell me where you stand on abortion?

    And, this is the relevance of the answer to that question: If you are a pro-life person (like, I imagine John Douglas is), then if you are up for forcing all pregnancies to come to term, then YES, you (and anyone else who is pro-life) is, by default, responsible for the po’ folks who are brought into this world and who cannot, (or, are not taught to) fend for themselves.

    If you are pro-choice, welcome aboard to my side of the Republican Party. However, just because we are pro-choice, we still are outnumbered by a bunch of meddling people who think that every pregnancy should come to term, and after that, that “life” can go to hell for all they care, as long as that life doesn’t interfere with their lives.

  29. jacewalden says:

    Jason my friend, on this point I must disagree with you.

    Here’s a scenario:

    I am Ford Motor Company…I’m only going to make a certain amount of cars per year, based on the demand for those cars. If I get some unexpected profit, am I going to use it to produce extra cars? No…simply because I have already made the amount that I expect people to buy. To put more money into making cars would be a waste of money. Where does that extra profit go? Certainly not to consumers. Possibly to my employees, but most likely it goes into the bank–and sits.

    I know I’m writing this with the risk of sounding socialist to you, but hear me out…

    If instead, that unexpected money goes to low to middle class families in the form of higher minimum wage (I want to make it clear that I do not support income tax, only a higher minimum wage), I gaurantee you that money will be back into the economy the next day. People with less money tend to spend more of what they have.

    I’m not saying that corporations are evil, I’m just saying that we have labor laws in this country for a reason…If we let our capitalistic nature go too far, we’ll have kids in sweatshops again (although that might teach them some damn discipline).

    Believe me….I’m not socialist. I just think that checks and balances are important in every aspect of society–even economics. So there it is.

  30. Bill Simon says:

    JaseLP:

    Your theory as it applies to oil companies is inapplicable. Perhaps you missed the day in your economics class where they discussed the concept of an “oligopoly.”

    The oil companies operate in an oligopoly market. While gasoline is a “commodity,” it is sold in a highly specialized marketplace.

    The price for gasoline will not “plummet” if the FairTax is implemented because that will cut their own throats. There is no need for them to reduce prices as long as every company is sharing in the wealth generation.

  31. Bill Simon says:

    Jace,

    While I warmly welcome you to my side of the Republican Party, I cannot form a good caucus if you walk in wishing to raise the minimum wage as your first act.

    Now, I might be in the mood for a minimum wage tinkering IF the following were to happen at the same time: 1) all subsidies paid to farmers to not grow crops is immediately eliminated (note to Senator Chambliss: this means you stop fighting for such crap in the budget);

    2) all public companies/corporations are required to disclose to their shareholders all monies contributed to elected officials, and none of that money is allowed to be deducted from the revenue…it all must come out of Net Income dollars (let’s see if the shareholders will appreciate their dividends being paid to politicians first…) ;

    3) Any and all subsidies currently paid out of the Congressional Budget, or via any Executive Order from the President, that are buried in “good-sounding” pork-barrel projects.

  32. kspencer says:

    I went through the calculations before on another thread, I’ll keep just the summary.

    4 to 5 percent is insufficient to replace individual income tax. The minimum is 6 percent. That’s ten percent state, plus the various local taxes of anywhere from 3 to 6 percent (including splosts and municipal sales taxes).

    If – in a nod to liberal stances that we’ve an obligation to at least care about the poor – we exempt certain items such as food or medicines, then the rate’s got to go even higher.

    Are we going to keep the revenues about the same and see folk on the borders go to other states, or are we going to slash our revenues and cut more government services?

    Related question is what plan is in existance for years of weak economies, when sales drop significantly?

  33. jacewalden says:

    Bill,

    I agree completely with you premises for minimum wage increases. Now we can talk about tinkering with it… I’m not saying bump it up to 7, 8, 9, or 10 dollars an hour…just a modest increase.

  34. Bill Simon says:

    Jace,

    There is a problem with “tinkering” with the minimum wage. If we go back to your Ford Motor company example, the thing is, nobody knows at the beginning of a sales cycle exactly how many cars (or, widgets, or whatever) will be sold.

    But, if you raise the minimum wage, all of a sudden, you have an increase in fixed costs that you might not be able to cover if sales don’t workout the way you think they will. If that happens, two bad things may occur: layoffs or closing-up shop. Both are detrimental outcomes and no government is going to come in and save you.

    See, it is sometimes very easy to look at the end point of a company’s sales cycle and declare “Hey, you made a ton of money! You can afford to pay your folks more money! And, we’re going to make you share that wealth!”

    This is, I’m sure, how people like Hard Core Chris think. They look at the endpoints and have no idea of how the endpoints will change from year-to-year, and just ASSUME every year will be like the last, if not better. (Chris is dead wrong in his thinking. He needs to get out of politics and go into the REAL world and see how REAL companies work to make their revenue and balance their growth with personnel.)

    If companies were really smart, they would figure out better bonus schemes for all employees to share in the better times and everyone get their base pay if the company breaks-even or loses money in a fiscal year.

    Minimum wage is like those damn subsidies that farmers are paid to not grow crops; it is a fixed cost and whatever happens during the year, we always have to pay the fixed costs. You increase fixed costs, and more companies go under, faster.

  35. John Douglas says:

    Back….Easter weekend is one of those rare events that gives me some family time.

    Bill, when did we develop the philosophy that its good for some to pay income tax and not good for others? Why should one group have to carry the weight for everyone? Is that penalizing success?

    In no way am I advocating keeping illegals here to pad the tax rolls. I am anti income tax regardless of who is here. One of the first bills I introduced in the House in 2003 was to eliminate the state income tax. (The first bill I introduced was a 10% salary cut for the legislature when Gov Perdue announced his proposed tax increases…..which I voted against.) This however is an opportunity for us to actually do something about the most unfair of all taxes….the income tax.

    Chris, you forget that no business pays taxes now….unless they arent aware of how business works. They all pass it to their customers. Businesses are only conduits passing tax money back to the government. So to say that businesses wont pay taxes would put them exactly where they are right now.

    Finally let me compliment Jace and Jason for seeming to grasp this concept well. Jason hits the nail on the head by saying market forces would dictate prices. Government has no business telling business what prices to charge. As an example of market factors, watch what happens when the new Walmart Banking system comes on line and see if the other banks dont become more efficient and less costly to consumers.

