74 comments

  1. Maurice Atkinson says:

    You know Erick, Marshall’s ads have been attempting to stereotype Mac as a Atlanta Metro elitist. I wonder what he says about his ticket. Granted Taylor has given some attention to Middle Georgia, but perhaps there should be a
    Metro Martin
    Metro Buckner
    Metro Thurmond
    Metro Majette
    Metro Baker
    Metro Irvin

    I try to be open minded and get to most political events, but these folks think the gnat line is in Henry County.

  2. DougieFresh says:

    This is great. In both races, the Dems have decided to lie about the Fair Tax. I was going to sit this election out and just vote. They convinced me to volunteer for Collins.

  3. Fogle says:

    Ben Marshall,

    While it leans Democrat, the 12th is relatively even. The “old 12th” was D+5 on the Cook Partisan Index.

    Barrow’s liberal base of Athens has since (correctly) been removed to make the district more geographically proportionate while a smaller, but just-as-liberal base in Richmond County has been added to the new 12th.

    If Cook had done a rating on the new 12th, I’m guessing it would be about D+3. And if GOP voters turn out, then Max can win this race.

  4. DougieFresh says:

    Mercer – G,

    I called about being there this weekend, but if I get things I need done at work early enough, and I feel particularly frisky, I might drop by.

  5. You guys are insane. Has anyone seen the NYT poll out last night that gives Democrats a 19 point lead in the generic Congressional ballot. I know that isn’t perfectly scientific, but it’s also about 19 points higher than it was in 2004 and 26 points higher than it was in 2002.

    Somehow, I guess we are expected to believe against all precedent and everything else that Georgia will completely buck the trend. Here’s something we also know: absentee ballots are traditionally good ground for Republicans, but absentee ballots are down statewide from their level in 2002, despite the fact that Sonny has probably spent $1,000,000 in the mail encouraging whites to vote absentee.

    In the 8th district, over 60% of absentee ballots are from Bibb and Houston counties. Now, I know Republicans think Collins will do well in Houston county but may I remind you that Marshall received 60%+ in 2004 and even in the awful Democratic year of 2002 (when the NYT generic ballot was +7R instead of +19D) he still pulled in 47% of the vote.

    Meanwhile, absentee ballots are hardly making a dent in Newton, Butts and Jasper counties. I’m sure a lot of Collins donors that live in Muscogee, Henry and Fayette will be surprised and maybe upset that they can’t vote for him when they show up, but in the 8th district I just don’t see it happening.

    I’m informed by a source that the same boosterism is also showing up in IL-8 and IA-3, the other Democratic held seats Republicans are targetting. And there too the Democrats see no reason to believe the spin.

    I don’t buy the 72 hour plan nonsense, but even if I did I wouldn’t think it could do more than move 5% points. Last time I checked Marshall was up by 16%, so…?

    In Barrow’s district 40% of the population is African American and the absentee ballots have been coming in pretty close to that level (as of yesterday, although the data seems a little odd from yesterday). Barrow needs about 25% of the non-black vote to win. Even Mark Taylor is polling at this level with whites at this point and I don’t believe Max Burns is anywhere near as popular as Sonny Perdue is.

    Sorry guys, but these races just aren’t that competitive, and the voters nationwide think and want Democrats to take over Congress. 8th and 12th voters don’t buy that they can prevent Congress from flipping parties — and they don’t want any part in it anyway.

  6. Eddie T says:

    GA-12 may very well be the Republicans’ “best” chance for a pickup nationwide. And that’s gotta be really depressing for y’all considering how unlikely it is that the Georgia’s going to be sending Max Burns to Congress.

    Zero Republican pickups on Tuesday.

  7. DougieFresh says:

    The generic ballot is the most worthless endeavor pollsters involve themselves in. On average 20 people in every state are in a 1000 person poll, while only 10 are taken in a 500 person poll.

    US elections are local, not national. In NYC, you will find 80 percent support for many Democrats, and the same can be said for San Francisco and other liberal hotbeds. Unfortunately for these people, and fortunately for the country, these people still only get one representative.

    Georgia is not NYC or San Fran. There is almost nothing common between a voter in Middle and Coastal Georgia and a voter in the Bronx. Why does anyone think that there is an statistical validity in including those voters in determining who will win the 8th and 12th in Georgia.

    The two Dems might very well win these two districts, but to suggest that either side should give up based on a national poll is foolish.

  8. DougieFresh, I respectfully disagree. Right now voter impressions and moods are being formed based on their perceptions of what is happening nationally. And voters are smart, they want and think that Democrats will take over Congress.

    I’d put more stock in national surveys predicting big Democratic turnout and sentiment than in an email message some RNC staffer typed out inbetween surfing myspace and updating his resume for next Wendesday.

    The people in Georgia’s 8th and 12th districts have more in common with the rest of the country than not. And even in sub-regions like the South and West in these national polls that are more conservative than the country as a whole and more like the Georgia districts, people still want change from the Republicans.

    My prediction: both fair taxers, Collins and Burns will lose badly this year. Democrats will take over Congress. Republican conservatives will begin foolishly pushing the fair tax as the “true conservative” anecdote to liberal control of Congress, and the more voters hear about this proposal the more they will vote to re-elect their Democratic incumbents in 2008.

    You guys are so blinded by ideology it is amazing. Every voter in America thinks Republicans want to cut taxes for rich people. When they hear about some massive GOP “reform” of the tax system they are smart enough to figure out that means massive tax cuts for the rich and corporations and they’ll either see massively reduced government spending (which believe it or not many benefit from) or a large increase in their own taxes. Even the President’s commission agrees with this. But hey, keep pushing it. The voters just aren’t as smart as you guys are yet.

  9. DougieFresh says:

    An interesting article about polls from the 2002 election.

    http://www.ncpp.org/?q=node/23

    This article is defending the polls as accurate, but the data they report shows how inaccurate they really are.

    Zogby tracked 17 races in 2002, and had the wrong winner in 5 of them. Thats missing a third of the races. Overall, all pollsters that were examined missed the correct winner 21/159 times. Thats missing about one in 7.

    Even the margin of error analysis is bogus. When most people look at margin of error, they assume if it is +/- 4 points that is means that if candidate X is ahead by 5, he is safe. No, according to the industries own analysis, a +/- 4 point lead means that a candidate has to be >8 percent ahead, since a shift of 1 percent goes to the other candidate.

    So, given the huge MoE allotted to pollsters, no wonder they claim such high accuracy. If they have two candidates at 50-50, and a 4 percent MoE, they claim victory whether it is 54-46 or 46-54. Hardly valuable in a close race.

    A last thing to look at is that the average Error by a pollster was 2.4 percent. This sounds close, but actually, they are cutting the Margin of victor in half to make it sound closer than it is.

    For example, Zogby had an average error of 2.7. This means that if he predicted 50-50, his average results were 52.7-47.3. In a close race, almost 3 points off is a huge difference. So much so that the numbers are colmpletely worthless. And this is simply the average. So in some races, he could have actually be off by as much as twice that.

    Keep in mind, that these were 2002 numbers. 2004 numbers were ever further off, but I wanted to compare a midterm election. Not only were polls off, but the exit polls of ACTUAL voters were off by 4.5 percent nationwide (2.25 using the polling industries special math). This is with real bonefide voters reporting to pollsters their preferences. If the Bush election in 2004 was within the MoE, what does that say about the current races?

  10. DougieFresh says:

    So I am a Republican staffer now? If that is a measure of your accuracy to gather and interpret facts, then you have my sympathy.

    2 months ago, I was hoping for a Dem takeover of Congress, and was sick of Bush and his tax and spend Liberal Republicans in Congress. I wasn’t going to vote.

    Then I started listening to the Dem Kook Squad and their gloating about taking over, and it suddenly became real, the danger you guys pose to the country.

    Do you want to win elections? How about stop selecting mentally unstable kooks to represent your party. I would love to have a choice, and not be forced year after year to vote for the lessor of two evils. I am not willing to hand the keys to the nation over to juveniles.

  11. I wasn’t claiming that you are a Republican operative, I’m just talking about Erick’s daily “we are hearing…” nonsense about Ga 8 and Ga 12.

    Polls aren’t perfect but when there is a huge margin one way or the other you can feel pretty comfortable about them.

