Isakson co-sponsors Fair Tax bill.

Yesterday, Senator Johnny Isakson signed on as a co-sponsor of SR25, the Senate version of Congressman John Linder’s Fair Tax bill. Senator Chambliss is the primary sponsor of the bill.

Sen. Isakson has never been a public opponent of the Fair Tax, but I’m pleasantly surprised to see him co-sponsor the bill.

On a related note, Neal Boortz, Herman Cain, Sean Hannity, Clark Howard, and John Linder will be at a Fair Tax Rally tomorrow evening at the Gwinnett Center. Apparently, country band Banks & Shane will perform their “Fair Tax Song.” I love the Fair Tax, but having a song about apiece of legislation is just a bit weird. I hope this rally doesn’t turn into some sort of new-age religious convention.

82 comments

  1. George Allen 08 says:

    Good for Isakson. Nice to see him support Linder and Saxby by cosponsoring the Fair Tax.

  2. Tommy_a2b says:

    Glad to see it but I am confused why Johnny keeps flip flopping on this issue. Anyone have some inside skoop on this?

  3. 4ofspades says:

    Tommy, not sure Johnny has flipped on this issue. He may not have been out in front of it before, but I don’t think he flipped.

  4. buzzbrockway says:

    As I recall, during the ’04 Senate race, Isakson said he had no preference between the Fair or Flat taxes, he just wanted major tax reform. I don’t ever recall him saying he was against the Fair Tax.

  5. larry smith says:

    I think you’re seriously confused, Tommy. Isakson hasn’t flip-flopped on this issue (or any other issue for that matter).

    He’s as rock-solid and consistent a conservative as I’ve ever seen.

  6. DTK says:

    Isakson also signed on as a co-sponsor in 2003, when he was in the House. He just didn’t play up his support for the Fair Tax as much as Cain did in the ’04 Senate race. Whether Isakson’s support for the Fair Tax was geniune from the get-go, I’ll leave that for others to decide.

  7. jsm says:

    Larry-

    I almost choked when I read your post. You think Isakson is a rock-solid, consistent conservative? Have you seen his voting record? He’s as good as anyone on the Hill at spending my money–even on senseless stuff.

    Numerous GOP officers and operatives in Georgia have been on Isakson to sign on to this bill ever since his election to the Senate. I think he may just be starting to hear the cries of his consituents.

  8. I’m glad to see Isakson and other Georgia republicans signing onto the issue that sunk Max Burns in 2004. I like Clark Howard as much as the next guy, but he should remember that when it comes to taxes, not everyone makes half a million dollars a year and would save money under this proposal.

  9. Bill Simon says:

    The Fair Tax, if ever implemented in this country, will result in the BIGGEST cluster-f*** of bureaucratic FUBAR that has ever happened, or ever been conceived.

    Merits of the proposed bill are interesting, mind you, but the implementation by THIS government would be as big of an unmitigated disaster as the FEMA FUBAR of 2005.

  10. Bill Simon says:

    Harry, I am one of these people that once I figure out the system, even though it is a big pain to grind through the process, I will stick with it until it can be proven that there’s a better way to do it.

    THIS government isn’t capable of improving it, no way, no how.

    AND, as someone who will be directly responsible for becoming the tax collector for the governent, I am also opposing it on those grounds.

  11. jacewalden says:

    “The Fair Tax, if ever implemented in this country, will result in the BIGGEST cluster-f*** of bureaucratic FUBAR that has ever happened, or ever been conceived.”

    Bill, I typically agree with you on everything. But I think this issue is where we part. If Fair Tax is implemented, could you please explain HOW it would be the “Biggest cluster-f***” ever? Not throwing stones, I just want to hear why you are so opposed to it.

  12. Bill Simon says:

    Name me 3 Federal government programs that have been implemented in the past 5 years that promised something great on the front end, and, when implemented, the program not only worked GREAT, but continues to work great to this day.

    Oh, and here are two constraints: The program had to have an initial price tag of at least 5 billion dollars AND the program had to affect the lives of at least 5,000,000 people.

    Ready? Go!

  13. Bill Simon says:

    You will note that I’m not even requiring you to provide me with successful examples of projects that are on the scale of overhauling the Tax Code. I’m just asking for examples that might be used to point out that the federal government CAN do something it promises.

    Are you pro-Fair Tax people up to the challenge?

  14. blazer says:

    Bill,

    That’s easy the Feds got Social Security, Medicare, and most importantly the prescription plan right. They are all just dandy. But seriously, I think anything would be better than the current system. And for the record I am in complete support of the ending of all three of those programs and never was in support of the Drug plan even being created.

    Johnny endorsed H25 in the house and then as a candidate continued to publicly endorse the Fair Tax; however, when he actually became a senator, he never cosponsored S25. Johnny has finally matched his rheteoric with his actions (I along with hundreds of other Georgians were glad to remind him of it regularly). I applaud him for his cosponsorship.

    J

  15. jacewalden says:

    Bill,

    Before I honor your request, I think you should answer my question.

    If Fair Tax is implemented, could you please explain HOW it would be the “Biggest cluster-f***

  16. McCain-Rice\'08 says:

    I have been some what skeptical of the fair tax proposal…Id like to see how it would effect us in the Midle class before I support it…all though I realize nearly all the candidates I have supported latley are staunchly in favor of the fair tax…but I think this idea is only popular in the state of Neil Boortz (a man I can not stand)..I don’t see this bill passing anytime soon.

  17. Bill Simon says:

    Because, Jace, it would require the correct planning and implementation of a software program that will contain something on the order of 5000 variables, along with costing about a trillion dollars of taxpayer money to get it to work with even 50% accuracy.

    All these yahoo politicians have NO concept of what feats of engineering really take to be designed properly and built for longevity. It takes a whole lot of planning and coordination of a whole lot of variables.

    NOTHING and NO ONE in any federal bureaucracy we have has ever demonstrated any competency of the type of planning and implementation that is required to implement the Fair Tax collection, accounting, and re-distribution of funds.

    AND, if they get some “specialists” from industry, it doesn’t matter…because once experts are introduced into “guvment”, their skills and abilities revert back to the guvment norm (because, they have to work with guvment bureacrats who don’t give a sh*t about concepts like “efficiency”) …and you get sh*t as your output.