    Great conversation here folks. Its a great idea whose time has come. I look forward to working with the House and Governor’s office to try and make it happen.

    Happy Easter!

  36. John Douglas says:

    Bill,

    I am pro life. But to say the babies born to those who might have had an abortion become my responsibility because I am opposed to killing them is a unique stretch of the abortion/pro life argument.

    Personal responsibility goes to the heart of many of the problems society has today. Downloading babies, each from a different man, the breakdown of the family, being here illegally, not paying taxes so long as taxes are the law, demanding producers pay for non producers are all signs of the terrible society problems we have in this country.

    And btw, abortion is still very legal…..for now.

  37. Bill Simon says:

    John D.,

    Let me ask you this: Did you vote for the $6,000,000 in pork-barrel projects in this year’s budget?

    If you did, then ask/answer yourself this question: As the number of illegals, under your plan, start throwing money into the state’s coffers and the coffers grow, are the pork projects going to increase OR will we all get a refund for that year OR is the sales tax percentage levied on us all going to decrease as a result of the increase in collections?

  38. atlantaman says:

    A couple of points to some questions that were asked:

    Do I really think that Wal-Mart would pass the savings on?

    Yes I do. I used to work in the manufacturing sector and had many clients that dealt with Wal-Mart. It was a love/hate realationship for them. Wal-Mart was brutal in getting its suppliers to lower their prices so it could then in-turn offer lower prices to its customers. Many economists believe Wal-Mart is more responsible for keeping inflation in check then the Federal Reserve.

    If all retailers were given an income tax cut each one would have to lower their prices to maintain their competitive advantage. For instance, if Wal-Mart kept the profits and did not lower their prices, then it would give K-Mart an opportunity to lower their prices and stop their declining market share. In short, its all about the free market.

    What would Ford do with the extra profits it received from the tax cut?

    Well this business about whether Ford would use the extra profits to needlessly manufacturer extra cars or just keep it for executive bonuses and shareholder dividends is the wrong way to look at it. Ford would be able to take the tax savings and reduce the retail cost of it’s cars (making it more competitive against foreign made cars that don’t have the hidden costs of SS, etc.). This would make Ford cars more affordable to the “working man” and “poor people” who the Democrats supposedly care so much for – it would then increase demand for Ford cars and Ford would have to increase its production. If you don’t think Ford would pass the cost savings on to the consumer in such a hyper-competitive world market where they’ve been losing market share, then you’re crazy.

    I’m constantly amazed when liberals call for increased costs of everyday items such as goods at Wal-Mart or cars at Chevy, by vilifying them for not increasing hourly wages or paying extra benefits. There are two sides to that equation and when a company has to pay more wages or benefits it has to increase the price for the items it sells, making the items futher out of reach to the “working stiff” just trying to get by.

    I guess it’s a victory when Charmin is guilted into raises it’s wages, but now the working stiff punching the clock at McDonald’s can no longer afford to wipe his ass with the extra-fluffy 2-ply.

  39. Bill Simon says:

    John,

    I’ve figured out after talking to my parents (who reside in this state and are legal citizens by birth) that they aren’t real keen on the concept of raising the state sales tax by any amount.

    They spent the last 27 years paying state income tax and what they had left over, they invested it where they could so they could continue living in retirement based on the balance of income and expenses. Their income is fixed, and they have a certain amount of buying power each year to match that income.

    You levy a sales tax of 5-7% for you to collect your largesse to play with in a budget, and they’re not going to have that same buying power they once did because they cannot automatically raise their income to pay for the increase in sales tax. (I’ve said this before, but maybe you are too focused on illegals only, and don’t have any need to consider any other segment of the population.)

    While your idea may sound good, in reality, there are a LOT more people who will be affected by the change than just illegal immigrants. You, Harry, and Atlantaman may think that “not enough people are paying their fair share,” but THAT thinking is identical to the Left’s thinking about who is and who is not paying enough taxes.

    You, Harry, and Atlantaman are likely in the upper-middle class to lower wealthy-class of income (and make more than a comfortable income) and you have no concept of what the rest of the working world has to contend with in terms of making a living and paying to support themselves.

    If that sounds like a lefty-socialist, it’s not. It’s me who is in the process of building a new business and who is not paying a whole lot of state income tax right now because I’m not earning a whole lot of money. You levy a 5% sales tax on top of the 6% I pay now in Cobb, and immediately increase my cost of living month-to-month, and I’ll be declaring bankruptcy (or worse) in no time at all.

    I’m not speaking on behalf of myself for selfish reasons, John. There are many folks like me who cannot rely on lobbyists to shove money down my throat OR rely on people doing business with me because they perceive I am in a position of power (unlike you). I’m just an average Georgian trying to make a living with as little interference from the power of government taxes as possible.

    Tell you what, make sure that you amend the Georgia Constitution to outlaw all income tax in this state before you switch to a sales tax system, John. Otherwise, I’m certain legislators in the future will not be able to resist applying both taxes on residents, income and sales.

  40. Bill Simon says:

    Oops! One correction to my previous post, John. It doesn’t look like you attract lobbyist money as much as you are a lobbyist (from your financial disclosure). So, unlike a lot of folks who don’t get their meals paid for, is it fair to say that you have it pretty good because a lot of your living expenses are paid for by the association you “advocate” for?

  41. John Douglas says:

    “So, unlike a lot of folks who don’t get their meals paid for, is it fair to say that you have it pretty good because a lot of your living expenses are paid for by the association you “advocate

  42. Bill Simon says:

    I am sorry, John, for my earlier comment.

    It’s not that I have a chip on my shoulder per se; it’s that I’ve become quite jaded about politicians ever since I’ve seen elected Republicans (mainly in Congress, but also in the state legislature) do the complete opposite of nearly everything that was once in the original goals/principles of the Republican Party.

    But, I will refrain from judging you in any future conversations.

  43. John Douglas says:

    “Tell you what, make sure that you amend the Georgia Constitution to outlaw all income tax in this state before you switch to a sales tax system, John. Otherwise, I’m certain legislators in the future will not be able to resist applying both taxes on residents, income and sales…”

    Bill, I would absolutely make sure the income tax was dead before starting the new sales tax. My intent is not to raise taxes at all, just change the collection method. And I would likely look favorably on requiring a 2/3 majority in the House and Senate to raise the sales tax so as to avoid “tax creep” and the idea we can get pie-in-the-sky with just another penny added here and there by the state. I have never voted for a tax increase and wont start now.

