68 comments

  1. UGAMatthew says:

    Those are rather exciting numbers for Fairtax supporters. Now my question is, if this ever gains enough momentum to be a ballot issue, will it be a partisan vote? Who will a Fairtax vote bring out to the polls? I have an idea, but wondering what y’all are thinking?

  2. Wow. I mean, I know Republican primary voters are stupid but I didn’t realize to what extent. Americans might just be dumb enough to vote for this fair tax thing at the polls. However, the backlash if it were implemented would be enormous the next election cycle. We’ve gone over this before so I won’t really rehash it too much but total taxes collected under fairtax (at least Max Burns’s version) would stay the same. Corporations would have their taxes eliminated. That means non-corporations would pay more taxes. Your average Joe is not a corporation so, on average, his taxes will go up.

    But I guess blissfully and ignorantly paying more money in taxes is better than paying less but having to calculate it on April 15th each year.

  3. LINDA says:

    Ah, the American public is so gullibe that they would vote to sign their deeds on property over to the government if it was served on a silver platter. LOL

    For you youngens, in case you do not know, when the IRS first implemented the income tax it was only supposed to pay for the war. This was back in the early 1900s, and it was only supposed to be a tax that the most wealthy paid. 360 degree turnaround, and people are still dumb enough to be like fish with hooks in their mouth and say “yeah boss, I trust you, I trust you to do me right this time and treat me fairly!” What morons to vote for such a tax trap.

  4. Jeff Emanuel says:

    Tell that to General Wesley “this nation was founded on a progressive income tax” Clark 😉

    Once something is relinquished to government — be it money or freedom — you can usually kiss it good-bye. GA 400 is a good example, for all you Atlantans…it was just supposed to be a toll road until it was paid for, then a free highway. Ten years after it’s paid for itself, I’M still putting MY money in the stupid basket….

  5. Michael C says:

    Enough tolls have been collected to pay the bonds, but because how bonds workthey can not be paid off early.

    And Chris please explain how taxes will go up under the fair tax.

  6. CobbGOPer says:

    Chris, you need to go back to econ class. Oh, and don’t follow Max Burn’s version, the version of Fair Tax you want is John Linder’s bill, he’s the original author.

    And you’re smoking crack if you think this isn’t a good idea. 1. You pay no income taxes. If you work hard and are paid more for that hard work, you keep ALL the money you earned, instead of being taxed at a higher rate because you’re making more money. In other words, no penalties from the government for working harder to make more for yourself and your family.

    2. Corporations are relieved of their tax burdens, saving them untold billions of dollars, and causing their costs of doing business to go down. Simple economics: if their cost of doing business goes down, they can lower the costs of their service or product. Under the Fair Tax, prices on new goods and services will actually be reduced in most areas. Once you include the national retail sales tax into the prices, things will be about the same price or slightly lower.

    Now to this you might say “HA! So prices WON

  7. LINDA says:

    Did you just fall of a turnip truck yesterday, CobbGoper???????? You have been fed a line of bullsh**! And what is sad, you believe it. Unbelievable!

  8. LINDA says:

    For example, after 911 when the government passed child credits for children up to the age of 17 with some income limitations, families received a credit of $1000 per child. This is still in effect, but since that time gas prices have doubled, utility bills are up 30%, real estate taxes are up, sales taxes are up, groceries are higher, drug costs are through the roof, thousands and thousands of workers have lost high paying manufacturing jobs with pensions lost and no health care benefits (examples: Ford, GM, Enron, Tyco, and nearly every clothing manufacturer and the list goes on and on.

    My point is that this child credit goes no where in paying the cost of daycare for children, where Americans can no longer experience the American Dream, as two income households are just getting by. I know because I prepare nearly 300 tax returns per year, and I know that two income households do not have money in CDs and savings accouts like their parents and grandparents had when only the man of the house worked.

    If you honestly think that you could actually save on the federal end without getting screwed by the state and local governments, then you deserve to pay more taxes and look for a jar of vaseline in the mail from the government!

  9. LINDA says:

    Dear Jeff,

    You can look in the archives of this blog about some pretty good posts about the Fair Tax, about a week ago. For one, I am not blinded by the light, and I do not trust the government. Those who trust the governmet are just like what Joan Baez sang “Freedom’s just another word for nothing else left to lose.” I do not believe in the tooth fairy, I do not believe in Santa Claus and I darn sure do not buy into the theory of a “fair tax.”