    Jace, I don’t know how old you are, but I suspect you haven’t done a whole lot of living and experiencing how the “real world” of government and business works.

    How’s that Hubble telescope project working these days?

  18. debbie0040 says:

    Glad to see Isakson has come on board. Look forward to attending the Fair Tax Rally today. Will be great. People will begin arriving early.

    I support the Fair Tax. We need reform.

  19. jacewalden says:

    Bill,

    Thanks for the explanation. Now, I’ll answer your question: ZERO. I can’t name anything that the government has done that has actually worked. Good point.

    I’m only 23, but I have to pay income tax just like everyone else. Our current tax system is anything but fair, and to think that it doesn’t need to be majorly overhauled is absurd. You and I have had this discussion before. I don’t think Fair Tax will solve all of our problems, but I do think it is something completely necessary.

    With both Senators (one who is the original sponsor of the Senate Bill) and 7/13 Reps ( one who is the original sponsor of the House Bill) on board with Fair Tax, I think its safe to say that Georgia is finally taking the lead on a matter of national importance, and I’m glad to see it.

    Debbie,

    Fair Tax, Illegal Immigration, and the Ehrhart proposal…I’m counting three issues we agree on now.

  20. Tommy_a2b says:

    Bake to Johnny flip flop’n on this. There was a GA State YR Convention in Conyer (I think 2003 maybe one you other YR’s can help me with the date) and Johnny was the key note speaker. He clearly stated that he was for flat because fair tax was impossible to implement (nut shell explanation.) Then he runs for Senate and endorses it in the House. Then once elected to Senate he refuses to endorse it (quot’n Boortz.) Now he endorses itt right before this massive rally here in GA. I am not in any way saying Johnny is bad or in the wrong I am juswt trying to get some clairity. Sorry for the misssspelled words.

  21. Bill Simon says:

    Jace,

    To me, the currrent tax system IS, actually, fairer in that it makes about 50% of the taxpayers very unhappy and 50% of the taxpayers comfortable with the system and the way it screws other people. It’s a perfect balance of Good vs. Evil.

    We go implement the “Fair Tax,” and damn near 75% of the taxpayers will feel very unhappy because they will realize that their government, once again, cannot get ANYTHING right.

  22. debbie0040 says:

    Jace, three issues Wow. There are probably more we can agree on.

    Some of the county Republican Parties have a question on the Primary ballot relating to Fair Tax. They want to gauge the voters on this issue and hopefully get the attention of elected officials. The results will be tabulated but non-binding.

    This is a Yahoo Fair Tax discussion group you can subscribe to. Just send an email requesting they add you.

    [email protected]

  23. Demonbeck says:

    Bill,

    I normally agree with you as well. But I believe that this time you are incorrect.

    While the government is most efficient at finding a way to mess something up, the most important part of the idea of a consumption tax is that people will finally realize how much money the government takes from them and subsequently spends on other people. If they are reminded on a constant basis, there will be a higher demand for more fiscal conservatism in Washington and Atlanta, etc.

  24. Demonbeck,

    I do my taxes every year in April and see the exact amount in income taxes I pay right there on a sheet I sign and turn in to the IRS and Georgia Revenue Department.

    On the other hand, I have no idea how much sales tax I pay. Can you really claim to know? Under the “fair tax” the tax would be built into the price and businesses would be in charge of figuring out how much of their revenue is owed to the government.

    So, I don’t see how you can possibly be serious and think that under the fair tax we’ll know how much we actually pay. Nothing could be further from the truth. And now that you bring this up, you make a good argument against the fair tax — it’s so hard to understand that the rate will probably approach what experts tell us it will need to be to replace the current system, somewhere in the neighborhood of 50%.

  25. Demonbeck says:

    No, Chris does not. If either of you had read the book or the bill you would realize this.

    The tax would not be built into the price. Currently, imbedded taxes (taxes that the manufacturer of the product or service has to pay) are part of everything you pay for before any sales taxes are added on.

    With the Fair Tax, those imbedded taxes go away (as do your payroll taxes. As a result the cost of producng items decreases for each business and they can pass those savings along to their customers. The customer – whose paycheck has increased by nearly 1/3 – can then buy those items for less than they did previously, until the 23% tax is added to the bill. When the cost of taxes is taken out of goods and services and the 23% tax is rolled in, those goods and services should cost roughly the same as they did previously – give or take a few cents.

    In essence people, get a pay increase of about 33% and personal tax collections remain static. Beyond that, foreign nationals (legal or illegal) pay into our tax system when they make purchases, criminals (like drug dealers) pay into our tax system when they make purchases, etc. Cost of living increases yet tax collection goes up.

  26. Demonbeck says:

    Chris,

    Most people don’t pore over their taxes like you and I do. Most don’t look at the taxes taken out of their paystubs. Most see the IRS return as free money the government gives them each year.

  27. Well if they think their tax return is free money they are going to hate the fair tax, don’t you think?

    First of all, I refuse to read a book that says 23% = 30%.

    Here is my all time question to the fair taxers that they can’t seem to answer:
    If they promise that revenue will remain more or less equal and that the average Joe will pay less in taxes, who will pay more?

    Now, keep in mind when you answer this question that under the fair tax corporations will no longer pay any taxes.

    So, corporations will see their taxes cut to 0%. The Average Joe will see his taxes go down some amount. Who will be paying more to keep it revenue neutral?

    And please, don’t say drug dealers and foreigners. There aren’t enough drug dealers to make a difference (and if they purchase a lot of their goods in an underground economy just whose going to enforce the fair tax there?). And as far as foreigners go, legal ones already pay income taxes now (so theoretically their burden would also go down just like the average Joe) and illegals either already pay or don’t have the purchasing power to increase the tax collections that much through a fair tax.

    So, to keep the system revenue neutral, who exactly will be paying more?

    (The real answer of course is the average Joe, but the Fair Taxers, even though they can read a book, haven’t figured this con out yet).

  28. Mike says:

    Not 100% on the Fair Tax yet, but the current system has to change. Give an average return to 10 different CPA’s and you’ll get 10 different amounts owed to or due from your favorite uncle. Ask the IRS a fairly compicated question, and you’ll be lucky to get the correct answer half the time. Bill–There is no figuring out the system. It’s all an educated guess. We can do better. Much better.