    Even with margin of error it is a little more complicated. Say that a pollster gets results that show 45-40 with a 4% margin of error. Some people would argue that this race is just as likely to be a 5 point lead as it is to be a 9 point lead or even a 1 point lead. Not the case. There is 95% confidence that the race is within the margin of error. That’s standard deviation stuff. There is a 5% chance either way that each result is more than the margin of error of the result, but there is also a greater chance that the result is actually correct.

    There is generally greater than 50% confidence in most of these polls that each result is within about 2%. And there is still a decent chance (probably around 30%) that the result is within 1%.

    So, the odds are about 6 times higher that the result is within 1% than it is outside the 4% margin of error. That’s significant. It might not mean much in a poll where the results are within 4 or 5 points, but the NYT poll shows a 19 point lead (surely this will tighten a little) and Marshall’s poll shows a 16 point lead.

    Let’s examine that poll. 50 for Marshall, 34 for Collins. Margin of error of about 5%. There is a 2.5 percent chance (95% confidence, 5% outside of moe, 2.5 above/2.5 below) that Collins is actually above 39. There is a 2.5% chance that Marshall is actually below 45.

    So there is about a 2.5% chance that this race is actually as close as 45-39, but still with Marshall in the lead. However, there is an equal chance that Marshall is actually up 55-29.

    There is also about a 50% chance that each number is within 2% or so. So, there are better than even odds that Marshall is somewhere between 48-52 and Collins is somewhere between 32-36. Even on the bad end of that spectrum, a 48-36 lead at this point doesn’t look too encouraging.

  12. RuralDem says:

    “I wonder what he says about his ticket. ”

    I think we’ve been over this a thousand times already. Marshall doesn’t NEED THE REST OF THE TICKET. Unlike most politicians, he actually works for his district, not his party. Why should he care how liberal Denise Majette is? There’s a realm outside of party politics you know. It’s called putting your constituents first.

  13. Iraqi Info Minister says:

    Erick, a quote I gave during my previous employment seems apropos:

    “I have detailed information about the situation . . . which completely proves that what they allege are illusions . . . They lie every day.”

  14. DougieFresh says:

    Chris,

    Okay, I misunderstood if you were refering to me.

    I am very familiar with how confidence intervals work, and the MoE that is quoted is assuming a perfectly random sampling. That means that very best true MoE is what they quote. And, it also assumes a two outcome result, and therefore is not really even valid for a a three person race.

    Any varience from a truely random sample will effect the result. Sadly, there is no way to guarentee a random sampling with something as non random as a phone call that requires voluntary participation. So, the pollster “tweaks” his numbers based on assumptions of how many self indentified republicans and dems are in the polling region. They also have fixes for other demographic variences, depending on the model used by the pollster.

    This is not scientific. This is educated conjecture. Unless you can force randomly selected people to honestly and accurately state their preferences and whether they are going to vote, there is no way to do these polls in a truly scientific fashion.

    As cell phones become used more and more as a primary means of communication, and as things like Caller ID and Privacy Director which completely blocks all “unavailable” callers, the sample will become more and more biased.

    It is true that the greater the margin the more likely the poll will accurately predict the winner. However, if the error gives a systematic advantage to one side or the other, like the 2004 election was demonstrated to give to democrats, then how do we know the margin is even as large as it is, before considering the error that is introduced in the ideal case.

    5.4 percent is Zogby’s average error in Margin of victory (2.7 MoE as reported in the poll). Assuming mean is equivalent to median (as most news outlets use them improperly and it is difficult to know which is used), that means that half of the races predicted by Zogby had a margin of victory off by more than 5.4 points.

    Assuming a random distribution, this means that half of those half would result in a candidate greater than 5 points down winning on election day. E.g., if Zogby polled 100 races, 50 of them would have the margin of victory off by more than 5 percent. If any of those races are withing 5 points, half of those would have then report the wrong winner.

    That is not a great track record.

    As for the NY Times poll, please post a reference. I have not seen any reliable polling data for either of these races, and I would love to see the time frame and methods used in the poll.

  15. me says:

    Not quite. The MoE quoted is the maximal margin of error because it assumes a 50-50 result. If the results are, as in the Marshall survey, 50-36, the MoE is actually significantly smaller.

    Pollsters should not “tweak” for party identification, which is very fluid — and fluctuates FOR A GIVEN INDIVIDUAL. Marshall’s pollster does not do that. He is in fact very vocally against doing it.

    What is valid is to make sure the sample is racially balanced, and perhaps geographically (within broad regions — not a small unit like counties, which is too constricting).

    A person’s race and, except in rare circumstances, their place of residence, does not fluctate throughout the campaign. And there is a lot of historical data as to what the composition of the electorate will be racially. In the 8th and 12th districts, it has not fluctuated much at all.

    If you find a pollster “tweaking” his sample in the way you describe, you should call him out on it. It’s not a reason to doubt legitimate polling.

  16. DougieFresh says:

    I read a detailed description of the process that major pollster do in order to normalize the results to “accurately” reflect the demographics of a survey.

    One the the techniques was to count the number of respondents identified as Republican or Democrat, then assign a scaling value to their responses so that the relative weight of each would be equal to what they assume to be the present in the wild.

    You say this is not done, so I will take your word on it, but I have heard this more than once.

  17. I’ve worked with the Mellman group and they do not do this, although Zogby does. To make sure their sample is representational, they will examine a number of factors but NEVER responses. So in other words they will never say “we have 30% of people saying Democrat and 40% saying Republican and we need to even that out”. You can never weight or resample based on a variable you are testing! Such is the problem with Zogby.

    You can, however, make sure that you have enough people that voted in 2002, enough new registers, enough people from the North part of the district, etc. One thing you can’t do in the 8th, however, is make sure that you have a representative sample for the Southeast part of the district … unless you’re talking about the old 8th district!

  18. Maurice Atkinson says:

    Rural, “”””Unlike most politicians, he actually works for his district, not his party””” as altruistic as it sounds, that’s a fantasy. There is no legislator that is not in some manner tied to his party caucus. If he expects to bring home any of the goodies he has to broker himself. He otherwise alienates himself and the district. That is precisely why so many have invoked Pelosi into this race.

  19. RuralDem says:

    Maurice,

    I do not believe I ever said he is 100% independent from the party. After all, he does vote with them on issues just as he votes against him. My point with the independent comment is Congressman Marshall is not a staunch partisan which is refreshing in an atmosphere when everything is either Democrat or Republican. It’s nice to know that there are still those out there who can look at both sides of an issue, and that’s what Congressman Marshall does.

    Fantasy? No.

  20. IndyInjun says:

    Dougie,

    Where is the ‘lie’ about the “FAIR”tax?

    It is quite true that the fairtax is an ADDITIONAL tax, for it will take repeal of a constitutional amendment do do away with the income tax. This won’t happen first.

    That nutty tax DOES put a $9000 tax on a $30,000 truck, without state sales tax (which does not include the likely conversion of state income tax to a sales tax.)

    Here’s a challenge. Go find the PUBLISHED reports of the “expert” economists that underpin this entire nutty scheme. For something so ballyhooed and major, it should be easy right?

    The “fairtax” is a con job and the folks for it are like the Moonies in their cult-like rejection of fact for an appealing theory.

    Barrow made Burns look clearly inferior at the Augusta forum last night.

    And he capably defended his “fairtax’ ads.

    BTW, I voted for every GOP POTUS from Nixon to Bush, inclusive, but the GOP is just about dead in my sight.

  21. Demonbeck says:

    Maurice Atkinson // Nov 2, 2006 at 10:05 am

    “You know Erick, Marshall’s ads have been attempting to stereotype Mac as a Atlanta Metro elitist … Taylor has given some attention to Middle Georgia … these folks think the gnat line is in Henry County. ”

    Maurice,

    While I agree with the premise of your statement, I cannot allow it to go without saying that your own geographic beliefs are also quite skewed. Albany is Southwest Georgia, not Middle Georgia.

    Of course, to those of us in Savannah, everything north of Forsyth is North Georgia.

  22. Demonbeck says:

    City. And I am starting to reconsider that as well. I talked with a family member who lives in Macon who said he has to drive out of the city to find boiled peanuts.