  10. LINDA says:

    My opinion is on the blog archive, in several lengthy posts along with someone name Indyinjun or something to that order.

    You giveth on one end and taketh away on the other. Our treasury is bankrupt, social security is a liability account and a band aid will not fix it. That is what the fair tax is, a band aid cooked up by a raido personality and some politicians trying to get some fame. Cut the spending in DC, and cut out the useless federally funded programs. Yeah some people will lose some jobs, but if they are worth their grain in salt
    then they can get a real job for a change.

  11. LINDA says:

    The tax codes took over 100 years to get written, that are full of rules that govern how rental property is taxed, how assets get stepped-up basis when passed on to decedents (means no tax paid for the majority), and this tax would be a windfall for the United States Treasury when these assets are transferred upon death form the well off baby boomers.

    It iwll not drive prices down, it will not put more money in your pocket if you are a middle income taxpayer now. It is a system that is bogged down with more bureaucracy than we have now. I do not trust the retailers that we have in business to remit sales taxes to the state, and I darn sure do not trust them to pay them a federal fair tax. Yes, there are many people collecting sales taxes and not remitting them. it is the same thing as here in Macon where we have 30% of the people not paying their garbage bills!

    Again, the government is not looking out for you or me, Jeff!

  12. LINDA says:

    Some may say, well Linda is just trying to protect her profession. That is not the case at all, as there would still be work for CPAs. People would always need help in filling out the paper work to get monthly rebates from the government (what a joke, right?), and I know that so many people would lose receits and never apply for the checks. I am close to retirement and set up with the current tax structure. If I buy my son a new car when he graduates from high school, I do not want to pay 23% more taxes than I do now. You see, my savings has already been taxed once already! It would be a windfall for the government, which would mean that they can have more POWER to play king. Money buys power, and it has a way of finding its way back to those that wield the power. TINSTAAFL!

  13. LINDA says:

    Reality based audits are what we need. For instance if someone is living in a $350,000 home, driving a Lexus and sends their kids to private school with adjusted gross income of $40,000 per year then an audit would yield untaxed revenue.

    The problem is that do to gee I need to whisper here “affirmative action,” we have people working for the IRS that could not audit their way out of a paper bag. We need to clean out the IRS of all of the incompetents, hire people that actually know how to prepare a Schedule C and an 1120 to look for the tax cheats. People on the social security registry that show no earnings for years on end should be audited. It is not fair to those that pay their taxes to pay more to subsidize for those that do not pay taxes now because of our BRILLIANT GOVERNMENT that cannot police their own tax structure.

    So why would anyone trust a politician to fix taxes? That is the joke of the Century!

  14. Danny says:

    Reality based audits? Who would perform these audits? Would we give the federal gov’t even more power to insert their hand into our personal finances? Would we have to allow them to look into our personal safes and safety deposit boxes as well?

    We need some major reform with taxes and SPENDING. Is the Fair Tax the perfect solution? Nope. Is it the best option on the table for real reform at this time? I believe so.

    Is keeping the current bureaucracy of the IRS the solution by hiring even more gov’t civilians who can’t be fired, but “know how to prepare a Schedule C” the answer? Nope. The problem is that there are things like Schedule Cs, 1040s, & easy ways throught the current tax system to scam your way into positive income redistribution. The gov’t has the ability to worm its way into our personal finances & the bureaucracy of the IRS has the power to consider private citizens guilty first.

    The fact is that you won’t pay 23% more taxes than you pay now. I do believe in free market capitalism & I do believe that competition would drive prices down once corps weren’t paying their share of various taxes, embedded included. Plus, I think the US already has one of the highest rates of corporate income tax in the Western Hemisphere.

    Am I saying with certainty that the Fair Tax would work? No, I believe that it’s a theory at this point. But some are concerned about merchants not paying the gov’t for the taxes they collect under a nat’l sales tax? What about the rampant tax fraud that goes on now by individuals? I can’t imagine there ever being a way to crack down on that or even reduce it. The numbers are so great who commit fraud under the current system than we’ll ever know.