  29. Bill Simon says:

    Demon

    Do you know what the Latin phrase “ceteris paribus” means? That is the condition under which the idea of the Fair Tax is operating. It is a fallacy borne of ignorance by people who have a lot more money than sense (common, or otherwise).

    The Fair Tax bill and book both ASSUME that all other factors will remain the same if the Fair Tax is implemented. Meaning, purchase volumes of final products will remain the same as they are now.

    However, once you change how the cost of an item is presented to the buyer, buying behavior WILL CHANGE.

    For instance, let’s say you’re buying an electronic gadget at Best Buy in Cobb County. Total walkout cost of the item to you is $74.19, including the 6% county sales tax. That means the price of the item is $69.99 now.

    Under Fair Tax, while the price of the item will be $56.90 ($66.99 divided by the utopian Fair Tax rate of 23% + 100%), a LOT of buyers will choke at paying a 23% sales tax levy on that, regardless of how much money they have rattling around in their bank accounts.

    So, if buyer behavior blips 1%, or 2% or worse (in that rates of purchases of non-necessities reduces by a certain percentage below what the rate is now), guess what? The guvment doesn’t get it’s anticipated revenue…because ceteris paribus doesn’t apply.

    And, finally, this means the rate for Fair Tax will have to INCREASE because all these other buyers decided not to buy at the same consumption rate they did before Fair Tax was implemented.

    Go ask Neal Boortz if he even knows what ceteris paribus means, much less has a concept of what happens when things don’t workout the way they expect them to.

  30. Mike says:

    Bill–Do you really think that credit crazy Americans will suddenly start saving? Even if a small percentage do, their savings will go in to a bank, stocks, etc. further fueling the economy. Like I said, I’m not sold on the plan, but it sounds better than the current system. Then again, it appears you’ve studied the subject much more than I.

  31. kspencer says:

    The fair tax is a promise to get something for nothing. I’ve argued against it many times and many ways, so I’ll just argue this time by presenting one specific element – and I’ll use SB25 instead of the FairTax book.

    Your federal government of 2005 spent about 2.472 Trillion dollars. Approximately half of it would be subject to sales taxes – the rest is payroll and items exempt (grants, etc) from the sales taxes. If the FairTax were in play in 2004, the expenditures would have been about 2.941 Trillion Dollars.

    Passing this bill, then, would mean an increase in the federal government budget of 20% (payable through increased taxes /AND/OR deficit), or it requires a substantial cut in government expenditures. Those who think government will shrink are invited to look at the last six years of revenue cuts and bloating budgets and explain why they think the leopard will change its spots.

    There are a lot of problems with FairTax. I’ve given you one, but ask you to keep in mind: There Ain’t No Such Thing As A Free Lunch.

  32. Good point kspencer.

    The issue comes down to this: If the Average Joe pays less, who pays more?

    The real answer is: The Average AM 750 Radio Host pays less, people who are not nationally syndicated radio hosts pay more.

  33. Mike says:

    I figured that the gvt would be exempt. If not, that would be a major drawback. How bout just a plain old flat tax with the condition that any politcian who recommends an increase in rate or proposes any deductions be summarily executed.

  34. Dawgsrock says:

    Question.

    The Fair-tax is a consumption tax. How would the budget based off a consumption tax. Ask some of the local school boards what happens when the SPLOST dollars aren’t what they projected when spending slows.

    I will admit that I haven’t read the book. It might be covered in there.

  35. debbie0040 says:

    Just got back from the Hannity/Reed event. Sean compared Ralph to Reagan.

    Was planning on going to the Fair Tax event but Sean announced around 7:00 p.m. so many were already there the Gwinnett Fire Marshall had stopped more people from going inside. People were being turned away.

    Has to make politicians take notice.

  36. Three Jack says:

    Fair tax event drew 4500 very enthusiastic supporters + estimated 2000+ prevented from entering by the Fire Marshal. Congressman Linder announced a meeting (finally) with President Bush to discuss making HR/SR 25 the issue for this year’s elections. This night will go down as the beginning of the end to the IRS as we know it.

    While it may be argued that government cannot implement the Fair Tax, there is no doubt the 60,000 page code now in effect is a failure by any measure. The Fair Tax should be THE issue for Republicans seeking office at every level this year.

    AJC story link — http://www.ajc.com/news/content/metro/gwinnett/stories/0525gwxrally.html.

  37. Three Jack says:

    One other comment on the Fair Tax Rally; had it been an illegal immigration rally supporting either side of the issue, media coverage would have been extensive. 7000+ have not attended all immigration events combined in GA yet they are covered by all media outlets.

    Bet a message was sent tonight to cover future events of which there will be plenty throughout the U.S.

  38. stephaniemills21 says:

    I love how some of you republicans just make sh!t up. Three Jack, just one of the rallies had a few over 7000 folks in attendance. Try 5X that.

    Just take a look at a previous thread on the very subject. Oh, and do not say you did not know, you COMMENTED on the very issue at hand.

    http://www.peachpundit.com/?p=1056#comments

  39. Once again, this issue worked out so great for Max Burns that I hope Republicans do nationalize it.

    I look forward to Republican candidates being asked why a gallon of milk (or gas) will be 30% more expensive.

  40. Demonbeck says:

    Chris, it won’t be 30% more expensive.

    The Fair Tax bill is revenue neutral for the federal government. While taxes are cut completely for businesses, they are imposed on the federal government. When the imbedded taxes for products are taken out, they are replaced with the new, national sales tax – meaning that cost does not change. As a result, this 20% increase in federal spending will not occur.

    Beyond that, I have answered your question before, so don’t say no one has ever taken the bait. The underground economy in America is overwhelming and so is tourism in America. Currently, trillions of dollars in earnings go untaxed each year (including drug money and under the table wages to illegals.) That money will suddenly be subject to the same taxation as everyone else is.

    I think it is pretty much a given that all Republicans would like to see a fairer distribution of taxes amongst Americans. This bill, by making taxes voluntary (Don’t want to pay taxes? Don’t spend any money), redistributes the tax burden on the purchase of all non-essential items.

  41. kspencer says:

    Demonbeck, wrong.

