The FairTax Cult

I’ve come to the conclusion that the FairTax no longer represents fundamental pro-growth tax reform.

It has taken me awhile to resolve my feelings for the FairTax. Unlike Indy and others, I think the bill would benefit our economy and country greatly. I think it might be one of the few ways out of this mess our congress critters have made with entitlements. I think a consumption tax is a better way to raise revenue than a tax on productivity. I think the FairTax would encourage savings and investment, bring foreign capital to our shores, strengthen the dollar and lower the price of oil.

The problem is that the FairTax promoters and supporters jumped onto the Mike “I’m happy to raise taxes in anyway you want” Huckabee bandwagon. How is it that people who want to lower taxes and improve government would vote for someone who increased the tax burden of his state by 50%?

I began to realize that the FairTax promoters would use any means available to promote their idea and the FairTax supporters would buy it. The FairTax movement stopped being for better public policy and became a cult.

The Boortz/Linder plan is to promote the FairTax here, there and everywhere. FairTax! FairTax! FairTax! Rally the people with a voice so loud Congress will be unable to do anything about it.

The problem is voters are more interested in American Idol or the latest season of Lost than how the tax plan they advocated for is being amended by the sausage factory on Capitol Hill and K-Street. HR25 could call for the mass execution of puppies and the voters will be happy because the bill’s title is “FairTax”. That is the fundamental flaw of the FairTax right now – its promoters and supporters.

Here is what I predict would happen if the FairTax ever got traction in DC:

Bowing to pressure from constituents, congressional leaders will agree to hear the FairTax in the House Ways & Means Committee. First to testify will be the Home Builders Association. They’ll complain that in a housing slump no one will buy their product (new homes) if it has a 23%1 tax on it. Home builders are a powerful lobby, so new home sales will be exempted from the tax. Then the Representative from Detroit will hold a press-conference saying how the FairTax will hurt the American WorkerTM, because it will make automobiles cost 25%1 more2. Labor Unions will protest and the US Automakers will be exempted. Even though most US cars are made in Mexico and foreign cars are made in the US foreign automakers will not be exempted. After all, if you exempt foreign car companies you’re sending tax breaks overseas and the populist voters won’t support that. A new bureaucracy will be created to determine how much of a car is made in the US and what percentage of the price should be taxed.

Soon every special interest with a lobbyist will start clamoring for an exemption. Teacher’s Unions will align with publishers to try and exempt books. Advocates for the poor will try and exempt personal computers – but only for personal use, and only if you make under $30,000/yr, etc. Food, Medicine, education, legal services will be exempted.

Next the budget wonks will complain that the Prebate will cost too much, and the class-warfare types on the left will call it a handout to the rich. So Congress will amend the plan once again. Soon only those making under $60,000 ($100,000 for married couples) will be eligible for the Prebate. That means the entire apparatus of the IRS will need to be kept around to verify income eligibility for the Prebate. W2s, 1040 forms and the lot.

By the time the bill makes it to a floor vote, the sales tax rate will be 45-60%1, half the daily necessities will be exempted, and the revenue numbers will come in way too low. The President (doesn’t matter which one) will say that he’ll veto the bill unless the Congress can meet certain revenue figures. The conference committee will convene and they’ll decide to keep the current Income Tax, at a reduced rate of 25% on all incomes over $75,000 ($125,000 for married couples).

So thanks to the Cult of the FairTax, the IRS will still exist to tax the high-income earners and to verify eligibility for the Prebate. New bureaucracies will be created to set the tax rates on imported goods “to protect American manufacturing” and to keep the K-Street crowd employed. The provision that the bill doesn’t become effective till the 16th Amendment is repealed will be gone.

Twenty years from the enactment of the FairTax, the income cap will still be $75,000/$125,000 (thus affecting the lower middle class) and the marginal rate will have creeped back up to 39%. And we’ll have a 35% sales tax too.

But, won’t competition force the price of goods to go down? Yes and no. Boortz likes to use the example of a loaf of bread dropping in price because the embedded income tax goes away. I don’t disagree. Bread is a commodity with lots of competition, low barriers of entry and a free market in which it trades. Bread prices will drop quickly. But what about a gallon of gas? Most of the cost of a gallon of gas isn’t the cost of manufacture, its the price we pay to third world despots. They don’t have an embedded cost of the income tax, so you won’t see the price of a gallon of gas dropping.