    That’s just sad.

  23. DougieFresh says:

    Indy,

    You show a lot of ignorance about the tax. The reason why the truck would cost 30 k is because of the taxes that are embedded all the way through production. If the cost of the truck falls to 24k and you get a 6k tax bill it is an even exchange. However, the tax payer can, and should, be rightly upset that the government is taking so much money. Maybe people will then realize how much the government currently IS taking behind the scenes.

    The simple factis that foreign good in our country often arrive with no taxes, save import taxes. And are then sold without a federal sales tax. Our domestic goods are taxed throughout all phases of production and then taxed again when sold in places like europe an additional 17 percent.

    This means our goods are double taxed and expensive, while foriegn goods often times arrive here with no taxes. You liberal dems who spout how much they “love” the american worker should all support this tax idea.

    Mistatements in an attempt to give a false impression are lies. I know democrats often have a problem with accountability, but the intent in the ad is to defraud voters. The only conclusion from the ad is that it is an additional tax that will exist on top of the current tax system.

    I guess it all depends on what the meaning of “is” is, as you democrats like to say.

  24. IndyInjun says:

    Indy has voted for every GOP Potus between Nixon and Bush inclusive.

    Indy also did contract audits involving multiple tiers of contracts for 9 Fortune 500 companies. You cannot get anywhere CLOSE to the purported 25% or so embedded tax costs. They are less than 15% per IRS data.

    Boortz has admitted double counting employee SS in the embedded tax benefit and the “get 100% of paycheck” claim. You cannot have it both ways and if employee SS is not a savings to the employer it cannot be included in the 25%

    Boortz tells folks to check the facts…I HAVE..

    The “expert economists” analysis on embedded taxes HAVE NEVER BEEN PUBLISHED.

    Were you ever in the Moonies?

  25. Bronson says:

    Indy,

    Thanks for the challenge!

    Here’s one verifying the rate:
    http://people.bu.edu/kotlikoff/Taxing%20Sales%20under%20the%20FairTax,%20What%20Rate%20Works,%20October%206,%202006.pdf

    Here’s one that shows the FairTax benefits 42 out of 42 stylized groups earning labor income:
    http://people.bu.edu/kotlikoff/Comparing%20Average%20and%20Marginal%20Tax%20Rates%2010-17-06.pdf

    Here’s one showing the micro and macroeconomic impact of the FairTax:
    http://people.bu.edu/kotlikoff/Simulating%20the%20Dynamic%20Macroeconomic,%20October%204,%202006.pdf

    Another macroeconomic study of the impact:
    http://www.fairtax.org/PDF/MacroeconomicAnalysisofFairTax.pdf

    White papers on various topics derived from these and other studies:
    http://www.fairtax.org/fairtax/whitepapers.aspx

    On the other hand, statements against the FairTax put together by the DNCC are largely based on a “study” by ITEP that is unsigned with no methodology provided.

    The FairTax DOES replace the income tax, payroll tax, etc. Repealing the amendment that ALLOWED for an income tax is accomplished through HR Res. 16. If FairTax grass roots are strong enough to force Congress to pass the FairTax against their own interest and against the self interest of K street, they will be strong enough to follow through and drive a stake through the amendment that allowed the income tax.

  26. me says:

    Don’t have time to go through this, but generallly all the stuff the Fair Tax folks put out is from Kotlikoff, who says that it WON’T be revenue neutral. He’s fine with that, because he wants massive cuts in the budget. But anyone who takes that position needs to say what they would cut.

    For revenue-neutral, the rate is anywhere from 54% to 90%-plus.

    I have personally talked to just about every economist invloved in this, including Dr. Lazear and those cited in the Fair Tax book, and not one of them says it can be revenue neutral at anywhere near 23%. Not one.

    Remember that the main expert quoted in the Fair Tax book is Dale Jorgenson at Harvard, and he says the Fair Tax is a bad idea and Bill Gale’s numbers (at Brookings) are the right ones. He also admits that the first big problem is a math/logic error he made and apologizes for. Basically, you have to either stipulate that the government pays the sales tax, or you have to reduce revenue by the tax that would be paid on goods the government purchased. All the calculations in the Fair Tax book are based on forgetting to do either.

    Also think about this: Even under their flawed theory, it’s not like you get a raise. The so-called “embedded” taxes either get added onto your purchase or — get this — prices go down, BUT SO DOES YOUR PAY. So this dea of taking home your entire paycheck is B.S.

    P.S. If you’re a responsible saver you get COMPLETELY screwed, because it is one of the few instances of GENUINE double-taxation; you personally got taxed on that money as income, and the Fair Taxers would tax you a SECOND time when you spend it.

    I’ll save the investment loophole for another day.

    This thing’s just a darned cult.

  27. DougieFresh says:

    Me and Indy,

    Both of you show how you know you are losing the argument with your allusions to “cults” and “moonies”. It is the biggest sign that you cannot back your claims with reason.

    Taxes paid are taxes paid, no matter where they are collected. If you insist that a 90 percent tax is required to make the sales tax work, then the government should be 45 percent of our GDP. (Government takes in 90 percent in revenue of what is spent on purchasing goods and services).

    Your numbers are out of whack.

    The current system is destructive to a democratic society. It is invasive, it is expensive, it give the government more power, it creates distrust, and allows the government to hide behind “withholding” and other “hidden” taxes like SSI.

    The fair tax means everyone will see what the government is raping them for on every purchase. This is why the Liberal Dems are so much against it. When the voters figure out what they have done to bloat the government, people will not be so willing to fund those grossly inefficient government schemes. Talk about your cults.

    If it is such a winner for your side, why not encourage more debate in public arenas instead of publishing lies in the form of 30 second adds. Of course your side does not want to do that, because they will lose badly when the public finds out the real details of the fair tax.

  28. me says:

    Here’s the simple and inescapable logic: Bill Gates spends hundreds or thousands of times what a middle class person does. But he makes millions of times what you do (or maybe it’s hundreds v. thousands; whatever; this doesn’t rest on the finer math).

    So, if sudenly Bill Gates is taxed at only thousands of times what you are instead of millions of times — plus you add to that that the rate is no longer progressive, so he’s paying the same rate you are, not a higher rate — well, who’s going to make up the difference?

    Fair taxers say that the poor will be held harmless because they get a prebate, or what economists call a demogrant. So the poor, arguably, pay less. Bill Gates clearly pays much, much, much less. So it’s the middle class who gets completely screwed. Plus the rates would have to be twice what’s advertised, even making exceedingly generous assumptions.

    So that’s why it fails before you even get to the hard math. I have explained in detail above how the hard math makes it even worse. A number of middle-of-the-road economists even say it would be ABOVE 100%. But it’s certainly at least 55%-60%. And unless you’re rich or poor, you pay a lot more in taxes.

    GDP per se is irrelevant to the calculation. You don’t say enough about why you have that misimpression to allow me to correct your error. But bear in mind that the author of all the studies the Fair Taxers use to defend their plan REJECTS their claim that ths can be done with a 23%/30% revenue-neutral plan.

    I read all their rebuttal stuff last week. One paragraph details how taxes who go down for practially everyone and poses the question of who pays for all that. Their answer was priceless: “Practically no one”. There’s no free lunch. If you believe there is, then it’s fair to say that your beliefs are irrational, and a group which is passionate about an irrational belief is fairly called a cult.

  29. schnarf says:

    The anti-FairTax people like to scare you with the 30% figure. They get this number by looking at the tax rate on an exclusive rather than an inclusive basis. Fine, then let’s look at it the same way for the income tax so we’re comparing apples to apples. A typical worker pays about $33 of his or her income in federal taxes for every $66 he or she gets to keep. That’s a tax rate of 50%. If you don’t believe me look at your last pay stub and do the math.

    How is that possible? The only people who pay taxes under an income-based system are people who WORK – from the working poor to the small business owners who create most of the jobs in this country. So of course they will bear a disproportionate burden.

    Who gets out of paying income taxes? Drug dealers. Underachievers. People who could work but choose not to. Who else? The super-rich who don’t need to live on a weekly paycheck. People who can afford expensive tax attorneys and accoutants to set themselves up as corporations and find loopholes, or send lobbyists to Washington to buy off their Congressional representatives. These are the people who liberals always claim to want to shake down for their fair share. Under the FairTax they would pay their fair share when buy luxury items. A true measure of financial wealth is not how much money you make, but how much you SPEND.