    1 – “it won’t be 30% more expensive”. 23% of what the retail seller takes in from sales will go to the government. The company can leave the price as it is and eat part of its profit, or it can increase the price of its goods by 30%. The expenses the company’s incurred at time of changeover are historical – already committed and/or paid, so the choices are loss leader or increase price. My company – I do consulting – will be increasing the price I charge as I get almost no savings from raw material pass-through. I’ve shown before that since the payroll portion of costs won’t decline the costs passed through won’t be the full 23 extrinsic /30 intrinsic percent margin. Everything will cost more, and a lot will cost the full 30% more than it did before the change.

    2) Government paying taxes means government costs go up. Which means that “revenue neutral” is misleading. Again, the choices are reduce services, increase taxes, or increase the deficit rate.

    3) Underground economy – you’re arguing from the book. The book references studies which DO NOT SAY WHAT THE BOOK’S AUTHORS CLAIM THEY SAY. The underground economy is made up in large part not of drug dealers and other “hardcore” criminals, but of barter and unreported fairly innocent income. The ubiquitous yard sales, bake sales, raffles and car washes for school and church organizations. Mowing the elderly neighbor’s lawn. THESE are the majority of the “underground economy” according to the studies the FairTax authors cite. Oh, are drug dealers part of it? Yep. Did you know that many drug dealers pay income tax? apparently not. Oh – and… TOURISTS ARE NOT PAYING TAXES?? Who are you fooling? I spent two weeks in another state. That means for two weeks I was a tourist. I sure pay income tax. Oh, you mean international tourists. We’re going to charge the foreigners for our gain. Right.

    One of the arguments claimed of FairTax is that it’s ‘simpler’. Read SB25 – honestly, thinking about how to implement it – and see if you still agree. If you want a simple tax filing, fill out a 1040EZ. The complexities are due to exemptions and clarifications. SB25 includes exemptions and clarifications that are ripe for just as much complexity. You want examples? OK.

    — Hobbies. Purchases for hobbies are subject to sales tax. Unless you sell them, in which case the sales taxes paid can be rebated. Paperwork and receipts, and don’t forget the qualifiers. Oh, and don’t forget that if you sell them YOU are responsible for collecting and submittinng the sales taxes.

    — Investments. Investments are not subject to sales tax. Investments are loosely defined as purchases made with the expectation of increasing wealth with minimal maintenance effort. So… are comic books investments?

    — Membership dues for a non-profit agency are not subject to taxes. However, materials provided from that agency to members other than as required by law are taxed on a fair market value basis. In other words, if your organization sends you a monthly magazine, they have to pay sales tax on that magazine. Do church bulletins count as such? Don’t know yet – that’s going to have to be clarified (including what does and does not count as exempt).

    — “Is this purchase sales tax exempt?” Every single time. Good faith errors by the seller will be a defense against penalizing the seller – but good faith must be demonstrated, it is not assumed. By the way, that’s more expense at the store eating into that so-called savings.

    Finally, “it’ll get rid of the IRS”. Yep, to be replaces with the National Sales Tax Agency. It says so, right there in SB25. The NSTA will be required to make rules for process and clarification, to investigate and pursue tax evasions and frauds, to process the NST in states which do not comply by having identical rules (say, by making food a different rate from other goods, or which don’t tax sales of houses and cars), and so forth. In other words, it’s the IRS by another name.

    So… FairTax isn’t simpler – there are several exemptions already present that introduce complexities, and most will need clarification. It doesn’t reduce how much we pay – though someone has to pick up what corporations quit paying. It “gets rid of” the IRS by changing its name. It forces government (state and local as well as federal) to spend MORE than it does at present.

    It doesn’t do what it says it’ll do. Why exactly do I want to support it, then?

    TANSTAAFL. There Ain’t No Such Thing As A Free Lunch. If it looks too good to be true, it probably is. You can’t get something for nothing.

  42. Demonbeck says:

    2) Government paying taxes means government costs go up. Which means that “revenue neutral

  43. Demonbeck, you are not making sense.

    There is no such thing as a free lunch.

    If corporate taxes are cut to 0, do you really think they will make enough money from foreigners and the “underground” economy for your overall taxes to go down?

    This is what I don’t understand. My personal priority is to pay the lowest taxes possible. I know that will come as a surprise to Bill Simon!

    But back to the point, I want to pay the lowest amount possible in taxes. I don’t care if this is through income taxes, sales taxes, property taxes, whatever, as long as it is low. It seems the Fair Taxers are saying we hate the IRS and income taxes so much that we will replace it with this new system even nobody can give us a straight answer on whether our overall tax burden will increase.

    1040EZ is so simple to file. It takes about 30 minutes from start to finish to complete and you know how much taxes you owe (or what kind of refund you’re getting). If you think you’re entitled to some exemptions, you can file the longer form and spend a little extra time to get more money back. What is so hard about that?

    Right now most filers can pay a pretty low rate with an easy to file form (1040EZ). Why you think things will be simplified when they have to save receipts and if they own/work at a business start keeping detailed tax records is beyond me.

  44. kspencer says:

    “… because 23% of their operating cost is taxes…”

    *blink*

    no. Not even close.

    At best, 23% of the NON-SALARY operating costs is taxes. Let’s do this in simple math.

    A current business sells widgets. 40% of the price is labor, 50% is supplies/equipment/buildings/etc. 10% is profit margin of which we’ll assume 50% is taxed. To follow the math, a Widget sells for $100. Labor gets $40, non-labor gets $50, the Federal Government gets $5, and “we” get $5.

    Fairtax goes into effect. Labor gets to KEEP ALL ITS MONEY, so it’s still $40. Let’s assume you’re right and non-labor drops by 23% – a full passalong. Labor then is $39.50. I want to keep my $5 profit. So I need to keep $79.50. Unfortunately, that’s ONLY 21.5%. I have to sell my widgets for $103.25. But if I’m doing that, then how is everyone else reducing THEIR costs by the full 23%? They can’t AND keep the same profit margin.

    The cost of everything goes up, or the companies make less profit. Or labor doesn’t get all the pay from its payroll. There are no other choices.

  45. kspencer says:

    Demonbeck, “How much do businesses currently spend on complying with our current tax laws?” Nice attempt to change the subject.

    The change alone is going to make accountants rich as everyone has to work against their instincts. And send bookkeepers to training sessions. Oh, and accounting software manufacturers have to make extraordinarily hasty modifications. (If that last doesn’t frighten you, you’re not working with an automated accounting system.)

    And that, too, is immaterial.