    When’s the last time any of you went to your mailbox after working all day only to find a letter from the IRS? It’s a bad feeling knowing that they have so much power of the citizen that in reality, you’re helpless. I say do away with the IRS. If the Fair Tax flops can it really be any more detrimental to the United States than this system that comes straight from the Communist Manifesto?

  15. Michael C says:

    Reality based audits would would drive compliance costs throught the roof, lining your pocket. I see why you support them. The Fair Tax nearly eliminates compliance costs and unfortunately your industry.

  16. kspencer says:

    Danny – the proposal won’t do away with the IRS. Or rather, it would, but it would replace it with a “National sales tax collection agency”.

    I’ve demonstrated multiple times that the price the consumer would pay for retail goods would go up. Basically, companies don’t quit paying all they presently do to the government. Part of that expense continues, it just goes to the workers. That cost gets passed along, regardless. I estimate the MINIMUM increase in cost of living – immediately on effect of the bill – at 5%.

    By the way, a lot of things on which you do NOT presently pay tax jump as well. Do you rent? Lovely – expect your rent to jump by about 15%. Don’t forget the increase on utilities. And as written, HR25 would add a sales tax to gasoline without removing the present excise taxes. Today the station I use was charging $2.85 per gallon. The FairTax would make that $3.70 per gallon.

    The corporations would quit paying taxes. The rich would pay less. The poor would not pay more. So who do you suppose pays so that the tax is ‘revenue neutral’?

    Kirk

  17. LINDA says:

    http://www.mises.org/story/1975

    Dear Michael C.,

    I do not do audits now! I would not do compliance audits, either. You have to understand that the tax structure that we have now is not perfect, but completely reinventing it will not solve our national deficit nor will it make you or me better off. I have already made my living, and my husband is retired. As a person that teaches accounting and person that works in the industry and understands taxation, I know firsthand that it would take money away from baby boomers nearing retirement. Do you know that we have 47 million people drawing social security right now? The government is not interested in revenue neutrality, they need more money for spend for yesterday and today’s debts.

    If there is any money floating around in an economy, government is always trying to figure out a way to get more than they need. Redistribution of wealth has destroyed our Country. I have copied and pasted a good link about the fair tax.

    I know that you believe the hype, and you see a pot of gold at the end of the rainbow. But that is not reality.

  18. kspencer says:

    Let’s do nuts and bolts – and yes, Michael C, I remember that you said you had trouble with algebra, so I’ll stay away from math this time.

    Here is one small section of HR25. It’s the entirety about investments.

    SEC. 102. INTERMEDIATE AND EXPORT SALES.

    `(a) In General- For purposes of this subtitle–

    [Kirk snipped section (1)]

    (2) INVESTMENT PURPOSE- No tax shall be imposed under section 101 on any taxable property or service purchased for an investment purpose and held exclusively for an investment purpose.

    and

    (c) Investment Purposes- For purposes of this section, the term `purchased for an investment purpose’ means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.

    So… A house purchased to be a home pays the sales tax. A house purchased as a rental does not pay sales tax. On a $150,000 (base, example) house the first-time buyer pays $194,805 before broker fees. The investor only pays $150,000 before broker fees. The house value is $150,000. So if the new owner wants to sell in a couple of years, he’s got to hope the base value of the house increased by almost a third in the intervening period or he loses just under $45,000.

    So… My brother buys comic books. The collection is valued at well over half a million dollars. Will his comic books be considered investments? The NASTCy (NAtional Sales Tax Collection agencY) will have to interpret the general rules to determine such. It will also have to have an audit and enforcement department to hunt for the people who CLAIM they’re buying for investment but aren’t meeting the tests. HR25 exempts the selling business from liability when the customer lies to them provided they accepted the lie in good faith. This means an audit of the business to test for good faith. Eliminate the IRS? snicker.

    It sounds too good to be true. It is too good to be true. TANSTAAFL.

    Kirk

  19. LINDA says:

    The estate tax system or structure benefits anyone that has an estate less than $1.5 million and goes up with inflation indexing periodically. At present, when a person passes away and leaves estates that are under the threshhold (the vast majority of American Citizens by the way), he/she transfers this stepped up basis to their spouse or other dependents.

    If the estate tax is eliminated, there would be (I assume) no more stepped up basis of assets passed on making all of these assets to be sold and taxed that today can be sold and escape taxation.