What about other things? Cable service? Cable and phone services are monopolies. The free market has been superseded by local and state governments. There is no free market forcing prices down in those industries. That $300 iPhone? Mostly made in China, the manufacturing costs won’t drop. And since the device has already been designed here in the US, the embedded costs of the income tax have already been spent. Apple will still need to recoup those costs.

Promoters and Supporters of the FairTax are selling a bill of goods regarding the price drop that the FairTax will never be able to provide.

Milton Friedman once said “Only a Crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are laying around”. This nation is going to face a crisis thanks to the incompetence of the morons in Washington. Health Care, Social Security, and a national debt that has dramatically increased under this so-called conservative administration will lead to massive economic dislocation.

When that occurs the people in Washington will need to do something. But only then will they actually ignore the K-Street crowd and do what is in the best interests of this nation. If the FairTax were to be enacted anytime soon, it will be a mutated abortion of what Linder and Boortz promise and it will be their fault for creating the Cult of the FairTax.


1 We will use the embedded rate for all illustrative purposes here. 23% or 30% doesn’t matter to my argument, so I’m just going to assume the figures quoted by Boortz, Linder and their supporters.
2 Remember: the FairTax is revenue neutral so to exempt new home sales, the rate will go up.

52 comments

  1. Goldwater Conservative says:

    Same rhetoric…different package.

    More money is made in America than is spent (unless you count government earnings and spending).

    I know that I am not alone. There is no retired person (nor any person that plans on retiring, and it is more and more becoming one of the many American dreams that will never be fulfilled for most) that can rationally support the “Fair”Tax.

    Who hear has listened to tax experts’ criticisms of the “Fair”tax?

    Check out Michael Graetz’s books at the library sometime. He also “debated” boortz on Cspan about the fairtax: it’s viability, revenue generation, tax rates, trade, etc….most importantly though, how the “fair”tax mob did their math.

    One of the biggest problems with the “fair”tax is people assume that everything else in our economic/political system can remain the same. It will take years, perhaps decades, to restructure everything to make the “fair”tax work. In the end…the tax code will be 60,000 pages again.

  2. Skeptic Tank says:

    Whether it’s better to tax wages or consumption is a topic that honorable people can debate honorably. I could make a credible argument for either side. However, what has always repelled me about the Fair Tax “cult,” as you so accurately describe it, is the dishonesty of the arguments that are made in favor of it (starting with Neal Boortz and continuing on through John Linder).

    The Fair Tax proponents can’t even be honest about the arithmetic involved. They propose a consumption tax of 30 cents on every dollar spent at retail. Simple arithmetic tells me that 30 cents on the dollar is a 30 percent tax — and yet, the Fair Tax folks will bitch and holler that it’s only a 23 percent tax. Wrong. It’s 30 percent, and if you run the econometric models, you would find that a consumption tax closer to 40 percent would be necessary to truly eliminate the federal income tax and still maintain the current level of federal services.

    If a person can’t be honest about the arithmetic, I don’t think you can trust any of their other arguments either.

  3. Erick says:

    Chris, well said. While I’m open to considering it, if we can’t get a flat rate income tax alternative right now — something that a lot of the western world is heading to — we’ll never get repeal of the income tax, which should be a pre-condition to even considering implementing something like the FairTax.

  4. Doug Deal says:

    Skeptic,

    I am not a supporter of the “fair” tax, but your line of reasoning is as dishonest as you claim the supporters of the tax are using.

    They are comparing the NRST to the income tax on the same terms, which is a fair way of comparing the two tax scemes.

    If you made $1,000 in one month, and 23% were taken out in taxes, you would have $770 to spend on items that currently have no federal sales tax. That means you have spent $1,000 on those $770 worth of items.

    If the sales tax was indeed reported at 30%, as you say, you would be using your untaxed $1,000 to buy those items at $770 for $1,000. In otherwords the tax paid on income at 23% is equal to the tax paid on sales at 30%. Your means on comparison is dishonest, not the means that Bortz and Linder are using.

    What matters is the bottom line number of dollars left after the taxes are paid, not math tricks.

  5. MSBassSinger says:

    Wow. Reading this is like watching someone aim at a target and hit the building the next door.