    An EXPLICIT CLAIM of FairTax is that it’ll be easier. I demonstrated otherwise. Yes, we presently have much paperwork. We change, and we’ll still have a lot of paperwork plus a bunch of confusion while the change is made and internalized – and we’ll have the bunches of paperwork even after the change confusion is ended. Promise broken.

  46. Demonbeck says:

    Oh Jesus Christ, kspencer. I picked 23% for the sake of argument.

    That $3.25 certainly doesn’t look like the 30% cost increase that you were claiming. Don’t forget that the profit you take home as the owner of the company is not taxed either. So instead of the % cut the feds take from the top of your companies earnings and then the % they take from your personal earnings, you get to keep all of the profit.

    As a consumer by your example, my paycheck grows by about 30% while my cost of living increases by 3.25% I’d take that any day of the week.

  47. kspencer says:

    DemonBeck,

    Since – as I showed two messages ago – the tax savings will NOT be the full 23% for any business which includes labor expenses, the cost of goods to government (just like everyone else) will increase. I will admit it’s not the full 30%. It will “only” be the amount businesses increase to maintain their profit margins plus the retailer’s sales tax burden, and that “only” on what isn’t tax exempt. Honest guess? “Only” a 5% increase in the government’s budget – excluding inflation effects. At 3.5% (official) inflation, that only has the revenue requirements of the US Government increase by 8.675%.

    TANSTAAFL

    Kirk

  48. Demonbeck says:

    I did not change the subject, kspencer, you said that businesses would have to spend a lot to comply, I asked, how much do businesses already spend to comply. I am trying to compare oranges to oranges, not add oranges to apples like you.

  49. Demonbeck says:

    Chrisishardcore,

    If you want to pay as little taxes as possible, then you are not filing a 1040EZ. How much time do you spend doing your non 1040EZ. How much do you pay your accountants to figure it all out for you?

    Collecting is simple. Currently cash registers have to account for 5, 6 or 7% of the purchase price for taxes. Do you see these companies bitching and moaning about the $$ it will cost to comply when a SPLOST is approved? No, you don’t. Because it is just as simple to charge 23% on a purchase as it is to charge 5%.

    As for exemptions, frankly, I don’t know what exemptions are in there. Personally, I would rather do away with all of them. I am merely speaking about this issue from a theoretical standpoint.

  50. Demonbeck says:

    spencer,

    You are already looking at a 3.5% increase for inflation, so don’t go and inflate any cost increases for government spending, because you’ll see that with or without a Fair Tax. By your own admission, the expenses will go up 5% for the government, so I’ll assume the same Cost of living increase will change for everyday folks.

    If you got a 30% raise, would you spend more or less? Would the bulk of America spend more or less? Add to that the wage earners who currently don’t pay into the tax rolls and if it doesn’t account for that extra 5%, I’ll eat my hat.

    Add to that all of the corporations who would come to America to escape the burdens of taxation and all of the new jobs they would create in America as a result.

  51. kspencer says:

    You cannot get something for nothing. You say the ‘current non-payers’ will cover the 5% – ok, I disagree because I don’t think we’re going to catch all the barterers, and the screams when a church bake sale gets a tax bill will echo for hours in congress. But I can’t prove you’re wrong, so I’ll accept the 5% coming from catching the so-called underground economy. That still leaves the base question:

    If you’re keeping more money and the corporations are keeping more money, who is making up the difference so the revenue change is neutral?

    Somebody is footing the bill. All I hear from FairTax is “Don’t worry, YOU get to keep your money, it’s coming from someone else.”

    On some specific points:

    23% has nothing to do with the number you claim to have made up. 23% is the first year tax specified by SB25.

    In the 1983 survey of tax compliance costs it was determined that approximately 42% of the revenue collected from business income taxes was expended in compliance. The IRS cost (that was, total IRS budget for processing, collecting and pursuing revenue inclusive of forms) was 22%, which means the cost for a business is 20% of what’s yielded. The highest current business income tax rate is 39%, of which 20% is 7.8% of tax revenue yielded. The average business pays less, as less than 20% of all businesses fall into the highest tax rate – but we’ll apply it nonetheless. If the average business has a 10% pre-tax net profit margin, then it pays approximately 0.78% of it’s gross in taxes. Rephrased, the cost of calculating and paying taxes is 0.0867% of its total expenses. As an aside, the Tax Foundation and other astroturfs for FairTax all still use the 42% value. This despite the fact the IRS has reduced its cost from 22% to 15%. There’s been no decent survey of the field in the last 20 years, so it’s guesstimated by most in the field that the savings due to increased computer power is balanced by increasingly complex tax codes.

    Sales tax, especially when part goes to state and part to fed, and the obligation of validating tax exempt status lies on the retailer, will cost approximately the same. I note as a single example that even though businesses don’t have to collect payroll taxes they still have to report payroll per individual so sales taxes can be allocated to FICA appropriately.

    The subject was that FAIRTAX will do away with the cost. The paperwork won’t go away – there is no savings. Wanting to know the exact cost does not change the fact that FairTax still requires paperwork and processing. you’re right, it’s not really a change of subject, it’s an attempt to obfuscate through focus on minutia.

    Demonbeck, your last post to Chris means this is the last response I’ll make to you. You just made it evident you’re arguing based on what you THINK the stuff means. You’ve not read the bill – SB25 or its house version. You haven’t even really read the book, and certainly haven’t pulled up a calculator or spreadsheet to crunch numbers nor read the sources the FairTax authors cite – or miscite, often enough.

    If everybody’s paycheck jumps 30%, you will see the cost of goods jump almost as much while EVERYBODY tries to get their hands on that “free cash”. What is being missed is that the government says they’re still going to get the money, just through a different mechanism. If you make poverty level, you get a rebate (after filling paperwork) so you’re not paying. If you’re rich enough to have a bunch left after paying for what you need, you don’t pay as much. If you’re a business you no longer pay. So just exactly who pays for what the rich and the poor and the businesses no longer pay?

    Me. And I refuse the privilege of paying everybody else’s share.

    TANSTAAFL,

    Kirk

  52. Demonbeck says:

    “I refuse the privilege of paying everybody else’s share.”

    Newsflash, you already are.