  44. Bill Simon says:

    I appreciate your principles very much, John.

    Just to give you something tougher to chew-on than my objections to the possible switch, I can predict a group of entities (on the order of 159 of them to be exact) who will likely fight you tooth and nail on this proposal.

    The “159” entities are the county commissions in this state. If the sales taxes become on the order of 10-12% in any county (or, perhaps even cities, as in the case of Atlanta with an 8% sales tax) jurisdiction, think about how darn near impossible it will be for any county to get a SPLOST through their electorate.

    See, in Cobb last year, I voted for the 1% SPLOST because I was personally promised by Sam Olens that he would put forth a rollback on property taxes…and, if the SPLOST didn’t go through, he said there would be an increase in property taxes in order to pay for the increase in infrastucture needs.

    But, I can pretty much assure you that if a sales tax burden is already above 10% in any jurisdiction, voters will reject any potential increase due to a SPLOST…regardless of the consequences. Psychologically, there is a mental limit, I think, for most voters at the 10% level or below to pay in sales tax where they live.

    This inability for a county to raise/renew any SPLOST (or, for even a school board to renew a SPLOST) will cause that county or school board (or, whatever jurisdiction) to slam the property tax owners for the extra money they need for their infrastructure improvements.

    In every change in law, there is always another law that rears its head that the writer of the law didn’t anticipate. It’s called the Law of Unintended Consequences.

    Go talk to your school board members…or county commissioners…and ask them if they think they will be able to get SPLOSTS through their electorate if the electorate is already paying above 10% in sales taxes. I could be dead wrong here. 🙂

  45. I’d like to make a couple of quick points. First of all, I would guess most (>70%) illegal immigrants work in jobs that pay more than the minimum wage already. I think this is definately true for construction and probably true in agriculture as well. Maybe they make about the minimum wage in Ocilla and Vidalia, but that also goes a lot further than it does in Atlanta.

    Second, there seems to be a lot of middle class resentment on this board towards the poor/people who pay less in taxes. That’s fine, but most of it is rooted in the overall tax burden that these individuals face, which isn’t really going to change under a fair tax (and actually might go up). Max Burns said during the ’04 campaign that everyone would basically pay about the same under the fair tax, which begs the question why bother with the change, but anyway…I personally look at tax policy/politics from a personal standpoint — will I pay less taxes under a change, as opposed to will someone else pay more. And anyway, a lot of the “have nots” who don’t pay (much) taxes are downscale conservative whites, who currently vote for the Republican Party out of social concerns. I think if the Republican Party basically stands as the party that will actually raise their tax burden, it will be hard to put together a winning coallition in the future without these folks.

    Finally, lets examine the idea that businesses pass on the taxes they pay to their customers. I may suprise some of you on this site, but I agree. Businesses pass on taxes to their customers, and the tax revenue benefits — those customers (for the most part). Since no one on this site suggests (or believes) that government spending will actually be reduced, I have a hard time seeing how the end price that customers will pay will go down that much. That government revenue still needs to be collected, and if it won’t be paid by businesses along the manufacturing and delivery chain, it will just be in the form of a very large sales tax at the purchasing point for the consumer.

    IF business passes on 100% of the savings that they get from not paying taxes, whatever cost savings are incurred will be completely wiped out by the massive sales tax that will be charged at the register because income is no longer being taxed on corporate profits, dividends, etc.

    The Fair Taxers themselves admit that the switch would be revenue neutral as a whole. The Paris Hiltons and Warren Buffets of the world will see their tax rate reduced effectively to 0%. That means at some point on the scale, others will be paying more. I think a lot of people on this site think the shortfall will be made up by people on welfare who don’t currently pay much taxes. I think they are correct (that those people’s tax burden would go up) but they are misled about their own. Even if welfare recipients and illegal immigrants started paying more taxes, it wouldn’t be enough (in a revenue neutral world) to make up for Warren Buffett and his pals not paying theirs.

    So our (middle class) taxes would go up too, and because it’s revenue neutral and I don’t expect the way money is spent in Washington or Atlanta to change, we won’t get a damn thing in return for our tax increase. So Sen. Douglas, Mr. Linder, etc, if you still think raising the tax burden for 90% of America while not increasing government spending that is targetted at them will cement the Republican Party’s electoral hold on Congress and the Georgia legislature, please, be my guest.

  46. JaseLP says:

    Chris,

    You still don’t know the plan. How can you possibly judge it merits if you don’t know the first damn thing about it?
    Anyone that lives below the poverty level will not pay taxes, therefore nothing changes for them. Why will they not pay taxes? Due to the “prebate.” A monthly check based on the poverty index that will each family will be expected to spend on the necessities of life (ie. food, medicine…)
    – The FairTax Act calls for the repeal of the 16th Amendment.
    – All embedded corporate taxes, payroll taxes and other taxes levied on goods during production would no longer exist which will result in a 22% to 30% drop on all goods and services.
    – The FairTax would be an inclusive tax of 23% to all goods and services which will result in essentially make all items be about the same prices as they were before the tax.
    – You will get to keep 100% of your paycheck.

    I’ll buy you the damn book if you’ll actually read it to get an basic understanding of it. You are debating something that you don’t even have a grasp of.

  47. Bill Simon says:

    Jase,

    The oft-quoted “23%” was the number calculated after the study was done in the late 1990s. Though it was bandied about in 2004 as remaining at “23%”, do you still believe that after 10 years (2008-2009 being the earliest years this would get enacted), that number would still be 23%? Even after the freakin’ expansion of our annual spending budget (by Republicans, no less)?

  48. kspencer says:

    Jase, I’ve read the book. I asked some questions upthread that John’s not answered, but let me revisit my concerns here.

    Issue one. On a flat translation the minimum state sales tax increase required to maintain revenue neutrality just for the individual income tax is 5.5%. To replace corporate income taxes it needs to be 6%. (This is based on the reported income and sales tax revenues of last FY, ended 9 months ago.) This gives us a state sales tax rate of 10% to which county and municipal taxes will be added, coming in at 13 to 16%. Politically speaking, what makes you believe that most people will accept a 250% increase in their sales tax rates?

    Related – call it issue 1A. The FAIRtax plan gives a prebate for poverty level expenditure to all citizens. Nominally, this is at least a full quarter of current sales, or 1% of tax revenue. Which means the preceding values 11% state and 14 to 17% total to sustain revenue neutrality. Again, how do you expect to persuade most people to accept this tax rate increase?