    Anyone that ceases to realize that the government is not your best friend has already been defeated. I know some famous person said something like this, but at present cannot name that person. I am admitting that this is not my idea.

    Well, I do remember “democracy is like two wolves and a sheep trying to decide what to have for lunch.” I believe that was gool ole Ben Franklin.

    In other words, do not trust your politicians to look after your best interests!

  20. LINDA says:

    From my experience doing taxes, I have yet to meat a taxpayer (other than a CPA) that understands gift taxes and estate taxes. I have people all of the time that want to decuct say $11,000 on their tax return for a gift given to a child. I have people call my office and want to know if they have to report Aunt Bessie’s certificate of deposit on their tax return that was left to them. Of course, you only report the interest income. People want to deduct burial costs on their 1040s, and that is why I can make a living. So what you have with this election in Cobb County is a majority of taxpayers that have been led like sheep to slaughter to actually believe that if a fair tax is passed, they will have MO MONEY! It is not going to happen.

  21. kspencer says:

    I meant to point out the glaring loophole caused by the rental property issue above – one of many.

    The solution, of course, is to create a corporation (and the rules will inevitably have to change so I’ll avoid ‘type’ for now). The corporation purchases the house – making it a ‘business expense’ instead of investment – and provides the house to the corporate officers. Sure, those officers have to declare that as “income”, but so what – income’s not taxed under these rules.

    For what it’s worth, I expect that hole to be closed swiftly. And closing that hole – or rather, tweaking it so ‘legit’ benefits aren’t strangled – will add to the complexity of the tax code once more.

    So much for simpler tax codes.

    Oh – did I forget to mention how much fun it’s going to be to issue and control the “prebate”? Sorry, the “Family Consumption Allowance?” I thought you people want a SMALLER government. This… feh.

    Some final remarks. CobbGOPer – your point 3 is mistaken. Food is to be taxed. EVERYTHING sold to the end-user is to be taxed EXCEPT investments and business purchases necessary to “produce, provide, render, or sell taxable property or services” or for “other bona fide business purposes.” (both quotes from HR25.)

    Companies don’t pay. The Rich don’t pay. The Poor don’t pay (actually they’re reimbursed). So who’s left?

    TANSTAAFL.

    Kirk

  22. Danny says:

    Kirk, I do agree that the IRS would change into a “Nat’l sales tax collection agency.” On that note, it should (in theory again) provide for the elimination of hundreds of IRS jobs, which is fine with me. The ones i’ve dealt with are overwhelmingly arrogant federal government workers.

    Regarding your other comments I would have to disagree on some. Companies would still pay the sales tax on all goods/services they purchase in their process of production. All of those taxes will continue to roll down, not to the worker but the consumer. I agree with you that there would be an initial spike in prices. However, that’s when I believe in the free market system. That’s why I think the Fair Tax is still a theory. I don’t think any other nations, only a few states, use sales tax revenue as the principle means of income.

    If the free market works as people like Sowell & Friedman say, then the problem of high prices would take care of themselves through competition. However, I will vehemently disagree with you that there are “a lot of things which you do NOT presently pay tax.” Renters may not pay direct taxes, but the cost of their rent consists of many different taxes on the way up to completion and renting of the apartment.

    Gas? I’ll reread the bill before I question your saying that it would not remove the current excise taxes because I don’t recall that. But, even if they don’t remove excise taxes, it will again reduce the level of taxes paid by corps on its way to the pump.

    Corporations will not quit paying taxes. Will they pay less tax? Maybe, but if laissez-faire economics really works then the price of items will fall. However, at least since the early 1800s we’ve not had a free market economy in the US.

    The theory (note that I use that word again) is that the rich are still going to pay a disproportionate amount of the taxes because they make more money so it makes sense that the things they buy are going to cost more, hence more sales tax paid by rich people.

  23. Michael C says:

    kspencer I think you need to do a little more research. Only new homes are taxed under the Fair Tax. in 2005 3/4 of all home sales were existing homes. So no tax. So couple that with a lower interest rate. Banks will offer lower rates as their operation costs go down and it is a pretty good deal for homebuyers.