  53. Michael C says:

    First. Bill, yoiu are right The Government will do everything possible to screw this up. Its the best thing they do. Screw things up. Thankfully HR25 has been studied and written by the private sector. Our job would be to insure that won’t happen. I grant you that is a very tall order. If your only opposition is the ineptitude of government then why do you blog? If the bill has merit then fight for it. Don’t avoid it because of the ineptedness of Government. We wouldn’t be here venting on Peach Pundit if we followed that model.

    Second, Corporations and businesses DO NOT PAY TAXES they merely collect them. The burden is past onto the consumer in the form of higher prices, lower wages for workers, and lower returns for investors. . Compliance cost will go down as companies will only have to collect the sales tax which they are already doing. Companies no longer will have to comply with any other tax will actualy will recieve a fee for collection. States recieve this fee as well for collection.

    Third, the fair tax is only revenue neutral for the first year of transition. Every year after that the system is expected to gain revenue.

    Fourthly, 23% and 30% are both right repectively. 23% is quoted tax-inclusive while 30% is quoted tax-exclusive. Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100. Spend that same $100 under a sales tax, you pay that same tax of $30, and the rate is quoted as 30 percent.

    Lastly, I encourage all to read the book, (preferably the expanded paperback) or simply visit http://www.fairtax.org and get the info for free.

  54. Michael C says:

    kspencer said

    If you’re keeping more money and the corporations are keeping more money, who is making up the difference so the revenue change is neutral?

    If we keep more we spend more which equal more revenue. If corporations keep more they expand (spend), pay employees more, who in turn spend more with there increased wages.

    Thats your increase in revenue.

  55. kspencer says:

    Michael C,

    Pardon while I set up a simple model – and you’re welcome to add the complexities to ‘fix’ it.

    Let us assume I “earn” 10,000, of which 28% is withheld for income/payroll taxes. I get to obtain $7,200 of goods by spending it all, and the federal government gets no more of it – it got $2,800 from me.

    FairTax passes. I get to keep $10,000 of my payroll. If I spend it all, I get $7,700 worth of goods and the federal government gets $2,300.

    So from where does the Federal government get the missing $500 in that first, allegedly revenue neutral, year?

    Note that I’ve already shown above that my $7,700 is actually not buying $7,700 worth of goods as the companies have had to raise their prices to maintain their profit margins. But even with that it is more than the $7,200 worth I got before fairtax.

    Please realize that I know I’m getting the poverty prebate, but that only increases the amount of money the federal government needs to collect up front. So again,

    Who pays that missing $500?

  56. Michael C says:

    For one, I like it when the government gets less money. Thats a win win in my book. The government can afford to do with a little less. Less for them to waste. But the government does not lose $500 in your scenarior. It is picked up in several ways.

    There is an important concept you are missing. Embedded taxes in goods and services. The cost of those goods will go down 20 -30% because their are no more embedded taxes. Wages will also rise. How much prices fall and how high wages rise depend on market forces.

    History shows that if you reduce taxes, people will spend the savings, generating more revenue for the government. People will have more money in their pocket. They will spend, invest, and save this money giving us a much stronger economy.

    Plus the FairTax applies to a consumption tax base roughly twice the size of our current income tax base. More revenue again.

    I have no misconceptions that this transition will be easy. But for the longevity of the republic I see no better alternative.

  57. Demonbeck, it took me about 3 hours to do my taxes with TurboTax, but I keep good records and can download most of my transactions (financial and otherwise) via online banking/investing etc.

    I purchased a house this year. Part of my decision when making the choice to purchase vs continue renting was the exemptions that are in the tax code that become available to me because I’m paying property taxes, mortgage interest, etc.

    So, I’d prefer to keep those exemptions. I don’t see how any type of transition from the current system can be smooth when some people like me have made 30 year decisions (mortgage) based on the current system.

    Right now my $1,000 mortgage payment really costs me about $800. If that exemption is eliminated, does the value of my house also go down 20%? This is such a dumb idea. If you really want tax reform, why not just consolidate rates, raise the standard deduction and give people easy to adopt credits for things like home mortgage interest and dependents (children).

    I’ll tell you why. It’s because people who make big bucks use a very small percentage of their income for consumption. Whereas most people (including most of the commenters on this blog) use a large percentage of their income for consumption. Right now we’re taxed on income so we all end up paying close to the same percentage in total taxes (especially when you add current consumption taxes like sales tax, which hardly affect the well off but can add up for lower earners).

    So people who consume a small part of the income would like to transfer taxation to that smaller portion — even if the tax rate is much higher than advertised. I bet millionaires like Boortz, Howard and Hannity know the real rate won’t be 23/30 but closer to 45%. But check it out. If I make $50,000 and spend $45,000 in a year, my current income tax rate is ~25% and I pay the federal government $12.500. Under the fair tax I’d be paying a 31% included tax, so I’d pay $13,900.

    Now Clark Howard: He makes $1,000,000 a year and spends $200,000. Now he pays $350,000 in income taxes. Under the fair tax, even with the obscenely high rate that would be necessary Clark would only pay $62,000 in taxes. Now I’m all in favor of tax cuts, and if I made $1,000,000 a year (or even $200,000) I’d probably be in favor of this type of plan (if I weren’t a Democrat). But why should my taxes go up 11% so Clark’s and other millionaires can see their taxes go down 75%?

    For the vast majority of people on this blog, in this state and in this country there are proposals to greatly reduce our taxes and make the system more fair. Boortz, Linder, et all know that the tax rate would have to be ridiculously high to maintain current revenues — and yet many of these people (Boortz especially) have been campaigning for years to greatly reduce or eliminate the federal government as we now know it. Hasn’t it occured to anyone on this site that the Fair Tax rhetoric may be a back door to eliminating government programs that they haven’t been able to eliminate through current political channels, even with a conservative President and Congress?

  58. In other words, relating to my prior comment, can’t you fair taxers give up the conceit that everything will be revenue neutral and dandy? We all know that this is a backdoor attempt to reduce the size of government. Gee, I wonder why Max Burns lost? Is it because the average Joe doesn’t want to pay the same amount of taxes that they pay now for greatly reduced services — and was smart enough to figure it out?