    The FairTax would distribute the tax burden evenly, not concentrate it squarely on a small band of wage earners in the middle of the economic spectrum. And remember the poor would pay no taxes, because a prebate check would be sent to every household to offset the consumption tax up to the poverty level.

    Occasionally I hear news reports about how consumer debt is at an all-time high and savings is at an all-time low in this country, and I always think, well duh – what do you expect to happen with a system that discourages work and savings, and rewards spending?

  30. DougieFresh says:

    Me,

    My point is that GDP is the “market value of all final goods and services produced within a country in a given period of time”. This means the value of all goods and services sold to a final consumer. Thus, they would be subject to tax.

    The USA has a GDP of 12.5 trillion US$ per year. The US government spends 2.3 Trillion, but currently only has revenues of 1.9 Trillion. So that means the US taxes 15.2 percent of the value of all final goods and services sold in the USA in a given year and spends 18.4 percent of the GNP.

    If you exempt federal spending, that leaves about 10 Trillion in private sector spending on final good and services, to fund 2.3 trillion in revenue, or 23 percent.

    Charlatans try to distract with irrelevant details. The tax taxes the final products and services, GDP is the sum of all final sales, so the required revenue is simply a percentage of that value, and thus is the same as the tax rate.

    If one also then quotes the sale tax rate on the same basis as one quotes income taxes, it is actually 19 percent, and not 23.

  31. me says:

    Actually, no, 23% is the so-called “tax-inclusive” rate, which in itself is terribly deceptive because sales taxes are never described that way. And that also demonstrates that your calculation method just isn;t how one goes about figuring this.

    There’s evasion, like it or not. And with a sales tax of 30% (stated in the terms actual people use), evasion would be rampant. That’s why no one has such a high sales tax (aside from all the regreeivity on the middle class).

    You seem to be forgetting the prebate. That’s a whole lot more spending.

    Remember, the government is a huge purchaser. You hav to either cut revenues or increase the budget to account for the government spending on itself.

    FInally, it’s just not realistic to think that people are going to stand for taxing food, toilet paper, healthcare etc. The Fair Tax base already excludes educational spending (which your GDP analysis leaves out).

    What details did you think wre irrelevant? This is just a huge shift of the tax burden away from the poor (possibly good) and rich to the middle class (a very bad thing).

    And then there’s the investment loophole. Whoa!

  32. IndyInjun says:

    Thanks Bronson, I will study that which was linked.

    I note that these studies are freshly released. This summer no one was willing or able to provide them.

    Of course new studies had eo be rolled out prior to the election.

    The work of the initial economists, which included Jorgenson and Kotlikoff, was funded largely by Shell Oil and Enron. I cannot help but note that the major oil companies have $40 billion in deferred income tax liabilities that would immediately flow to the bottom line at the passage of the “FAIR” tax.

    The effects on local government are nutty indeed. I shall leave that for another time.

    Me……yup… Moonies they are….

  33. DougieFresh says:

    Under the fair tax plan, toilet paper et al are not taxed, that was the point of the “prebate”. It is a funding of the amount people would pay for sales taxes up to the poverty line.

    So, with an average family size of 4, including 2 adults, that means an anual rebate to the average family of $6,000. With 300 million people, thats 75 million checks, for a total of 450 Billion. I made a math error in my original calculation as I took the 2.3 trillion expeditures total for revenue which is really 1.9 Trillion. Adding this in simply bumps the actual expeditures back to 2.3 trillion, so the actual result is still in the same ballpark.

    You cannot calculate the fair tax rate on the same basis as normal sales tax rates because it will not be replacing sales taxes, it is replacing an income tax. If the income tax rate is quoted in such a way as to make it more palitable, then the same has to be done to the NRST to compare them on equal ground.

  34. DougieFresh says:

    All tax liabilities under the current tax system are maintained even with the passage of the fair tax. Yet another falsehood spouted by the Liberal Dems.

  35. DougieFresh says:

    If someone owes $20 under a current tax liability, they still owe it under the fair tax.

    They will no longer incur that liability going forward for the same activity, but if it was already accessed under the current tax law, they still owe it.

    My love of the Fair Tax does not come from an expectation of getting some form of tax break. It comes from my love of freedom, and the intrusions into that the current tax system has allowed.

    Do you guys that are opposed to it enjoy the fact that the tax code is as complex as it is? Do you support the fact that the people with the powerful lobbies in Congress have more such much power that they actually write much of the tax code, which your House member votes on without even reading it?

    Do you who oppose it like the fact that the Federal government uses the tax code to reward and punish behavior as it sees fit?

    Are you happy with the current tax system?

    If you like it, then say so, and there would be no reason for us to discuss it, as you will never be convinced. If you do not like it, is all your hatred for the Fair tax just because you are so blindly partisan that you would rather keep the nation down in order to score political points?

    My suspicions is that 75 percent of the American people think that the current tax system is horrible and would support something a lot simpler and more transparent. I think they would support having the government out of our private documents and stopping the government’s eye from peaking over our shoulders at every financial transaction we make.

  36. Indy & me,

    The embedded corporate income tax costs are cumulative. You can’t just look at GM and say that their compliance costs are X% and leave it at that.

    For example, when you buy a car, you are paying huge amounts of embedded taxes and tax compliance costs, all the way down the line; not just those of GM. You must remember that corporations don’t pay tax. They just pass it on in the price of the products or service that they sell. The same applies to compliance costs. Every dollar of compliance cost reflected in the price of the product or service.

    The car is made of steel. So, you have to include the taxes and compliance costs of the steel company that is passed on to GM, in the price of the steel. Then, you must include the passed on taxes and compliance costs of the companies that make the machinery that GM bought to turn that steel into a fender or frame. Of course, since that machinery is itself, made of steel, you have to include another layer of passed on taxes and compliance costs from the steel company. Of course, the steel is made from ore, so you must also include the passed on taxes and compliance costs from the mining company. But, it doesn’t stop there. The mining companies use equipment made by GM, that is made of – you guessed it – STEEL, so you have a whole other set of layers of taxes and compliance costs to consider.

    The person who ultimately pays all of those layers of taxes and compliance costs is the final retail purchaser.

    Some people suffer under the misconception that poor people don’t pay tax. But nothing could be further from the truth. Even when a poor person buys a pair of socks, he is paying layer upon layer of corporate income tax that has been passed on by the many layers of suppliers, wholesalers and distributors. With the FAIR Tax, poor people really wouldn’t pay tax, since all those layers of embedded taxes would be gone.

    Interestingly, because of the way those costs are passed on, even the government pays the corporate income tax. Whey the government buys a presidential limousine, they are paying all those layers of embedded taxes and compliance costs and they are paying for them with our money. If it were just taxes, it wouldn’t be so bad, since they are effectively, paying themselves. But, it is the added compliance costs, at every level that they don’t get back.

    But, here’s the best part of the FAIR Tax. Since US products would instantly become more competitive, worldwide, under the FAIR Tax, there would be more demand for the lower cost US products, which would create many more US jobs. With more jobs to fill, but the same number of people to fill them, it would naturally drive US wages up. Everybody wins… well, at least everybody in the USA.

  37. IndyInjun says:

    Dougie:

    It is pointless to discuss financial accounting and tax accounting with a Moonie.

    The liabilities present timing differences where taxes are deferred into future years. If the “FAIR” tax goes away, the deferred tax liabilities are never paid or returned.

    The liability for the timing differences goes away with “FAIR”tax passage.

    This is something the corporate interests that funded this scam know fully well and they know that they can focus-group and deceive Moonies into somehow believing this is a good thing.

    Across all business the instant tax forgiveness that would occur is likely in excess of 1 $trillion.

  38. Bronson says:

    Me,

    I have a letter from James Poteba that says in fact the rate is 23% using the FairTax base. Dr Poterba was one of the original researchers for AFFT. He later did another study that used a different rate. AFFT asked him for clarification and his response was that his later study used a different base, but using the FairTax base, the rate was 23%. Those who claim the rate would be higher always change the base.