    Issue 2 (though still related). Approximately 7% of the state’s population lives close enough to a state border to shop in the other state with minimal discomfort. All the border states – to include Tennessee and Florida which have no income taxes – have total sales tax rates below 11%. Based on surveys of sales in Chattanooga (Chattanooga citizens going to Catoosa/Walker/Whitfield counties for goods to purchase at a 2% discount due to sales tax differential), we can anticipate a measurable reduction in sales in border counties. Are we prepared to balance the economic downturn of these counties? I will note that while the above mentioned counties plus the counties near Valdosta would suffer, the counties which would be facing the greatest impact would be those near Fort Benning. That base is preparing to receive an additional 5,000 soldiers and their families. Taxes – to include sales taxes – are going to hahve some impact on where they actually live, and Phenix City Alabama is a very easy commute for those residing off-post. 15% (11 state, 3 local general, 1 splost) compared to 8% (IIRC – do not have it at hand) is significant. Again, between declining sales and places of new residence, border counties will suffer economically. What plan is in place to counter these effects?

    Issue 2A. Is the plan prepared for the inevitable increase in internet sales and its impact on sales tax revenues?

    Issue 3 – future plans. One of my major problems with TABOR in Colorado (as mentioned before, I come from there) was and is the lack of planning for economic rough times. What plan is being prepared to cope with the inevitable slow sales cycles? As I read the book, nothing – instead, the government will be expected to cut services to match. This is stupidity in any business – it’s why businesses are expected to maintain a reserve on hand as part of their plans. So why are we planning to force our government to be stupider than businesses? Or are you proposing a reserve as part of the plan, contrary to the recommendation of the national FAIRtx proposal?

    Issue 4 – totality. Are we truly going to have a full sales tax or are we going to continue limiting it to ephemerals? At this point in time, “property” – to include exchange of ownership of companies and debt notes – is exempt from sales taxes. Is this going to continue? According to FAIRtax directions, yes. Sales/purchases of Stocks and their dividends will be, therefore, untaxed, as will purchase of properties to lease to renters. The imbalance this creates is obvious to me, and needs addressed to avoid even more political resistance.

    Issue 5 – enforcement. One of the arguments presented in the FAIRtax proposal is that there would be a reduction in size of the revenue department. How, then, do we intend to enforce the collection of receipts? This is especially applicable to barter – already a fly in the ointment of income tax calculations.

    Issue 6 – fairness and encouragement. Most of the complexity of the Federal and State income tax plans come from attempts to be fair and to encourage or discourage certain behaviors. [For those who would challenge this, I point to the 1040EZ. If you wish a simple tax form and process it exists. It is not the tax that is complex.] Presently certain businesses are allowed to be sales tax exempt though they must report and pay corporate income taxes. Likewise, individuals are encouraged to purchase and improve houses through a variety of tax credits and deductions. Are the FAIRtax proponents prepared to offer equivalents to continue being fair and to encourage/discourage, or is the state willing to forego these effects?

    Note that some of the above are covered in the FAIRtax book, but it does so inadequately (IMO).

    Final note – not an issue, but a concern. I live next to the state of Tennessee. I can see the effect of that state’s revenue plan (no income tax) on a regular basis. Of particular note over the past two years has been the extraordinary number of people who pay tuition to get their children into Georgia schools. Road conditions and difficulty paying for emergency services are two more data points. It is my belief that if you want it you have to pay for it, and that most people take for granted far too much of what they get from the government. I note these because the “obvious” method of selling all this is to have the rate be less, which means reduction in revenues and subsequently services. I live in Georgia because it’s better than Tennessee, and would rather that Georgia didn’t become that state.

  49. Demonbeck says:

    Now I don’t have the patience to read the past 62 comments on here, but I wanted to add my two cents. I would love to see a consumption tax in GA, but it’s just not do-able until there is a national consumption tax.

    Auto dealers in GA would lose their shirts – among many others.

  50. John Douglas says:

    I dont understand either how Auto dealers would loose their shirts.

    I also disagree that the tax change has to happen in DC before it can happen in Atlanta. I see little progress in Washington. We need to take the initiative here to try and get the ball rolling again.

  51. Demonbeck says:

    You buy a new car. You pay taxes on the purchase of that car. Now say for argument’s sake, that Georgia’s current taxes are 6%. When you buy an auto that is $20,000, you pay $1200 in taxes. In order for us to moves to a consumption tax, we are going to have to increase the sales tax to what? 10%? That’s an extra $1000 you wouldn’t be paying for the same car in Alabama or South Carolina.

    Who is going to buy a car in GA when they can get the same car for less across the border? Think about the implications for other large item purchases…Stereo equipment, televisions, houses, farm equipment, back-to-school needs, computers, etc. Outside of personal needs, think about business needs and the costs to business.

    I understand that these businesses will pass these costs onto the customers but state taxes aren’t the real culprit here. Federal taxes is the problem. Unfortunately, there is very little progress in fixing this problem in DC and I wish that wasn’t the case. However, even John Linder and Neil Boortz will tell you, for a state to attempt the consumption tax before the feds do, is foolish.

  52. Danny says:

    Sen Douglas,

    First off, as a Covington resident, I’m proud to have you representing me in Atlanta. However, I agree with the above comment that in order for a sales tax to maximize its efficiency, it needs to be implemented at the federal level first.

    Because so many goods & services originate in multiple states, the embedded federal tax won’t be affected and I suspect that businesses would have no reason to engage in a price war, ultimately lowering prices of the actual good. If the state income tax is eliminated, would this eliminate much of the sales tax and all of the gas tax as well?

    Without reading any state version, I’m assuming that there are no provisions such as a reimbursement check for necessities as proposed on the federal level. What would be the defense to the typical obtuse class warfare argument ?

  53. atlantaman says:

    Chris-

    I realize the Fed Sales tax and GA sales tax is getting mixed into the debate here. But in general, if you believe the end tax amount is the same (reduction in income tax is offset by the increase in sales tax) would you not at least agree this puts our domestic manufacturing plants on a better footing with foreign manufacturing plants who do not have the “hidden tax” burden American companies are paying?

  54. John Douglas says:

    Danny:

    Thank you for your kind words. As for the chicken or the egg first, I am not optomistic on the federal level. I dont want to wait while honest taxpayers continue to pay for dishonest residents.