    Kind of sounds like new homes sales would take a hit. Not true. The FairTax eliminates the embedded, upstream costs in new homes. It is estimated that
    the removal of these embedded costs could reduce the purchase price of a new home by as little as 12 percent and as much as 20 percent in normal markets. By contrast, under the current system the embedded, upstream costs already included in existing homes will remain embedded. Even though the sale of an existing home containing the embedded costs is not taxed under the FairTax, it is logical to conclude that the seller’s price will include the embedded, upstream costs imposed under the current system. Under the FairTax, the combined effect of (1) the greater affordability of new housing and (2) increased savings rates which increases the number of potential buyers for new homes, becomes more pronounced in a rising interest rate environment (the FairTax results in the immediate elimination of the interest differential between tax-free and taxable debt).

    I cut and pasted this because it says it better than I. Read the whloe thing.

    http://fairtax.org/pdfs/TreatmentOFhousing.pdf

  24. kspencer says:

    Danny, as someone else posted (though he was in favor of FairTax), READ THE BILL.

    No. Business don’t pay taxes on anything they purchase that is for:
    a) resale;
    b) to produce, provide, render or sell taxable property or services;
    c) in furtherance of any other bona fide business purposes.

    That’s a direct quote. What it means is that pretty much everything a business buys is exempt from the sales tax. Corporations quit paying taxes.

    And about the rich still paying a disproportionate share – possibly. Not what I said. I said they’d pay less than they do already. Don’t think so? Go figure – use the IRS numbers – what proportion of “the rich’s” income is from investments (capital gains taxes). That’s gone, and since investments aren’t taxed it’s not being replaced from the wallets of the rich.

    So the rich are paying less, the corporations are paying next to nothing if that, the poor pay very little more, but the government is expected to get the same amount of money as before FairTax (that’s what revenue neutral means). So again:
    If Businesses aren’t paying anymore;
    and the Rich pay less;
    and the Poor don’t pay any more;
    Who makes up the difference?

    TANSTAAFL.

    Kirk

  25. kspencer says:

    Michael C, I suggest you read the pdf you linked to and HR25.

    The pdf claims that first-time properties wouldn’t be taxed. You claim that there is no sales tax on used property. Neither exemption exists in HR25.

    The pdf is the sales pitch. HR 25 is the meat. I learned a long time ago that the promises in the sales pitch mean nothing.

    I have crawled through this bill and the FairTax book (both editions) and the website and all it’s recommendations. Everyone keeps referring to the sales pitch as the gospel, but when I look for the promise in the actual deal it’s rarely there. Consequently I keep coming to the same conclusion.

    Con Job.

    If it sounds too good to be true it probably is.

    TANSTAAFL – There Ain’t No Such Thing As A Free Lunch.

    Kirk

  26. kspencer says:

    I have to issue a retraction and correction – and possibly apology – to Michael C.

    There is an exemption for used property. Taxable property is defined as:

    (i) any property (including leaseholds of any term or rents with respect to such property) but excluding–

    `(I) intangible property, and

    `(II) used property,

    Kirk

  27. kspencer says:

    Since there is still not a first-time buyer exemption, this means NEW property must include the sales tax. But at least the seller of the used property doesn’t have to escalate. Small favors.

    Kirk

  28. Mad Dog says:

    “Do we understand why these two men (Neal Boortz and John Linder ) from Georgia want to do away with the federal government and the IRS?”

    That was asked [in a] May 6 rant to The Times. I understand why they are a mess! (By the way, they do not want to get rid of the federal government, they just want it back the way it was intended: more local control.)

    What I don’t understand, Mr. ____ is your letter. It starts out by mentioning the Fair Tax rally, which I attended, then leads right into your biased view of “The Fair Tax Book” and the only page you actually read, page 11.

    In chapter one, The History of our Income Tax, there is an overview of how income tax came about and its beginnings dating back to the Civil War. On page 11, which Mr. Parker sarcastically comments as the second full page of text in the chapter, there is a footnote that seems to have angered him. (Note: page 11 is only the third page in the chapter.)

    That quote is from Thomas E. Woods, Ph. D. Since Mr. ____ conveniently left out the second half of the quote, here it is in full:

    “Strictly speaking, there was never an American Civil War. A civil war is a conflict in which two or more factions fight for control of a nation’s government. That was not the case in the U.S. between 1861 and 1865. The seceding Southern states were not trying to take over the U.S. government; they wanted to declare themselves independent.”