    The tax panel likewise did not evaluate the FairTax. They evaluated a plan designed by the Treasury Department , that shrunk the FairTax base significantly. Dr Lazear was part of that effort. Amazing that after dissing an NRST he gets appointed as Chairman of the Council of Economic Advisors.

    The numbers they used in their evaluation came from the Treasury Department. AFFT asked Treasury for the methodology and a description of how the base was determined and has been unsuccessful in getting the numbers or methodology. Since you are apparently on such great terms with Dr. Lazear, could you please ask him for that methodology and have it forwarded to AFFT? After all…we all want to be open…right? I can’t imagine why Treasury might want to publish numbers and then hide the methodology.

    Your comments about Kotlikoff are way off base. First, he is a Democrat and tends to be much more liberal than myself. If you read his paper written for the St Louis Federal Reserve titled “Is the US Bankrupt?”, you will see one of his recommendations is a form of universal health care for example. Hardly a shrinking of Government.

    He and others such as David Walker of GAO do consistantly tell everyone that will listen that we are on a collision course with an economic reality that will not be pretty for Americans. This will mean higher future taxes and lower benefits. Dr. Kotlikoff sees the FairTax as part of a solution to avoid this “Generational Storm.” To quote Senator Kent Conrad, Democrat from ND, “We’re not preparing for what we all know is to come. We’re all sleep-walking through this period” (Nov 2005 article in USA Today titled “A Perfect Storm”).

    In recent testimony before the Senate Finance Committee, David Walker and four members of the tax reform commission were testifying about the panel’s recommendations for tax reform. David Walker pointed out that nothing they recommended did anything to solve this longer term crisis. Elizabeth Garrett, one of the Reform Commission’s members concurred and suggested that Congress would have to consider adding a VAT to their proposals in the future. So let’s not only compare the FairTax to the current system, but also understand that without such a change, the current system is probably going to be getting mush worse regardless which party is in office.

    Regarding revenue neutrality, the FairTax is indeed revenue neutral at 23% inclusive. That is in the study I linked above. The study adds that to be spending neutral, the inclusive rate would have to be 23.82%. That is a far cry from a 50% rate that you mention. An alternative is to keep the rate of 23% and cut non-social security spending by 2.72%. That would be a very small cut especially considering spending has risen over 30% since 2000. The resulting economic growth would be substantial. All the data is provided in the study. Nothing is hidden. Why won’t those who choose to diss the FairTax be as open?

    By, the “author of the studies rejects” I assume you are speaking of Jorgenson. That author projected a 23% rate based upon the base the FairTax uses. Then a few years later, he developed his own proposal and wrote a book about it. When I first got interested in the FairTax, I emailed him to ask about the embedded costs because he did not make it clear in his study what that consisted of (yes…I have seen it). His response was for me to buy his book for $70. I did. It didn’t answer my question. Instead, he just deferred to William Gale’s calculations to say the rate would have to be higher and went on to pitch his own proposal. William Gale did change the base. He removed almost half the base, called it the FairTax and then came up with a higher rate. Once again, the higher rate is always a result of someone changing the base. THE REVENUE NEUTRAL RATE ON THE FAIRTAX BASE IS 23%!!

    Change the base and of course you’ll get a different number! The FairTax base is almost twice as large as the income tax base, so if the average rate of the FairTax is 50%, just what does that infer about the average rate of the taxes it replaces?

    You also mischaracterize the study linked above on average and marginal tax rates. That study shows that out of 42 stylized groups of laborers (wage earners)…all 42 will have lower average and marginal tax rates. That does not make it a free lunch. Kotlikoff states that it does so by taxing wealth. AFFT has consistently stated that the FairTax is a tax on wealth…ah like Bill Gates. Now one thing I’d like you to get for me please is a copy of Mr. Gates tax return. The definition of income is very small. It is very simplistic to use Mr. Gates as an example and pretend he pays income taxes on all or even most of his income. Most of his income will either be tax free or taxed at the lower capital gains/dividends tax rate. There is very little paid in payroll taxes. If you got his return, what you would likely see if that his effective tax rate is much lower than most middle income workers. He is too smart to arrange his affairs any other way. Could you please get that return for me while you’re having Dr Lazear obtain the Treasury methodology for AFFT? Then perhaps we could talk facts instead of innuendo.

  39. me says:

    Lazear tried to get Treasury to release all the figures; they would not. (This obviously was before he became the President’s Economic Adviser. I don’t imagine it would be as easy to get him on the phone now. We’re not friends; I just called him to ask questions.)

    Kotikoff says the Fair Tax at 23% is not revenue neutral; he says Gale is basically correct. (Gale does nt change the base to get it up past 37%.) The first 12% comes from (Jorgenson’s) error on including government-purchased goods. I make no claims as to Kotlikoff’s ideology. I merely present the fact that he endorses the national sales tax BECAUSE it will cut revenue / spending dramatically. His reasons for wanting to do that are his own, and whatever they are are not terribly relevant to whether HR 25 is revenue neutral.

    No economist that I know of says the HR 25 base (the unFair Tax base) is even close to revenue neutral. The government taxation issue alone pushes it up 12% with no change in the base, even if you retain the strange assumption that evasion will be practically nonexistent. And, of course, it is unrealistic to think the base will be so broas — even before accounting for the “investment” lopphole.

    Bill Gates still pays a lot more than he would under the Fair Tax and the middle class eats the difference.

    HR 25 doesn’t tax wealth because so much of the wealth of the rich is locked up for more than one lifetime. How many lifetimes would it take Bill Gates to consume his wealth — assuming he doesn’t spend like Michael Jackson? In essence, you’ve pt your finger on the problem: Instead of wealth being taxes as it is created (a reasonable fee for the advantage taken of the American economic environment), it is taxed as it is spent — which it may never be. It is a tax on consumption, not on wealth. So while it may replace a low effective rate on income or wealth, it would be replaced by an even lower rate on income / wealth for the rich and a vastly higher rate on income / wealth for the middle class.

    Please state anything you take to be innuendo. I can’t find it. Othe rthan the cult reference, which is accurate in the way I explained.

  40. Demonbeck says:

    me,

    Chatham County recently had a SPLOST vote. Part of the reasoning for supporting the SPLOST was because property taxes would go up to pay for needs if it wasn’t passed. With SPLOST, the Savannah area can expect people from outside of the area to provide about 40% of the money expected to be raised by this consumption tax.

    What you and the rest of the folks with their heads buried in the sand refuse to acknowledge is that a consumption tax (even though it is revenue neutral for most) will impose taxes upon foreigners, criminals, illegal aliens etc. who are currently not paying into the federal tax structure.

    On top of that, we will be getting the full amount of our paychecks rather than paying our taxes through our paychecks.

    In fact, it is this reason that scares Fair Tax opponents the most. If the general population were to ever realize the amount of money they actually pay into the system, they would be outraged. A majority of Americans do not realize that they pay taxes because they don’t get a bill on April 15th, they get a return. Little do they know that it is merely the change from their annual membership dues of being a law abiding working American.

  41. Bronson says:

    Quoting from the recent study “What Rate Works” by Kotlikoff and several other economists (did you read it or just say you did?):

    “Bill Gale (2005) and the President’s Advisory Panel on Federal Tax Reform (2005) suggest that the effective (tax inclusive) tax rate needed to implement H.R. 25 is far higher than the proposed 23% rate. This study which builds on Gale’s (2005) analysis, shows that a 23% rate is eminently feasible and suggests why Gale and the Tax Panel reached the opposite conclusion. ” (page 2)

    They then go on to explain that HR 25 calls for revenue neutrality rather than spending neutrality and comment that in this paper, they are focusing on spending neutrality. Continuing on with another quote from the study:

    “Some critics of the FairTax argue that the rate needed for this purpose would be far greater than 23 percent; Gale (2005) argues that it would be at least 31 percent. The most importance finding of our paper is that the 23 percent called for in H.R. 25/S. 25 is, in fact, very close to the required rate. Indeed the requisite 23.82 % rate is so close to 23.0 that only a 2.73 % cut in non-Social Security federal expenditures from the CBO projected spending level for 2007 is needed to accomodate a 23.0 percent rate.” (Page 3)

    “It is important to note that these calculations are based on the “static” assumption that implementation of the FairTax would have no effect on the tax base; in so doing, they ignore the expansive effect that the FairTax could be expected to exert on the base as it eliminates the bias against saving inherent in the existing tax system.” (page 3)

    You can read the reast for yourself, but there is little there in agreement with Gale’s assumptions. Gale DOES change the base. He tries to qualify WHY he changes it but he does change it. This study addresses Gale’s assumptions.