    As for autos being bought out of state, TN and FLA already have high sales taxes in place of income tax. There would have to be a system in place to collect GA taxes if a car is bought out of state. The county could collect it when the GA tag is purchased.

    Of course few details are set at this point since this is still an idea with many miles to go before implementation. But the level of discussion here is indicative of the interest in such a tax.

  55. Demonbeck says:

    Now Danny, don’t put words in my mouth. I would love to see a consumption tax here in GA. I am merely saying that it is just not do-able at the moment.

    Don’t get me involved in the class warfare department, because I think that’s a bunch of bull.

    The state income tax is about half of the federal taxes and I would welcome the extra cash flow eagerly. Of course, I also live close enough to the border that a quick trip for shopping is not a big deal. You can bet your bottom dollar that a lot of others would join me in shopping in other states.

  56. Demonbeck says:

    Sen. Douglas,

    Excellent answer on the auto situation. Goes to show why you are a Senator and I am not. (Yes folks, I can admit when I am wrong.)

    I’ll tell you what, if you can resolve the situation to where Georgia Business is not affected by this change, I will support your efforts 110%. I sure as heck don’t want to keep giving the tax man my hard earned money whether I spend it or not. If it’s gonna go somewhere, I would rather it go to the Georgia tax man, however, if I keep more of my money by going to another state – my allegiances won’t win out.

    What about smaller items or items that aren’t registered with the state? (Like computers.) How will Georgia regulate internet sales?

    It’s not that I don’t have faith in the General Assembly, I just feel that there may be too many what ifs for us to a pass comprehensive state tax reform like this. I do want to say, however, that this is the best way to fix the illegal immigrant problem. (They will have to pay taxes when they purchase anything.)

  57. Demonbeck says:

    One thing to think about – and I don’t want to put words into Sen. Douglas’ mouth – is that because of the lack of state taxes prices on hotels will go down only to be replaced by the new consumption tax. A consumption tax has not hurt Florida’s tourist business at all. To say it would affect tourism is as much a red herring as the class warfare tactic.

    Sorry, but I gotta call it like I see it.

  58. Demonbeck says:

    And another thing. (The dreaded triple post.)

    We must all recognize that it takes some guts to be the first to put this out there, but it takes a set of ten pound steel huevos to get on here and hash it out with us. Agree or disagree – You have to give him that.

    Much respect for the Senator from the 17th.

  59. JaseLP says:

    Demonbeck,

    You’re right about the tourism aspect. Tennessee and Florida have both maintained a good tourist industry with their consumption tax.

  60. Bill Simon says:

    And, you two (Demon and Jase) know this how? Are you economists? Have you performed any actual research to confirm this, or, are these statements you want everyone to accept as factual whether or not they may actually be factual?

  61. Demonbeck says:

    No Bill, I am not an economist, but last I checked, Disney World is still open and doing quite well. You don’t see people turning away from Florida’s beaches in droves either.

  62. I will ask a simple question:

    If the amount of money the government raises is going to stay the same, and the poor/middle class will pay less taxes under the Fair Tax, then who is going to pay more to make up for that shortfall?

  63. Bill Simon says:

    Demonbeck,

    Ah, another armchair observation to rely on for changing tax policy.

    Tell me, does evolution exist in your world, or are you a Creationist only guy? 🙂

  64. Demonbeck says:

    Bill,

    I am an evolutionist all the way.

    It is not a matter of who will be paying more or less in taxes, but the fact that Georgians will be getting more of their paychecks back each pay period. When one chooses to consume, then one pays taxes. When one decides to save, taxes are not deducted.

    This helps cut down on tax evasion costs and forces drug dealers, illegal immigrants and other tax evaders to start paying into the system as well. (An entirely new source of revenue that no one disagrees with!)

  65. kspencer says:

    Just for a data point, I present Tennessee (and in particular Chattanooga) vs Catoosa (and Walker) counties of Georgia.

    The state has a 7% sales tax rate – 6% on food. The city of Chattanooga also has a local 2.25% sales tax for a total sales tax of 9.25. There is also a state high-value-item sales tax. Any item sold for over $1600 ALSO gets a higher sales tax rate of 2.75% applied to the subsequent $1600. Everything above $3200 is charged at the 7% rate. That means the highest sales tax rate is 3200*9.25% plus 1600*2.75% for a total of $340 or 10.625%.

    In comparison, Catoosa County has a sales tax rate of 7% with only 3% on food. If the state rate were to increase ‘only’ another 4% (which is too low as already discussed) then Catoosa County’s rate would exceed the worst value of Chattanooga – 11% vs 9.25%. A 1.75% discount is enough to encourage some Georgians in Walker and Catoosa counties to go to Chattanooga for their small item purchases – small meaning less than $1600 for an item. This would be balanced by a 1.25% Georgian advantage on food items (8.25 TN vs 7.0 GA).

    Again, the increase needed to approximately replace the Georgia IIT would be 5.5%, bringing the Catoosa county rate to 12.5% (8.5% food), which gives a significant motivation to purchase small goods in Tennessee.

  66. Bill Simon says:

    Kirk,

    Great research. Nothing like hard facts to beat out “Neither Dollyworld, nor Disney World are closed yet with all those states’ increases…so it’ll werk jest fahn rite heah in Jawja…”

    Demon/Jase: Would you folks care to back-up your claims with any kind of research? Or, are you guys like Mark Burkhalter who operates on his “gut” rather than what the facts might say otherwise?

  67. kspencer says:

    Bill,

    I can make it even blunter.

    I pay a couple of thousand in state income taxes, and another couple of grand in sales taxes. If my local sales tax rate goes to 10% or more, I go a few miles north and spend my money in Chattanooga. The county loses $300, and the state loses $3700 (approximately), and Chattanooga + Tennessee gains about $3900.

    I think it’s called penny wise and pound foolish.

    Oh. If the legislature of Georgia passes a bill requiring me to pay money to Georgia when I shop in Tennessee because Georgia costs too much, I’ll do my best to replace the legislature come next election. And for at least the border counties I betcha it happens. If.

  68. Bill Simon says:

    If Georgia were to try to pass that type of law (i.e., requiring money owned by Georgians to only be spent in Georgia), I predict a lawsuit against the State of Georgia based on unconstitutionality.

    At one time, I would have stated emphatically that it would be the “Southeastern Legal Foundation” who would file that lawsuit.