    First, the garbage about Huckabee being a tax raiser is just plain wrong. Any complete look at taxes in Arkansas during his tenure as governor shows he held tax increases below other governors, such as Romney. Huckabee in fact got a Democrat legislature to lower many taxes. If you didn’t support Huckabee, it is time to let it go. The truth is, many Rockefeller-Republican types that opposed Huckabee did so only because he represents a candidate whose Protestant political views are an affront to their secularist political views.

    As to the Fair Tax, the support even of Linder and Boortz is contingent on the actual legislation not exempting the industries you mentioned, or any industries. If the Fair Tax was made into a bill as you predict, it would lose support fast. And even if it were passed in a Democrat Congress hungering for such a tax, the bill still depends on the passage by the States of a Constitutional amendment repealing the 16th amendment. The spectre of 50%+ sales tax rates would keep that from being passed in the States.

    I think most all the Fair Tax proponents are more concerned with “how will Congress screw this up” than with any other single part of the Fair Tax.

    As for the regulated industries not being subject to market pressure, they are subject to regulatory pressure, which could be used to reflect the tax savings from the Fair Tax in the COGS, and thus the final cost to the consumer.

    Skeptic Tank probably needs to work on his or her math skills. What sells for $10.70 today (with tax) sells for ~$10.80 (with tax) after the Fair Tax. Play games with the percentages as you will, but that is how it works. Also, I doubt his/her “econometric models” that say 40% accounts for the untaxed income in this country.

    If you consider just how much of our economic management in the US is geared towards managing taxes and avoiding them, I can understand why some folks are sore afraid of the Fair Tax. They derive income from treating the cancer of the progressive income tax, and if that cancer were gone, their income and power would be gone.

    Here is an alternative I would go for in lieu of the Fair Tax:
    End all witholding, all Soc Sec “employer contribution”, and all corporate taxation, and require everyone to pay their taxes each quarter at the real Soc Sec rate. When taxpayers see how much they are really paying (corporate taxes are pass-throughs to the consumer), they will clamor for the Fair Tax (assuming they don’t just take up arms). The first fiscal quarter for which Americans write a check for what they are really paying, that should end all this anti-Fair Tax nonsense.

  6. John Konop says:

    A hybrid between the fair tax and flat tax would be a better solution. A small flat income tax would make the transition easier via the market and lower the transaction % of the fair tax. The key is eliminating all write offs, the government should not be in the business of picking winners or losers.

  7. Jason Pye says:

    First, the garbage about Huckabee being a tax raiser is just plain wrong. Any complete look at taxes in Arkansas during his tenure as governor shows he held tax increases below other governors, such as Romney. Huckabee in fact got a Democrat legislature to lower many taxes. If you didn’t support Huckabee, it is time to let it go. The truth is, many Rockefeller-Republican types that opposed Huckabee did so only because he represents a candidate whose Protestant political views are an affront to their secularist political views.

    The fact is, and this has been well documented by the Club for Growth and independently verified by FactCheck.org, Huckabee’s tax increases far outweighed his tax cuts and he increase spending by more than 60%, much faster than the rate of inflation.

    You’re trying to gloss his fiscal record over because you agree with his religious views.

  8. MSBassSinger says:

    Jason Pye,

    The head of the Club for Growth has been a vocal opponent of Huckabee going back many years. Their anti-Huckabee diatribe is the result of a personal vendetta, not a fact-based assessment.

    I looked at your FactCheck.org link, and they say, “In fact, after adjusting for inflation, we found that spending in fiscal year 1998 (the first budget for which Huckabee was responsible) was actually $10.4 billion, while spending at the end of 2006 was $15.6 billion. That’s a big increase, but it’s a far cry from doubling state spending. ”

    “It’s worth noting, too, that Huckabee, despite facing a $200 million shortfall in 2002, ended his term with a surplus of $844.5 million. A billion dollar turnaround is, we think, a noteworthy accomplishment.”

    Perhaps you are trying to mythologize a tax-hungry fiscal record because you disagree with his religious views. Keep in mind that statement, and the one you wrote that is similar, both require the writer to know the other’s mind. Neither of us know the other’s mind, and I assume both statements would be factually incorrect. I know yours is.

  9. Jeff Emanuel says:

    Chris, exceptionally well-put. As you say, Congress will never, ever willingly divest itself of the ability to progressively tax income (and even if the 16th was repealed — which it will not be — the FairTaxers are incorrect in their belief that income would no longer be Constitutionally open to taxation; the 16th simply took that right and made it more explicit).