  42. DougieFresh says:

    Indy,

    Sure ignore the question and resort to the only thing Liberals can do, sling insults.

    It is not suprising that Republicans have been able to maintain majorities at every level for so long, with such little effort and thought. Drinking Kool-Aid in an echo chamber only gets you so far.

  43. indychad says:

    I am a FairTax grassroots Volunteer.
    Let me help out here with some facts:

    1) “It is quite true that the fairtax is an ADDITIONAL tax, for it will take repeal of a constitutional amendment do do away with the income tax. ”

    Fact: The FairTax is NOT an “additional tax.” It is a REPLACEMENT tax. The FairTax does away with income-based taxes and replaces them with one tax at retail. The Fairtax legislation (House Bill 25) nullifies the sections of the tax code that make it work, and replaces the entire code with the FairTax legislation. That ends the present income tax. The repeal you mention will be needed to prevent a future income tax. God knows we don’t want income tax and consumption tax both at once. The effort to repeal the 16th amendment is underway already. And you’re probably right; it won’t happen first.

    2) ” That nutty tax DOES put a $9000 tax on a $30,000 truck…”

    Fact: The 23% FairTax on a NEW $30,000 truck amounts to $6,900. That $6,900 is part of the price, not added on. Your prebate at the beginning of the month that you buy the truck reduces the FairTax amount.

    Fact: At the state level, many state governers have indicated that they would consider converting their sales tax to a FairTax system. But that’s for each state to decide.

    3.)”Here’s a challenge. Go find the PUBLISHED reports of the “expert

  44. indychad says:

    Kotlikoff Study: 23% FairTax = Revenue Neutral

    Abstract

    As specified in Congressional bill H.R. 25/S. 25, the FairTax is a proposal to replace the federal personal income tax, corporate income tax, payroll (FICA) tax, capital gains, alternative minimum, self-employment, and estate and gifts taxes with a single-rate federal retail sales tax. The FairTax also provides a prebate to each household based on its demographic composition. The prebate is set to ensure that households pay no taxes net on spending up to the poverty level.

    http://people.bu.edu/kotlikof/Taxing%20Sales%20under%20the%20FairTax,%20What%20Rate%20Works,%20October%206,%202006.pdf

  45. I forgot to mention somethng at the end of my previous post.

    Since the FAIR Tax would instantly make US made products more competitive worldwide, it would create more demand for US made products and thus, create more jobs in the US. That means that more people would be working, which means more people PAYING TAXES into the system, rather than BEING A BURDEN on the system.

    Since the effect of this is a potentially huge factor can only be very generally estimated, it has not been considered in any of the studies that I am aware of, other than to mention it in passing. But, whether it creates 10 jobs or 10 million jobs, just keep in mind that every job created by the FAIR Tax turns one person from a BURDEN on the system into a PRODUCTIVE taxpayer.

    And, this goes far beyond the bottom of the pay scale. As an IT consultant, I know several $40-50k/year programmers, who are out of work, due to outsourcing. Since the FAIR Tax would make outsourcing much less attractive, even many of those people would be able to find jobs again.

    Beyond the economic effect of taking a person off the welfare roles and creating another taxpayer, the psychological effect on those people must be enormous.

    I am reminded of the movie, “Dave,” in which Dave Kovic says, “If you’ve ever seen the look on somebody’s face the day they finally get a job – I’ve had some experience with this – they look like they could fly. And its not about the paycheck, it’s about respect, it’s about looking in the mirror and knowing that you’ve done something valuable with your day.”

    Even if you don’t consider all of the many substantial financial benifits of the FAIR Tax, that personal aspect alone, would go a long way toward making this a better country.

    • More people working and earning their own way.

    • More people paying tax, instead of being a burden.

    • More people who can take pride in what they do.

    The FAIR Tax is a Win-Win-Win situation. The only losers are our elected officials, who can no longer give tax breaks to their big campaign contributors.

  46. Phil_will1 says:

    This is a very interesting thread. Perhaps some of the FairTax opponents can answer a few questions for me. This country faces a number of economic challenges, such as

    1. We have a massive and growing trade deficit. Virtually every serious economist agrees that this is not a sustaniable trend.

    2. The federal budget deficit, even though declining because of the improving economy, is still under water and can be expected to deteriorate again when the inevitable cyclical economy slows down. This means massive debt service obligations will be handed down to future generations, necessitating higher taxes or draconian cuts in federal expenditures.

    3. The individual savings rate in this country has slipped into negative territory for the past two years, a trend which virtually all economists are troubled by. This problem is exacerbated by our previously mentioned deficits in the federal budget and trade.

    4. Every spring the trustees of Social Security and Medicare issue their annual report which points out that the day when those two programs will not have enough revenues to pay for the services promised is closer than it was in the prior year’s report.

    5. Medical costs continue to rise faster than inflation, which is a problem that affects the entire economy, but most especially governemt expenditures via Medicare and other programs.

    Since you opponents don’t want to support the FairTax as a way to address each of those problems, how would you suggest addressing them?

  47. Burgener says:

    One of very few reasons people dislike the HR25 plan is that it doesn’t reduce the budget of the federal government. But is there any way to reduce the federal budget without FIRST having the expense of the federal government posted on every sales receipt? The FairTax plan is just the first step on many.

  48. IndyInjun says:

    Gents, sorry for the references to moonies, but the “FAIR”tax movement has a considerable number of elements common with a cult.

    My use of it has prompted some useful discussion.

    My approach is that of a sales tax accountant having worked with the taxes of 16 state and for 9 Fortune 500 companies. I did tax research that produced $tens of millions in sales tax savings. In short, I am not an income tax accountant fearing displacement, but a sales tax accountant prepared to reap a huge bounty if this thing ever were to pass.(It won’t.)

    Dougie…..I have researched 20 corporations with an aggregate of more than $200 billion in deferred income taxes liabilities on their balance sheets. These financial accounting liabilities arise due to tax credits, accellerated depreciation, or the like which effectively reduce the tax liability for the returned year by shifting the taxes to future years. The IRS does not record any official liabilities for these tax deferrals and they are paid out as the timing differences work out. If the “FAIR”tax passes, there will be no more income tax returns required and the corporations will never pay out the deferred income tax liabilities that exist on their balance sheets. These balances would go straight to income, albeit as an extraordinary item.

    Bronson…..John Linder was on C-Span in December 2005 being interviewed by David Wessel of the Wall Street Journal. Wessel asked about the rate and Linder said the rate was being rescored to take into account the objections of the Presidential Commission by the firm “Global Insights” and that the revised rate was coming in around 24 to 26%. A 26% rate is 35%!!!!!!! on a tax exclusive basis.

    Bear in mind, too, that “revenue neutral” means replacing the tax revenue collected by the current system. At one point the Fairtax org site made the FALSE CLAIM that the tax would provide for all government spending. Furthermore, Social Security is running a surplus during the baseline years that I have seen used and SS goes into deficit in the out years. The SS component of the Fairtax would have to increase, if SS is truly “fully-funded.”

    Another thing not mentioned a lot is that the states and locals have existing sales taxes PLUS income tax systems that piggyback on the Internal Revenue Code. These would likely convert to the same tax base. Per the “FAIR”tax site this rate would be 7 % tax inclusive or 9% or so tax exclusive. Tax rates of 42% PLUS tax exclusive simply are unworkable.

    Indychad……The income tax won’t be dead until the 16th amendment is repealed. PERIOD. I actually agree that Barrow’s ads are misleading as the INTENT is that the Fairtax be a replacement tax.

    Indychad ….as a tax researcher who once got a $300 grand tax reduction in the face of an adverse ruling by the GA Supreme Court that the same equipment was taxable to another manufacturer, I can assure you that details do not bore me. Bronson gave me some related data, but where is the analysis about embedded taxes and where is Jorgenson’s original work? At the Fairtax groups site, it was said that this data has not been publicly disclosed. Without full release and given the funding of Fairtax.org by corporations who stand to gain in the $trillions, BUYER BEWARE.