    BUT, ever since Shannon “Yes-I-will-pander-to-everything-Christian-because-that-is-really-what-those-louts-who-drew-up-our-Constitution-really-meant-to-do” Goessling has decided to turn it into the Southeastern Christian Legal Defense Foundation, they aren’t very reliable when it comes to defending violations of the U.S. Constitution…unless, as I imply, it has to do with Christianity being attacked.

    Guess it’ll have to be the ACLU to file that lawsuit.

  69. JaseLP says:

    Bill,

    The bill that Douglas is talking about introducing, I don’t know all the facts.
    The FairTax, I only know what I’ve read in the book and heard Boortz say. I recommend you do the same…read the book. Check it out at your local library. That’s where I’ve gotten my info from.

  70. Bill Simon says:

    Jase,

    To be quite truthful, I know lots about the FairTrax, having studied it when Linder ran against Barr in 2002. At the time, I was in favor of it.

    HOWEVER, from a practical standpoint today, there is no way I would support it now. The main reason being the absolute cluster-**** that is caused by nearly every domestic improvement plan being implemented by the bureaucracy in Washington, D.C.

    Look at how much money has been buried in Homeland Security with much left to be desired in effectiveness. Look at No Child Left Behind, which, according to this AP report, has states all over the country skewing results out the yin-yang, including the stellar State of Texas.

    And, then there’s the “prescription drug plan” debacle.

    Jase, the system we have right now sucks, I’ll grant you. But, I’m not willing to trust this federal government and all these bureacrats to implement any better plan. In fact, I’ll bet they screw it up worse than the current plan.

  71. Danny says:

    Chris, I’ll answer your question, at least on the federal level. It is the belief that if we went to a nat’l sales tax corporations would no longer be paying income taxes nor would they pay the cost to manage their business around the various tax laws.

    Because we all know that businesses are actually tax collectors rather than tax payers, the expense to bring a product to the shelf would theoretically be less if they weren’t paying the price of collecting. It is believed that the lower cost of production would initiate competition between companies and thus the price of a good would soon come down.

    Each family would receive a “rebate check” every month to cover the cost of necessities, i.e. food. The amount would depend on some gov’t statistics based on your geographic area.

    Based on this premise, a low income family would pay less tax because they they’re not buying high priced items that they can’t afford. They’re paying for necessities like food & shelter, while their extracurriculars would be subject to the tax. Those with higher incomes would continue to buy their regular goods and services because once the price competition begins, things will be less expensive in lieu of the cheaper overhead during production.

    Also, people would keep their entire check. One more thing is that companies that moved overseas would be more inclined to come back to the US. From books that I’ve read, comparatively the US has some very high corporate tax rates.

    With all that being said, I’m not convinced it would work. Just because Boortz writes a book saying it will isn’t enough to convince me. Just because Linder says it’s so doesn’t make it the gospel. Saxby Chambliss told me he wants to cut gov’t waste too. Also, I’ve heard but haven’t researched it, that there have been a other countries that have adapted the sales tax method of taxation. If that’s true, I’d like to see how their economies went.

  72. Danny says:

    Now that you mention it Bill… I wondered why I heard an oinking noise four stories in the air while reading his token response email. You may be onto something there. I guess it depends on how many subisidies a Moultrie hog farmer can get.

  73. John Douglas says:

    Demonbeck:

    “We must all recognize that it takes some guts to be the first to put this out there, but it takes a set of ten pound steel huevos……..”

    LMAO, next session you’ll understand if I wear baggy pants 🙂

  74. kspencer says:

    Bill Simon, I was probably over the top in that part (the law to pursue taxes that went out of state). On the other hand given some things I’ve seen, maybe not. But that’s the minor point.

    Again, if the sales tax around here went over 10%, I’d do my shopping in Chattanooga. And I suspect i’d be a long way from alone. The loss of tax money for the county and state is bad enough. Worse, though, is the effect on businesses.

    Swagging, I’d figure that half the sales in Fort Oglethorpe and Rossville would disappear. Maybe a third of those from Ringgold would do the same. I can’t think of any business that can withstand a 25% reduction in sales, much less a third or half. And the higher the sales tax differential the worse it gets. I’d be unsurprised to see similar results around Columbus and Valdosta (among other places).

    It’s the unintended consequences that’ll hurt the most. Hopefully any plan to make these changes at least watches for the most obvious of the problems.

  75. Joeventures says:

    I just find it hilarious that a bunch of “free market conservatives” would justify their support of this scheme with a monthly welfare check doled out to everyone. No matter whether you’re rich or poor, you would be entitled to your monthly check.

    … not “socialist” at all.

    😀

  76. Three Jack says:

    Boortz (www.boortz.com) is working on a major Fair Tax Rally tentatively scheduled for May 24th in Metro Atlanta. Venue announcement may come as early as today. No matter how one feels about the Fair Tax, this will provide an opportunity to express dissent against the current failed system.

  77. Three Jack says:

    Noted on Boortz website:

    BY THE WAY!

    A listener pointed this out to me yesterday. If you eliminate the spaces in “The IRS” you come up with “theirs.” Ironic, don’t you think?

  78. Demonbeck says:

    Even if the Fair Tax cannot work for GA, we ought to at least study the implications of implementing it or the Flat tax over what we have now.

  79. Danny says:

    Joeventures, it’s not socialist at all. It’s simply not paying tax on necessities. While it may “feel” socialist, it isn’t. Redistributing income that forces those who achieve in life to pay for those who don’t…

    Your use of the word “doled” in this situation is incorrect. It’s not a welfare check because it’s not redistributed income.

  80. Demonbeck says:

    Joeventures,

    The monthly “stipend” is not anymore socialist than the annual tax return is. This check is merely a tax return on essential items that you must purchase for the basic necessities of life.

  81. lhuff says:

    I have read all of this with great interest.

    When I was in college at North Georgia, I would drive up to the Woody Gap fire tower to talk on my amateur radio. On one trip I found a locked gate across the gravel road to the summit. Whe I asked the ranger in Dahlonega why the road had been closed, he said it was because people were going up there and leaving a mess. Their “no littering” signs had done no good so they closed the road.

    That was my first experience with our government taking the lazy way out to solve problems. I was being punished for the wrong doings of others. I’ve seen this all of my life. Now that I’ve reached retirement, it continues. I guess I should expect nothing different.