  59. kspencer says:

    Michael C – no. I’ve not missed the savings. I’ve walked through the darn thing using some full accounting books of existing companies. Look above at my example to Demonbeck and you’ll see an example of why. Heck, I’ll restate it:

    A company’s expenses only reduce by the cost of goods and services purchased. Personnel expenses do not decline. Thus the businesses prior to the retailer will not pass along a full 23 (or 30) percent reduction, but rather only a portion. For this reason, the retailer has a choice of cutting his profits OR raising the cost to the consumer sufficient to meet the sales tax requirement. On this basis alone, the cost of goods and services increases. If the cost of goods increases, then the purchasers of those goods are not getting a savings.

    Try it yourself. Go to your company’s books. Cut every non-payroll expense by 23%. Cut your gross income by 23%. Calculate your net income – modified gross minus (modified nonpayroll and unmodified payroll). Compare it to your net income after taxes. I’ve made a wager 11 times that the fairtax net income is less than the original, and only lost that once — because the company was single owner business that didn’t technically have a payroll, but paid the owner out of “profits”.

    I’ve read the book and website. I’ve analyzed the submitted bill. Worse, I read the citations and links and supplements to the book and the website. I cannot decide if the authors are ignorant or scoundrels, but they keep promising something for nothing.

    Want me to think I might be mistaken? Show me how (G-(E+P)-T)

  60. Three Jack says:

    stephaniemills… says,

    “I love how some of you republicans just make sh!t up. Three Jack, just one of the rallies had a few over 7000 folks in attendance. Try 5X that.”

    Me, I love how you dimwits exaggerate. AP says 40K, AJC says 5k – 10K, you say tomato, I say tomAto. The point is media covers a bunch of illegal invaders who benefit from the current tax system while practically ignoring 7000+ legal residents determined to change the system so that the invaders will have to pay their fair share. That ain’t “making shit up” stephanie.

    But as I stated, it is only a matter of time until national media is forced to cover tax reform rallys because it will be the next big movement.

  61. kspencer says:

    sigh – let’s try this again. Sorry, it seems to have cut me short.

    The net after tax income of a business pre-fairtax can be formulated as:
    G-(E+P)*(1-T)
    G = Gross Income
    E = Nonpayroll expenses to include benefits such as medical
    P = Payroll expenses where what currently goes to IRS goes to employee.
    T = Tax rate in decimal form.

    The net tax income of a fairtax business with the SR25 tax rate of 23% can be formulated as:
    .77G-(.77E+P)
    Note that it’s assumed gross stays the same, and that all expense sources also cut their product sales by 23% to reflect the savings.

    Assuming a ‘reasonable’ 10% profit margin (that is, 90%G =(E+P)), then for FairTax to work – that is, for businesses to sell their stuff for less and still make a profit, the tax rate (T) must be large enough that:
    (G-(E+P))*(1-T)

  62. kspencer says:

    CRAP – ok, Erick, all I’m trying to type are basic algebraic formulas. I don’t know why it’s stopping partway. I’ll try in words.

    Mathematically, the 23% FairTax allows businesses that are earning a 10% pre-tax profit margin to ‘pass along all the savings’ (cut product prices by 23% or more) if payroll (excluding benefits such as medical care) is less than 7% of the gross IF the income tax rate is 39% (the highest rate, though not the highest income bracket). At the “best” business income rate of 27%, the fairtax produces savings if payroll is less than 5% of gross.

    Most businesses I know have a much larger payroll. Thus most businesses will have to cut payroll or cut their profit margin or increase their product price to make the same profit.

    Oh – I know folk will talk about how the breakeven place for the profit MARGIN is higher. Almost double, as a matter of fact. Which will matter SO much to banks and insurance agencies and brokers and realtors and, well, all those places where personnel expenses are a LOT more than a quarter of the total.

    Savings. Bah.

    TANSTAAFL,

    Kirk

  63. Michael C says:

    chrishardcore, interest rates will drop by approximately 25% because of the reduction of overhead to lenders and banks. So the answer to your question, refinance your loan after the fair tax and lower your rate. Use the difference to invest in growth or large cap mutual funds for a 12% (long term) ROI, instead of loaning the Government your money by overpaying your taxes to get a deduction. You have lost the use of that money by giving the government an interest free loan. A house is an investment not a tax deduction.

    kspencer, I am doing a little research. I will respong in kind soon.

  64. Michael C says:

    Kspenser, Small businesses employ the majority of Americans. 89% of all employers are small businesses. The majority of the owners of those small businesses are taxed inividually on the profits. Say a business/owner makes a $200,000 profit. Under the current system the company/owner’s tax liability is roughly 33% or $66,000. Now under the Fair Tax that money is returned to the business/owner.

    Now I don’t quite follow your logic about increased profit margns etc. Honestly I was never that good at algebra. But if I was a small business owner and I had $66,000 more under a new tax system I doubt I would need to raise my prices. In fact I might lower them to increase my volume, Hire more workers to become more service oriented or expand into new areas. Heck I might just blow it all on useless, meaningless things, which under the Fair Tax generates more revenue for the government.

  65. stephaniemills21 says:

    Oh Wee Jack,

    Exactly where did I exagerate? The photos on the AJC site showed that there were a lot more that the 5-10K they initially estimated. Now, this may be novel to you, but before I commented I did something a little shocking – I looked up what the real numbers were, and did not just spout out some ill informed drivel. The AJC story that ran the next day used “at least 40 thousand,” the AP used consistently used 40K, and I even found a Gainesville Times story that said 50K, which is what I think i remember the final estimate being. Research can be a great thing. You might want to try it sometime.

    Now, as far are news coverage goes for the Fair Tax “rally” the two are not even comparable. The Fair Tax “rally” (or as i like to call it, Fair Tax Book Promotion Tour) was a single event in a single venue. The immigration rallies were held across the country and MILLIONS of people participated in them.

    Also, I was even conservative in my comment, and only suggested 35K just to be fair to you. (5 X 7000 = 35,000) Now, you may say “tomAto” but 1+1 still equals two, and any way you put it, your statement was nothing but bull and whiny.

    And why must you resort to name calling. I said nothing about you personally, just called your statement out for what it was. Do you have some insecurities? Hell, I bet you are even one of those guys who tells their girlfriend that four inches is six inches.