    With respect to the taxes on that truck, we can go through the formula in HR 25 step by step, which would show the tax on a $30,000 sticker price to be $9,000. The 23% fair tax of $9000 comes from dividing said tax by the price plus the amount of the tax, or $39,000. YOU ARE WRONG. Prebates are totally extraneous to the issue, as even the Fairtax site says that the prebates are to cover tax on the “necessities of life.” A new truck is a durable good.

    ActionAmerica…….As an IT professional, the Fairtax should scare you out of your wits. Business is totally exempt and even if it were taxed, services provided in Bangalore, India won’t be charging the tax. So you would be looking at giving outsourcers a 30% advantage, even if your wages are the same. Think again, if you expect that the Indians will collect the Fairtax and remit it.

    The incentive to use foreign made components increases because there is a 30% penalty on top of any wage differential, meaning industries that are close to being competitive lose out. For example, a $1 per hour price advantage becomes a $1.30 advantage for a foreign import.

    As far as the cascading effects of mulitple tiers of transactions prior to final sale, I see no evidence that these embedded taxes are more than 15%. This is born out by Boortz, who admits now that the embedded tax analysis included BOTH employer and employee SS taxes. This means that either the “100% of paycheck claim” is false (one gets 92.35% of paycheck) or the embedded tax figure is MUCH lower.

    Half of my expertise is in multiple tiers of contracts and I cannot accept the 25% embedded tax figure without substantiation, which is what the Fairtaxers wish me to do.

    How much embedded US taxes are there in a Chinese import at Wal-mart? Surely not 25%!

    Vertical integration, industry consolidation, and manufacture via US assembly of foreign-made components are trends that invalidate the notion of multiple tiers of compounding tax costs that rise to 25%.

    As for the silly notion that there will be no record-keeping or tax audits, the fairtaxers are ignorant of the FACT that the Fairtax clearly requires the consumers to keep records and bear the burden of proof that the tax was paid. This is clearly in HR25 , as it is in the state sales tax laws.

    The IRS will be replaced by state revenuers who ALREADY HAVE the power to audit individuals and to ESTIMATE sales tax liabilities in the absence of the required records. (States do not rountinely use these powers, but when 100% of the revenues of all 3 branches of government are their responsibility and with combined rates of more than 40%, these dynamics change radically.) Said powers have been tested and upheld by the GA Supreme Court.

    Finally, the tax applies to rapidly inflating medical insurance costs, even premiums paid by employers. Where will that come from? Payroll deductions, is my bet.

    Paying such high taxes on costs of medical care, utilties, and energy that may inflate at compound double digit rates, while one’s wages are increasing by low single digits is sheer insanity. Do a spreadsheet…..

    Dougie……you speak as if the Fairtax applies to all final consumption and under state sales/use tax laws it does, even when business is the final consumer. Not so the Fairtax, which provides for blanket exemption of business purchases, irrespective of whether such costs are directly used in production or not.

    The impact on local government is quite astounding. The cost of financing for them is lowered by the income-tax exempt treatment of muni bonds to their holders, affording a 25 to 30% advantage. These savings go away with the fairtax, so that locals and states would have to compete on an interest rate basis with the federal government and corps. Alas, the states and local governments have no printing presses, so their rates would be higher. The notion that rates go down is an unsubstantiated fiction.

    Thats all for now.

    I still think that “con job” fits.

  49. IndyInjun,

    You say that the FAIR Tax should scare me, as an IT professional, since “services provided in Bangalore, India won’t be charging the tax.”

    What has this to do with anything? The idea is that services in the US won’t be “PAYING” 39.3% income tax (sole proprietors somewhat less). That means that companies that provide a service in the US suddenly eliminate a major disadvantage and can compete with foreign companies that still have to pay income tax (India 33%, unless it is a foreign company, which pays 40% in India).

    As an IT professional, I’m absolutely salivating at the thought of more mid-level IT professionals working at 9 to 5 jobs and not out on the street, competing with me, for high-end consulting work.

    In fact, you show your lack of understanding of the FAIR Tax, when you say, “Think again, if you expect that the Indians will collect the Fairtax and remit it.”

    Hello!? The FAIR Tax is a retail sales tax that is only collected in the US, on all new products sold in the US, REGARDLESS OF COUNTRY OF ORIGIN. The advantage is that when a product made in India is sold here, the Indian company has to build into the price of the wholesale item, a 33% Indian income tax, while a competing product made in the USA, includes no income tax. But, both products are subject to the FAIR Tax. That gives the US company a 33% advantage. It works the same way, when we send product to India.

    Again you show your lack of understanding of how the FAIR Tax works, when you say, “The incentive to use foreign made components increases because there is a 30% penalty on top of any wage differential, meaning industries that are close to being competitive lose out. For example, a $1 per hour price advantage becomes a $1.30 advantage for a foreign import.”

    In actuality, the FAIR Tax presents a 30% ADVANTAGE, rather than a penalty. Just think about it. It’s quite simple. If a foreign company has to pay income tax in their own country and the US company has to pay no income tax, that gives the US company an advantage of roughly the level of income tax in the foreign country, minus what stays outside that country.

    UK and Australia have a 30% corporate income tax. Only a few major countries have lower corporate tax rates. But, US companies have to pay both foreign income tax and then make up any difference in what they paid and 39.3%. Unfortunately, they don’t get money back for taxes paid in countries like Japan and Germany, that have even higher taxes than the USA.

    The largest foreign-owned multi-national companies can manage to keep much of their income outside of the home country and shelter those earnings in low tax jurisdictions, until they are ready to reinvest it, thus deferring taxation. In most cases, that income is taxed only in whatever country the income is earned or wherever the product is manufactured.

    But, US-owned multinational companies don’t have that luxury, since they must report all income earned, regardless of where it was earned or is domiciled and pay tax on it, accordingly. With the FAIR Tax, US-owned multi-national companies would no longer suffer under that disadvantage.

    Smaller foreign companies end up repatriating most or all of their foreign income and have it taxed, at that time. So, their products would end up costing more, in the US, thus making US manufactured products more competitive.

    The multiple tiers of corporate taxes is bad, regardless of how big it really is. But then, you have to add in the compliance costs, as well. My wife is a CPA, who has worked at high levels with Fortune 500 companies and she tells me that well over than half of the accounting costs of most such companies can be traced back to US income tax compliance. I suppose that if you are an accountant, you might worry about the FAIR Tax, since it would eliminate a lot of corporate tax compliance jobs. Certainly, you should worry if you work for a tax preparation firm.

    So, that would make the losers, 1) our elected officials, who could no longer give tax breaks to their big campaign contributors and special interests, 2) foreign companies, 3) tax accountants and let’s not forget 4) 125,000 IRS agents. Personally, I don’t worry about any of them, especially since the economy will improve for the other 300,000,000 of us, in the USA.

    But, to top it off, you show your total incomprehension of how the FAIR Tax works, by using an argument FOR the FAIR Tax, as though it was a negative. I have to wonder if these are not intentional errors, designed to mislead. You said, “How much embedded US taxes are there in a Chinese import at Wal-mart? Surely not 25%!”

    The whole point is that there is very little embedded tax in products from China, which gives Chinese products a decided advantage over US products that have multiple layers of embedded tax and compliance costs included in the price, under our current tax system. However, under the FAIR Tax, the US products would have no tax or compliance costs built into the price, which would make the US product more competitive with the Chinese product.

    Whether embedded taxes are 5% or 25% or more, is immaterial. When a person buys a TV, the decision between an RCA and a Panasonic can often be a price difference of as little as 5%. What if it’s 10% or 15%? That’s an out of the park home run.

    It’s all about making US products more competitive, at home and abroad, thus creating more US jobs and consequently, more US taxpayers. The current system cannot be made to do that. The Flat Tax won’t do that. Only the FAIR Tax does that.

  50. IndyInjun says:

    AV-

    Lessee, where to start……

    IT wages in the US are several times higher than those in India and China, so the embedded taxes in the cost of their services is rendered insignificant.