    I am a moderately conservative Republican, but a sales tax to replace our income tax is a terrible idea for older citizens. I pay a known amount for state and federal income tax. I then have the rest of my income to enjoy. This is the result of result of a life time of planning. I have income from my investments and a small pension and use them to make my life enjoyable. I worked for it. I earned it.

    So, we have some people who arent’t paying taxes under the current plan. The answer is to do the work needed to make sure these people are on the tax roles or remove them as a burden. Instead, our legislature passes a do little immigration bill and proposes a consumption tax to make sure the state get’s it due from illegals. This is a direct punishment to many senior Georgians and I for one resent it.

    Illegals, by definition, are breaking the law. Maybe it’s a federal issue, but it’s a state problem in Georgia and if the federals won’t fix it, the people we hire to make our laws should. I’m smart enough to know that rounding up all of the illegals and jailing or exporting them won’t work, but stiff penalities for hiring them would. If illegals can’t make money, they won’t owe taxes and can’t afford to stick around and be a burden. Worry about your constituents instead of big business.

    Taxing people who are here illegally dosen’t make them legal, but it does legitimize them to a degree. This is just wrong. Fix the problem!

    This is very much like the proposal which was pulled because it’s an election year which would shift the burden of funding education from property taxes to sales taxes. The idea is that some people have children in school, but aren’t helping pay for it. Guess what, there are a lot of people in Georgia who are using services for which they aren’t paying. My county eliminates the education portion of my property tax and I don’t want it added back as a sales tax.

    So, we’ve got proposals for a 23% (actually 30%) federal tax, an increase of 6% in our state sales tax (so we don’t have to deal with the real problem of illegals) and a 4% increase in our sales tax to pay for education (because some people are escaping the property tax). Wow, I have to tell you, my taxes will go up – way up. The bright retirement I worked so hard to achieve is beginning to look a bit dim. Just like 45 years ago, it’s easier to put up a gate than do something about the illegal littering.

    As I stated, I’m a moderately conservative Republican and for the first time in my life, I have no one on a local, state or federal level for whom I wish to vote. I am ashamed of the Republican party. It seems to me that politicians of all ilks have become more concerned with keeping their jobs than doing what we hired them to do.

    Thanks for joining us Senator. Sorry for the rant, but after asking our legislature to fix our immigration problem, we get a watered down bill and a proposal to penalize me so that we can tax people who should have been addressed by a real solution to the problem.

  82. lhuff says:

    Danny,

    If it isn’t “doled” why not just reduce the percentage a point or two and forget sending out the checks. Sending out the checks is a thinly veiled version of socialism.

  83. Demonbeck says:

    lhuff,

    I do believe that. I would prefer to see it eliminated altogether and have the taxes lowered instead, but you won’t see that happen because special interests would wail and scream about how this is an unfair burden on our state’s poorest people. The monthly check compromises so that that argument is (somewhat)nullified.

    As for your other comments, you have obviously not read the Fair Tax book. The 23% consumption tax would take the place of our current income tax and the taxes levied on businesses. As a result, the taxes imbedded into the goods and services you currently purchase (a large part of each business’s overhead) would no longer be a part of the price. Thus, the prices of goods and services would go down and be replaced by the new consumption tax. Same goes for state taxes. As a result, your cost of living would not go up and the Social Security check you recieve each month would increase by nearly 30%.

  84. kspencer says:

    I keep seeing this word “failed”. I don’t think it means what you think it means, so someone explain to me what this other meaning is.

    See, to me “failed” means that the government doesn’t collect enough to pay for the services it provides. It may be due to poor budgeting, or it may be to inefficiencies in methodology and/or collection. But last time I looked, Georgia collected a small surplus this year. So “failed” seems to be the wrong word.

    So I need to ask – just why are folk calling the current system “failed”?

  85. kspencer says:

    Demonbeck,

    Here’s my basic problem with the FairTax. It doesn’t appear to be levelling with its readers.

    The implication of the book is that everyone gets to pay less tax. But realistically, if you’re reducing someone’s burden you’re increasing that of someone else.

    Who pays more and how much more do they pay? Ideally I’d like to see that on a per capita measure, but I’ll take knowing the demographic slice and the amount and I probably can figure that for myself.

    Secondarily, who pays less and how much less do they pay? I’d use that as a reality check – the increase to one group should match the decrease to the other.

    And yes I’ve read the book, which is why I’m asking the question. Because again the book – when it gets to such details – feels like someone’s trying to sell me “something for nothing”.

  86. lhuff says:

    I have not read the book, but joined the fairtax.org movement when it first started. I removed my support because of the checks. We are compromising away the ideals upon which this country was founded and I refuse to support any effort to promlogate this.

    I think you are somewhat optomistic and perhaps a bit idealistic. We are currently living under a reduction in tax (which the Republican congress we worked so hard to elect refuses to make permanent) and I haven’t seen any reduction in the cost of any items I buy. I understand it’s not 23%, but regardless, it has helped the economy and reduced my tax burden a few cents, but it hasn’t reduced prices.

    Thanks for your reply. We certainly need to do something, but I don’t believe the Fair Tax as it is described on fairtax.org will do the job. I’ll buy the book and read it. Maybe I’ll change my mind.

  87. Demonbeck says:

    kspencer,

    Obviously, you didn’t read the book closely enough. It goes into great detail about the underground economy which pays no taxes whatsoever into our current system. Folks like drug dealers, prostitutes and other criminals, illegal aliens and Willie Nelson (j/k – tax evaders). Their inclusion would add billions of dollars to the fold.

    Folks who hide their money in offshore accounts would become subject to these taxes when they buy things with their money in the States. In fact, imagine the influx of money that is currently outside of America into our nation’s banks!

    Imagine the amount of tourists who visit our country and the money they spend coming here. All of that would be subject to the consumption tax as well.

    lhuff,

    If your only problem is the monthly tax rebate check each family would receive under this system – then I really am perplexed by why you would oppose it. Certainly, you have more than one problem with our current complex tax system.

  88. lhuff says:

    I have several problems with the current tax system. I don’t like it’s progressive structure. I despise the “earned income” provision. I loathe the complexity. I don’t like the fact that it misses the underground economy altogether. It needs fixing and it needs fixing badly.