    This was just a footnote. Anyone who listens to Boortz knows he likes to point out technicalities and, in Mr. Parker’s case, get people riled up. This was one page out of 182. It is not what the book is about.

    Now for those of you interested in real change, the Fair Tax is the way to go. It eliminates federal income tax, Social Security tax, Medicare tax, capital gains tax and you will never hear the word “audit” again.

    But don’t worry, you will not lose any of your benefits; they will be funded by a national sales tax. The experts’ estimate the tax will be 23 percent to fund the government at its current rate. If we can get our elected officials to actually cut spending, it could go down.

    I know 23 percent sounds like a lot but keep in mind everything you buy has about 25 percent in taxes already in the price because it is taxed every step of the way. Those taxes will be gone, so with the Fair Tax in, prices should remain the same.

    And best of all: You keep your entire paycheck! Think of all the money you will have and you won’t have to save any more receipts or spend hours filing returns.

    To get more information go to http://www.fairtax.org. Be informed so people like Mr. _____ won’t mislead you.

    Kellie Weeks

    Gainesville

  29. Mad Dog says:

    I see I struck a nerve with my letter about how some in the former slave states continue to fight the Civil War. The Civil War was not a technicality as suggested in the June 4th response to my letter.

    Hamilton in Federalist 6 and 7 argues that forming a weak republic would be worse than forming no republic at all. He expects a strong central government to prevent individual states from engaging in civil wars for trivial reasons. Among these reasons, he includes territorial disputes and disputes over women by drawing upon Greek history. American history teaches us that in this case, Hamilton was right. Without a strong central government as created with the constitution, civil war would break out among the states.

    If Ms. Weeks would read the legislation, H.R. 25, especially Section 505 and 508, she would understand how she has been misleading people about audits. The new and improved IRS, all 51 branches, could issue summons, conduct audits, and imprison people. The misnamed FairTax would not eliminate the IRS or the record keeping for Social Security, Wages, and other benefits as claimed.

    The FairTax, as proposed, is unconstitutional as it violates Sections 9 and 10 of Article I. The Congress does not have the power to regulate intrastate commerce. The FairTax is dependent upon taxing and defining intrastate trade and intrastate commerce.

    Ms. Weeks thinks she will get to keep her whole paycheck. That’s very unlikely. Visitation rights may be increased for our money, but the FairTax will function as a regressive tax and an illegal tariff on imported goods. Imagine trying to buy a Toyota today. Now add a 23 percent sales tax. Now imagine borrowing money for a new car. With the increased sales tax, borrowing money to buy a new car will increase the up front amount consumers pay in taxes.

    UNDER AN INCOME TAX SYSTEM, If you are paying 23 percent income tax on $40,000 of income, spend everything you make, you pay $9,200. Under the proposed FairTax, if you make $40,000, live paycheck to paycheck, borrow $20,000 to buy a new Toyota; you will pay $13,800 in federal sales taxes. WHAT A DEAL! Who wants to increase their taxes?

    There is no logical reason to support this tax plan, other than it will finally destroy the Union.

  30. Chris says:

    It says businesses would not pay taxes on goods for resale or other bona fide business expense. Would churches have to pay taxes on goods used in the conduct of their activities? Would a church become a business by definition for the purposes of this tax policy?

  31. kspencer says:

    Chris, quoting from HR25:

    SEC. 706. NOT-FOR-PROFIT ORGANIZATIONS.

    `(a) Not-For-Profit Organizations- Dues, contributions, and similar payments to qualified not-for-profit organizations shall not be considered gross payments for taxable property or services for purposes of this subtitle.

    `(b) Definition- For purposes of this section, the term `qualified not-for-profit organization’ means a not-for-profit organization organized and operated exclusively–

    `(1) for religious, charitable, scientific, testing for public safety, literary, or educational purposes;

    `(2) as civic leagues or social welfare organizations;

    `(3) as labor, agricultural, or horticultural organizations;

    `(4) as chambers of commerce, business leagues, or trade associations; or

    `(5) as fraternal beneficiary societies, orders, or associations;

    no part of the net earnings of which inures to the benefit of any private shareholder or individual.