    Most IT work, and indeed MOST Computer Assisted Design Work, is done over the internet these days. Of course, if the end user in the US is a biz, they are exempt from the FT and this poiint is moot. However, if it is a TAXABLE service and the provider is in Bangalore, there is no enforcement mechanism for collecting the FT from the seller. This is the situation the states have in collecting sales tax on online services.

    This brings up a secoind point – that of the displaced 125,000 IRS agents. Those folks will be the happiest people on the planet, because they get an IRS pension and can immediately go to work for the state revenue agencies auditing for the USE TAX aspects fo the FT under state laws and HR25, itself. They will be doing the same intrusive audits that they currently perform.

    The price differential of imported items is magnified if the embedded US tax savings do not offset the price advantage. Bear in mind that consumers will be paying a combined federal and state FT of at least 40% on top of whatever the purchase price for electric utilities, water, gas, sewer, food, medical expenses, hair cuts, vacations, virtually everything that they buy. This will mean a 40% penalty on discretionary purchases and a 40% penalty on paying any higher price. It forces people to look for items made with 50 cents an hour Chinese labor versus $15.00 and hour American labor.

    As far as the embeded taxes being 25%, to my knowledge there has not been any analysis published, while IRS stats indicate that these taxes might be 12%.

    The formula for the FT rate allows for increases as required by social security and medicare. All available analyses show these costs exploding in future years, which means that SS will either be cut of the FT rate will explode.

    I work in SALES TAX ONLY. My work is not threatened by the FT. IN fact, I have strategies to thrive under it. I just know for a fact that the average Joe and Jane won’t come out ahead.

    The FT will never happen because there is no way on earth a poltician can run on a tax that puts a 40% tax on top of the cost of nursing home care, while yielding immediate tax forgiveness of $40 billion for big oil.

    The effects of the FT on local governments are even more disastrous. First, they lose 25 to 30% savings on financing costs from elimination of the tax exempt status of their bonds. They have to charge their constitutents a combined 40%-plus tax on fire, water, sewer, stormwater, and other services. Failing that, they are the end consumer and have to pay the 30%- 35% (per Linder 12/05) federal tax on items for which they are the end consumer…i.e library books, computers, administrative purchases. Local and state governments, especially in Georigia, have come to depend on sales tax revenues that will then be competing with federal sales tax, with the astronomical tax rates driving down tax collections.

    I cannot imagine any state or local official even dreaming of supporting such a suicidal measure.

    Sorry to disagree with your wife, but the Fortune 500’s I worked for would never spend that much money on tax compliance. One of the biggest deceptions about this nutty tax is that its proponents like to attribute the costs of entire accounting systems to tax compliance, when the bulk of the effort is required for financial and cost accounting. Those costs are totally unaffected by the FT.

    We need a FLAT tax. The fair tax is so loony that a Republican Presidential Commission on Tax Reform – one that was biased in favor of a consumption tax – could not bring itself to recommend it.

    The Wall Street and corporate manipulators who hatched the FT have one thing right from their focus groups and that is that the public can be seduced into just about anything as long as they are promised “100% of your paycheck.”

  51. gatormathis says:

    I have a friend who lives in Denmark.

    He says a vehicle there carries a 160 percent tax.

    When the vehicle times the 160 percent is figured, then that amount is multiplied by a 25 percent sales tax.

    If you think taxes will go down, whatever kind of “new” tax system comes around, think again.

  52. Tax Sanity says:

    I dont see how fairtax can work as advertised. I wish it could.

    But unless there is some alternate universe, where math has no meaning, then Fairtax has fatal flaws.

    For one thing — Fairtax pretends to tax the federal government, to pay the federal government, about 300 billion dollars.

    Boortz writes “the federal government itself becomes a major taxpayer” Page 148.

    Well lets see if the federal government can really pay the federal government 300 billion dollars.

    Its like me saying I will tax myself 10,000 dollars a day. Oh, I can write a check for it, I can even deposit my own check in my own account. But at the end of the month, I dont have 300,000.

    Incredibly, Fairtax thinks they will have 300,000. Well — they pretend they have 300 billion. But they dont. THey have zip.

    For example, when the Fairtax makes the US Navy pay 4 billion in “sales tax” on a 12 billion dollar aircraft carrier — the Navy can write the check, The Treasury can even deposit the check.

    But the Treasury isnt a dime ahead. The treasury had to issue the money to cover the check it cashed. Its looney as a tune.

    But Fairtax acts as if they are getting 4 billion into the treasury from the Navy. Fairtax advocates think they got 296 other billions from taxing government overall. But they dont.

    As a result, the Fairtax budget would be 300 billion dollars shy — and the rate would have to go up on the fairtax to cover that. So the rate would have to at least be 35% for that one fallacy.

    Another major fallacy — Fairtax pretends it will be able to tax health care. Fairtax looks to tax the 2 trillion dollar health care industry — to the tune of 460 Billion.

    If Fair tax CAN NOT tax health care for political reasons — they lose 460 Billion more in revenue, and the tax rate has to go up to 50-55% percent.

    Lets see if the Fairtax can really tax health care and get 460 billion from these people.

    Will Fairtax get away with taxing health care?

    Depends. Depends what a cancer patients does when just ONE patient gets a tax bill of 40,000 dollars on their surgery, chemo, and hospital bill. Will they go ahead an pay it?

    Or scream like bloody murder?

    Keep in mind, there are 15 million people dealing with cancer at any one time.

    Even if they have insurance — insurance doesnt cover this extra 35% tax. So if you survive cancer and your insurance pays the doctor and hosptial 100K, you still owe the 35,000 for the tax. Its the new co-pay.

    Even if you die — you would still owe the 35,000 tax. Plus, the tax on your funeral.

    What do you think nursing home patient will say, or the famlies they see a 25,000 tax, per year, on their nursing home care?

    Will they just pay it? Or scream like bloody murder?

    What would the parents of an 8 year old leukemia victim say, when they see a “sales tax” bill of 70,000 dollars, on their effort to keep their child alive. Suppose further that the parents only make 35,000 a year.

    Will they just pay it — using magic — or will they scream like bloody murder?

    What will people say when they see their bills — second opinions are taxed — lab tests — taxed — ER visits — taxed. Dental care -taxed. Doctor visits — taxed. Knee replacement — taxed. Child birth — taxed.

    The outcry from these folks will be like nothing US history has ever seen before.

    Congress would quickly exempt health care expenses from a high sales tax.

    If any Congressman dared to suggest the parents of a cancer victim should pay a sales tax — they wont be a congressmen very long.

    So the rate would have to be adjusted up — to 55-65%

    My point is — you wont be ABLE to tax health care. And you CAN’T tax the federal government.

    The Fairtax budget would be 800 billion dollars shy —

    And we havent even discussed other huge markets which will demand exemptions. Renters — Car sales, new home sales — new moblie homes.

    Of the 40 million renters in the USA – I bet not 12 individual renters know their taxes would skyrocket the moment this bill is passed. And wow, will they have a few words.

    ALready, you have nearly a trillion dollar shortfall!!

    Fair tax can’t work. And Im really sorry that it can’t.

  53. IndyInjun says:

    But very true.

    One never hears that their EMPLOYER PAID health insurance premiums would be taxed.

    I have also called attention that the states paid $835 Billion in Medicaid costs last year, and the Fair???Tax would add a 30% tax (on whatever costs remain after about 10% embedded taxes are removed.)

    I am very interested to read the new FT defense book.

    I do not think Boortz and Linder engaged any sales tax accountants to keep them from making total fools of themselves – again.

  54. drjay says:

    whatever happened to the idea of a flattax??

    how fun that we bring this thread back after over a year.

    has huckabee won his last primary???

    31-17

  55. IndyInjun says:

    “whatever happened to the idea of a flattax??”

    It became overinflated and transformed into a GREAT tax.

    Alas, key cocktail napkins were lost, and that, as Paul Harvey would say “is the rest of the story.”

  56. Icarus says:

    “Likewise, I’m told the RNC is very, very pleased with the ground game in GA-8 right now and expects to pick it up too.”

    Haven’t had the opportunity to ask how Mac Collins’ concession speach is coming along in a while. Anyone know when he might be finished with it?

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