    My point is simple. You guys have been trying to change it for several years and barely got noticed. If you do get it changed, it will take even more years to change it again. It is extremely important that it be fixed correctly this time. I don’t want it to go from worse to bad. I believe that’s what will happen with the fair tax as I understand it from the web site. Like I said, I’ll read the book and may change my mind, but beginning a fix with a compromise keeps getting us into trouble with other issues (such as the immigration problem we’re addressing here). I don’t understand why it’s a good idea with our tax system.

    BTW, my only problem with the check isn’t the progressive bend it adds to the fair tax. Someone has to maintain a list of people who should receive a check. Someone has to fold, spindle and mutilate the check. Someone has to take it to the post office to mail it. Sounds like we might need a bureau for that. I wonder what it’ll cost. I wonder what will happen when they decide people who make over $30K a year don’t get a check… or maybe a smaller check than someone who makes $15K but a larger check than someone who makes $60K. Hmmm, sounds familiar.

    I’ll read the book while you read the history of our current tax system and the I.R.S. Deal?? It wasn’t supposed to be this way.

    You’re a good advocate for Fair Tax. It’s nice to see passion about an important issue. I just think it needs more thought and more work.

  89. Demonbeck says:

    The check comes to you based upon the size of your family, not based upon how much you make. The authors have even stated that perhaps an ATM type card would be more appropriate and easier to maintain than sending a gazillion checks each month.

    Personally, I would prefer to get my rebate annually, but let’s not pick nits here. The idea is sound and I think good. It is the only one that helps to solve the issue of non-payment of taxes on a grand scale while simplifying our tax code.

    Frankly, I am for anything that simplifies our tax code and would willingly go from “worse to bad,” at least it would be a step in the right direction.

  90. Demonbeck says:

    You definitely need to read the book. (New paperback version comes out soon!) Based upon your comments, I believe that you too will become a believer.

  91. lhuff says:

    Yeah, I realized the check was based on the size of your family. No matter the delivery method, monthly check, annual check, ATM card, it still requires a group of people inefficiently using tax dollars to administer.

    It still rewards, as Neal Boortz would call them, “brood mares”. It is still progressive (although I wouldn’t feel that way if we could do away with that darned check). The rebate just adds up to a bunch of negatives and even worse the potential for more negatives and abuses.

    Danny,
    I pre-ordered tha paperback for a May 2nd shipment. I will read it as soon as it arrives.

    Thanks for the good debate. I wish I had read the book prior to seeing this discussion. I felt a little unarmed. Good luck!!

  92. kspencer says:

    Actually, Demonbeck, I’ve read the book. Got it about ten feet from me as I write, but I’ll reread it. Again.

    See, the first time I read it I was nodding in general agreement – till I read the appendix that showed the actual calculation of tax rate. And the reveal of that sleight of hand had me go back through it with a fine tooth comb and soundly question if not reject the things I’d slid past before.

    The sleight of hand? Throughout the common number cited is 23%. Only at the end do you discover he’s using mathematical semantics – most readers would call the number 30%. On the second passthrough the second glaring sleight of hand arose – the claim it would eliminate the need for the IRS. Quite simply, bull. The nature of the system is such that MORE investigators will be required.

    There will also be a need for a network of rules almost as complex as those presently existing. No? If a church member purchases bond and donates them to a church, who pays the sales tax? (Oh, I know the answer. Stocks and bonds aren’t taxed as they’re not ‘really’ sales. And I’ll be returning to that point shortly).

    I do recall the description of the hidden economy that allegedly doesn’t pay “its fair share”, but the problem is that when I started working through the numbers two facts arose. First, there were an extraordinary number of duplications – people who fit more than one category. Second, a very large proportion of those ‘not paying taxes’ would be living almost entirely on the prebate – in other words, still “not paying taxes.” Since the lower class is still paying a lower proportion, they’re ok. And the taxes of the upper levels of income decline. They don’t? Bull. What proportion of the income of anyone earning under $100,000 (over double the median) goes to taxable goods in a year? Answer, 70% or better. What proportion of the income of anyone earning over $500,000 goes to taxable goods in a year? Answer, less than 40%. Recall that investments are tax-free. (Yes, investments, those non-taxed stocks and bonds.) The rich, then, pay less than they did. So if the rich pay less and the poor pay about the same, it means the middle class pays more. Even though the book says otherwise.

    And it completely ignores the fact that a new underground economy would emerge — If I mow your grass for the summer and in exchange you fix my car, how much does the government collect? How does it know? Oh, I have to fill out a tax form? If I don’t, how do you know I SHOULD have done so? Oops, even more enforcement officers.

    Bottom line, the FAIRTax isn’t simpler, it doesn’t reduce the size of the IRS or the tax code. It won’t stop a non-taxed underground economy from operating. It does reduce the taxes the rich pay, but it’s not the poor that pick up the slack – it’s me. I decline the offer.

  93. kspencer says:

    By the way – most public libraries in this state have a copy or two available to check out. Courtesy of your government and a surprisingly tiny proportion of your taxes.

    Kirk

  94. Danny says:

    Technically speaking kspencer, per my accountant, if I paint your house and you rebuild the engine in my car, we’re already supposed to count that as taxable income. I know, I know, it sounds ridiculous. He told me this some time ago, probably 7 or 8 years ago.

  95. kspencer says:

    Danny, yes, I know. You are supposed to fill out a 1099-B using the fair market value of the service(s) or good(s) you provide, giving one copy to the IRS and the other to the person to whom you gave the service or goods.

    The thing is, the FairTax would make reporting of this more important and at the same time would make detecting and investigating it more difficult. To be fair (pun not intended), barter of used goods would have no impact – FairTax is supposed to apply only to “new” goods. However, services are always new goods. Thus the barter example is one of the more blatant examples of why the allegation that the FairTax would eliminate the need for the IRS is absolutely wrong.

    Kirk

  96. rockyfatcat says:

    This is a good first step to prepare our state for the passage of the FairTax. Florida and Texas each do not have a state income tax. When the FairTax is passed each of those states have said they would be capable of lowering the state sales tax to 2%.

  97. Mad Dog says:

    So when will the FairTax posse grow a brain? Asks the National Inquisition.

    Nothing is more un-American that this FairTax and its mindless propaganda.

    Just say no to taxation without representation.

    Who wants to go down in history as the first elected American to tax people who can’t vote? Must be a Republican!

  98. jsm says:

    MD, does that include felons, those here on work or student visas, illegal aliens, etc.? I think these folks are taxed without representation already.

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