  66. kspencer says:

    Michael C,

    Small business, large business, it doesn’t matter. If the expenses of the business are more than 10% payroll related, the business LOSES PROFIT on fairtax. Since you say you don’t do algebra (odd, since it’s a requirement of every student graduating from high school in Georgia), I’m going to ask you to take it to an accountant. Ask them to run the numbers on a business ASSUMING that all things purchased decrease 23% and the Gross income is reduced by 23%. You’re wanting an honest comparison of corporate profits under current tax law vs being under FairTax assumptions. You’re going to discover that if payroll is more than 10% of expenses the company has a drop in profits. Not additional money. Less money.

    caveat. If the profit margin is more than 20%, the allowable proportion that is payroll starts climbing. Most businesses aren’t going to get profit margins of that size.

    And by the way, most small business owners pay themselves in the payroll step, not from profits. Paying from profits means the government takes MORE money. Say the owner takes $200,000. If it’s as “payroll”, then the business profit is that much less and the company’s taxes are lower. If it’s after profit, the tax is for $200,000 MORE – and the corporate tax is usually higher than the individual tax.

    If it looks to good to be true, it probably is.

    TANSTAAFL,

    Kirk

  67. Mad Dog says:

    Tourists … hidden costs … prebates …

    Labor costs will only decrease by about 7 percent IF FICA is repealed for the FUtax.

    To decrease labor by a total of 23 percent will mean reducing staff or wages by 16 percent.

    Fixed business expenses, long term borrowing, will remain the same under the FUtax. The cost of re-issuing bonds will prohibit refinance.

    Closing costs and points will prohibit refinancing a house. (IF interest rates remain below 9 percent). If interest rates fall as unlikely as that will be, then it becomes senseless to pay points, closing costs, and also add years to your mortgage. (Most people add years when refinancing. Not everyone. Just most. Try getting a 23-year mortgage.)

    Rents will not change because long term borrowing costs will remain fixed.

    Energy costs will just continue to rise as MORE foreign oil is used than domestic oil -AND -AND -AND prices are set in the world market that will NOT have any hidden costs REMOVED. PLUS foreign oil will not be assessed a new sales tax at the final user.

    NO one will get an increase in spending power. If real currency in circulation increases 23 percent, the value of currency will fall 23 percent. Market fundamentalism says so.

    Under this plan, non-currency based wealth will increase. Land. Gold. Diamonds. Those do not have multiplier effects on capital investment. MEANING; those are not types of capital used to leverage economic activity. Those are the things the wealthy, like Paris Hilton, buy with money to HOLD against inflation, economic crisis, and monetary collapse.

    If prices remain exactly the same after the FUtax is imposed, then corporate REVENUE will fall. If fixed costs and variable labor costs (wages) remain the same, prices must be increased to cover existing expense stream, maintain cash flows, and feed the profit hungry owner/investors.

    If GNP is Quantity sold times price, then a price reduction of 23 percent would mean GNP would fall 23 percent.

    I use GNP since the formula is so easy to understand. GDP is statistically the same, within 1 percent, of GNP.

    GDP is figured as Quantity time price (.77 of previous prices) plus government expenditures plus [exports minus imports].

    Still a reduction of GDP.

    The holiest of tax books says GDP will increase 10 percent the first year!

    Now, if employment falls or wages fall… depression/recession follows. No ifs or buts.

    Now, if the FUtax is going to being 23 percent of new products consumed only by individuals, what exactly must be the total sales of new products to retail customers?

    Remember to be revenue neutral. The current government expenditure is about $2.8 trillion.

    No matter what figure you use, the US economy doesn’t produce that amount of new goods and services.

    How do I know that?

    Personal income is under $3 trillion dollars. Any personal expenditures above personal income has to come from savings. Reduce savings and there goes the economic engine of accumulated capital the FUtax is supposed to create.

    Want to say the difference will come from all those billions the books mentions? Billions are still less than TRILLIONS. Just in case you didn’t know.

    Want to say the money spent by foreign tourists will make up the difference? Their personal retail spending would have to be in the trillions. About …. ten of those trillions.

    Do you see three tourists for every citizen at Wal Mart? Do you think maybe the tourists shop duty free? Pay for their airfare overseas?

    The whole idea of the FUtax is to F— you over, destroy the federal government, and create anarchy.

    The current system is better than chaos.

  68. JasonW says:

    I”m glad to see Johnny finally co-sponsor it in the Senate. However, He didn’t co-sponsor it in the House until he faced mounting political pressure from Cain, and to a lesser degree Mac Collins during the race for the Senate seat. And again we see him not co-sponsor the bill until he was faced with mounting political pressure. I know certain other Republican US Congressman were very upset that he hadn’t co-sponsored the bill in the Senate, and I think that had a lot to do with him finally cosponsoring it, and I know he had received numerous letters from Constituents asking him why he hadn’t, and all he could respond with is “Were Looking into It”. I think this is more an act of peer pressure than it is anything else….but at least he now supports it.

  69. MoMospy says:

    Enjoy your ability to openly comment on and criticize the FairTax while it lasts…AFFT wants to take that right away from you…

    The Americans For Fair Taxation (fairtax.org) are on a mission to squash out any public criticism of the FairTax plan and are attempting to exploit the federal trademark system for the ADMITTED purpose of being able to shut down anti-FairTax websites during the upcoming elections. They have an open application to obtain a service mark for the word “FairTax.” Genie Hayes, the communications director for AFFT, openly admitted that the goal of AFFT is to get this service mark and be able to yank any anti-FairTax websites as well as to have total control over any shirts, bumper stickers, or anything of that nature that is printed with the word FairTax. They are attempting to get the strong arm of the federal government to back them up in hindering free speech and open/honest debate.

    The FairTax is promising to become a rather prominent issue in the upcoming Congressional elections–and if AFFT succeeds in obtaining this service mark, they are going to be in an excellent position to keep people from criticizing the FairTax Act.

    The time for opposition to their application is fast approaching. I know that an application for a service mark can’t be opposed just because the applicant’s motive is unethical. However, I do believe that there is a very STRONG case that AFFT doesn’t meet the legal requirements for obtaining a service mark. The strongest argument is all around us–the phrase “Fairtax” is SYNONYMOUS with H.R. 25 and the Fair Tax Plan.

    Unfortunately, as it stands right now, I think they’ll win their service mark and they’ll be on the road to having the power to tell people that they cannot participate in public debate regarding H.R. 25. Perhaps, at least, the public will be informed of this attempt to filter open and honest critiques.

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