    `(c) Qualification Certificates- Upon application in a form prescribed by the Secretary, the sales tax administering authority shall provide qualification certificates to qualified not-for-profit organizations.

    `(d) Taxable Transactions- If a qualified not-for-profit organization provides taxable property or services in connection with contributions, dues, or similar payments to the organization, then it shall be required to treat the provision of said taxable property or services as a purchase taxable pursuant to this subtitle at the fair market value of said taxable property or services.

    `(e) Exemptions- Taxable property and services purchased by a qualified not-for-profit organization shall be eligible for the exemptions provided in section 102.

    Section d is your answer.

    Kirk

  32. Mad Dog says:

    Oh Chris,

    What a novel solution. Only your basic philosophy pre–empts it as a workable solution.

    That’s the problem with Market Fundamentalists. They say the market solves all problems. Then, they don’t want to apply their fundamentalism to their solutions.

    Telling me to buy a used Toyota might save me in taxes, but increased demand for used (undertaxed) cars will increase the price. Used foreign and domestic cars will go up in price equal to the 29.9 percent sales tax proposed by southern anarchists. Just going by the Market Fundamentalism of the FairTax posse.

  33. Mad Dog says:

    “Gets Rid of the IRS”

    It gets rid of the IRS in the same way renaming a street gets rid of traffic.

    If there’s no GA 400, there’s no traffic problems on GA 400.

    The bill will create 50 more IRS offices, one in each state. Each run supposedly by each state for a cut of the take.

    Who will handle enforcement? The Moldy Book says it will be self enforcing.

    Just say no to breaking the law. There’s a leap of faith! The jump won’t kill ya, just the landing.

  34. kspencer says:

    Let me dig a touch deeper on the real estate issue, hoping to recover from my earlier error. Instead, it’s a point that’ll carry over on many other issues.

    Let’s assume that the change takes effect on January 1, 2007. We’re going to look at a new house that completed construction in late December, 2006, and is priced at $200,000, but is not yet sold.

    According to the FairTax pundits, the taxes embedded in the property are approximately 27%, or $54,000. So the “true” value of the house is $146,000. And, using the FairTax logic, a house with identical floorplan built next door but begun and finished in 2007 will indeed have a ‘value’ of $146,000.

    So the builder has a conundrum. See, the company ALREADY PAID the $54,000. But everybody knows the ‘true’ price is $54,000. What are the company’s options? In simple, hope to find a sucker who’ll pay the extra, or eat the loss of $54,000.

    That’s not really fair. See, the 2007 house will sell for $200,000 of which the builder gets $146,000. For the builder to get his $200,000, he needs to sell the house for ~$259,750. So you, the buyer, get to choose between a house RIGHT NOW at $260,000, or one in a few months at $200,000.

    Builders, hope you’ve got the ability to eat those losses.

    Kirk

  35. Chris says:

    Ok, but after further consideration on the not-for-profit issue, my next question would be what government entity will monitor and police the activities of not-for-profit organizations, if the IRS is disbanded under the FairTax proposal? Say some leftist treehugging feminazi nonprofit starts openly funding candidates with the people’s donations, or with state or federal grant money. How will that be controlled, without the IRS holding reign over their activities by monitoring the use of their public or donor funding?

  36. LINDA says:

    Demonbeck,

    I suppose when one cannot speak with an ounce of intelligence, it is easier to scoop down and grab some dirt and throw on others.

  37. kspencer says:

    Chris, that’s most of chapter four which is too long to cut and paste here. In simple, the states are “allowed” to collect and adjudicate, but the feds will oversee and take over if the states are unwilling or fail to do it the way the feds want. In this case, it’s “the Secretary of the Treasury”, which means an agency or bureau or service under that jurisdiction, which means the IRS under a new name.

    I’m also puzzling through one section of the HR that I’ll go ahead and mention now. As I read it the bill is putting the sales tax on all internet sales based on the ‘location of end use’. It’s worth noting that transportation of the goods – be it from internet, phone, or catalog sales – is also taxed. That much is specified. But the implication is that this will replace the current moratorium on sales tax of internet sales.

    Kirk

  38. Chris says:

    So internet sellers have to remit taxes to the agencies of each state they sell goods to, since the states are asked to handle the collection of these taxes?

  39. kspencer says:

    That’s how it looks to me.

    SEC. 405. INTERSTATE ALLOCATION AND DESTINATION DETERMINATION.

    `(a) Destination Generally- The tax imposed by this subtitle is a destination principle tax. This section shall govern for purposes of determining–

    `(1) whether the destination of taxable property and services is within or without the United States, and

    `(2) which State or territory within the United States is the destination of taxable property and services.

    `(b) Tangible Personal Property- Except as provided in subsection (f) (relating to certain leases), the destination of tangible personal property shall be the State or territory in which the property was first delivered to the purchaser (including agents and authorized representatives).

    `(c) Real Property- The destination of real property, or rents or leaseholds on real property, shall be the State or territory in which the real property is located.

    `(d) Other Property- The destination of any other taxable property shall be the residence of the purchaser.

  40. Mad Dog says:

    The pro posters need to explain price theory. If they know anything about price theory.

    The book is dependent upon commodity pricing theory, assuming homogenous product in a static market with finite and equal number of buyers and seller compelled to enter into transactions.

    The United States economy has differentiated products in a dynamic market where buyers outnumber sellers and compulsion to participate varies.

    If there are any pro FairTaxers that can discuss that with any level of competence…

  41. Danny says:

    Kirk, I’ve been away from the computer for a few days. I’m inquiring about your post on the 20th @ 425. Hopefully this isn’t too far down the line & out of sight. First, I’ve READ THE BILL already so thanks anyway. I did however review your post about the bill.

    Referring to Ch1 Sec 102 that you posted, Sec B under Business Purposes doesn’t say explicitly that they’re excluded from the tax.

    I’ve skimmed, not REREAD the bill, this afternoon. I can’t find specific language that says a business doesn’t have to pay the sales tax on items they buy. For example, Snapper mowers in McDonough buys a load pressed steel to form into panels that will make their new mowers. Are you arguing that this pressed steel is not subject to the sales tax? This pressed steel can not be resold as steel can it? Can you elaborate on your point?

    Also, there is a such thing as a free lunch. The EITC is an example of paying $1 & getting $2 back. That’s free money to me, albeit a different subject. Maybe Linda the resident CPA can confirm that this happens regularly.

  42. Danny says:

    Basically my point is, either way you look at it, corporations don’t pay taxes. Not in our current system, nor if the Fair Tax were implemented. The expense of taxes are passed down to the end consumer.

  43. newgeorgian06 says:

    The most appealing aspect of the Fair Tax to me is the efficiency gains. Corporations and regular people spend billions of dollars and hours to comply with our current tax system. Take that out and you take out a significant inefficiency with our economy.

    But it would never pass because the expansive tax code gives our Congressmen and Senators their power. If there were no lengthy tax code with no loopholes, then who would the lobbyists buy dinner for and take golfing? Why do they need to do that? Other than enjoying it, they need money so they can wage their expensive campaigns… So, if politicians could get their support from a different source, then perhaps we could have the fair tax… Any fair taxers out there for public financing of campaigns?

  44. Mad Dog says:

    The underlying problem with the FairTax can be seen in one simple explanation.

    If a company today is stating revenue of $100 million dollars, under the FairTax, their revenue will be $77 million dollars.

    If the FairTax book and it’s wild assertions are true, then GDP will fall 23 percent and employment will fall 23 percent.

  45. Mad Dog says:

    Demonbeck,

    It has nothing to do with taxing revenue.

    When the “embedded taxes” are removed from “price,” then revenue falls.

    When the revenue falls (because revenue is calculated as price times volume), businesses won’t be able to pay their bills.

    Get it yet?

  46. Demonbeck says:

    Currently, revenue is pre-tax figures, so if revenue is $100 million dollars, then gross revenue is only (at a 33% tax rate) $67 million dollars after taxes. Frankly, I’d rather my company have a $77 million dollar revenue under the fair tax plan.

  47. Mad Dog says:

    You don’t get it.

    $100 million dollars is available to the company to use in any way it wants to use it.

    The company has total control of revenue. Remember your FairTax book? They don’t pay any taxes.

    Their price times volume now equals $100 million.

    After putting the FairTax plan in effect, their price times volume will be $77 million.

    What will get cut?

  48. Demonbeck says:

    “What will get cut?”

    Their costs will get cut, because the price of their costs will no longer have embedded taxes either.

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