    Well said, all around.

  10. MSBassSinger says:

    Jeff Emanuel,

    The reason there is a 16th amendment is because the Supreme Court found a federal income tax to be unConstitutional. Repealing the 16th amendment simply reverts to that ruling being in force. The Supreme Court would have to overule the previous ruling in order for a federal income tax to be re-instituted. There was no “right” for the feds to enact a federal income tax. All rights that the Constitution guards are personal rights. The federal government has no rights, only enumerated powers so as to restrict what they are able to do.

  11. drjay says:

    i think i like the flat tax–like the one jerry brown advocated in 1992–his was 13%–i don’t know if that number would work or not…

  12. Jason Pye says:

    The head of the Club for Growth has been a vocal opponent of Huckabee going back many years. Their anti-Huckabee diatribe is the result of a personal vendetta, not a fact-based assessment.

    Their analysis seems fairly accurate to me. I have not been able to find much to dispute it, other than Huckabee’s own words, which are nothing more than the lies of a politician caught with his pants down.

    I looked at your FactCheck.org link, and they say, “In fact, after adjusting for inflation, we found that spending in fiscal year 1998 (the first budget for which Huckabee was responsible) was actually $10.4 billion, while spending at the end of 2006 was $15.6 billion. That’s a big increase, but it’s a far cry from doubling state spending. ”

    Did I say that he doubled spending? No, I did not. I said he increased spending by more than 60%. FactCheck’s analysis backs up what I wrote.

    “It’s worth noting, too, that Huckabee, despite facing a $200 million shortfall in 2002, ended his term with a surplus of $844.5 million. A billion dollar turnaround is, we think, a noteworthy accomplishment.”

    The surplus is negated by the bond debt accrued during his time in office.

    Perhaps you are trying to mythologize a tax-hungry fiscal record because you disagree with his religious views.

    My main issues with Huckabee are based on his fiscal record, which is abhorrent.

  13. Demonbeck says:

    Not to intervene in your squabble, but 10.4 to 15.6 is a 50% increase.

    Who checks Factcheck.org’s statements?

    15.6 – 10.4 = 5.2

    5.2/10.4 = 1/2 = 50%

  14. John Konop says:

    The reason why a hybrid is important is a retail sales tax would generate underground economy revenue which is only fair.

    And a low flat tax with no write offs would decrease the cost of filing, monitoring by IRS, court disputes via argument over tax code and stabilize tax revenue via transition.

  15. Adam says:

    I think John Konop touched on the important part — eliminating write-offs. Regardless of whether a tax is graduated income, flat income, or consumption, the complexity springs from the exemptions. Defining the tax rate and collection method is easy. Defining the tax base is where our nation’s illustrious politicians get tripped up.

  16. Erick says:

    MSBassSinger, you are in error. The Supreme Court actually ruled the circumstances giving rise to an income tax were no longer present and caused it to end.

    Notwithstanding that, the Supreme Court has previously held that other powers of the Congress are superior to the taxing power. Therefore, should there be a war or other pressing emergency identified by Congress, an income tax would be legal, despite not having a 16th amendment.

  17. HankRearden says:

    Eventually we will all give up and stop working. Then none of us will have to pay income taxes.

  18. IndyInjun says:

    Thanks, Chris…..uh, ‘Rat’. I have said for a long time now that they are indeed a cult.

    I wasted my money on the latest Boortz book only to read in the intro that the authors were unwilling to debate the bill, only the “concept.” This is what Glenn Richardson tried to pull when folks diligently dissected H Res 900, AKA the “GREAT” plan.

    In other words folks are supposed to disregard actual legislation that would define and enact their reform measure in favor of the “concept” as defined in the most recent moment by Linder and Boortz.

    Only cultists follow such absurdity.

    You mischaracterize my opposition, which focuses squarely on H.R. 25 and the expounding upon it by the FairTax org folks.

    Forget K Street getting involved. They have been from the outset. Fair????tax is straight out of the lobbyist playbook, which the funders = the principle benefactors.

    You are right to suspect it because of Taxabee, too, for it is a tax increase. H2O nails that it is poison for near-retirees as it is double taxation.

    My prediction is that Boortz would be first in line for a loophole……the dumbass doesn’t even understand that it would put him out of businesss.

    There is a side of me that would LIKE to see it pass……..there is a fortune to be made, for the reality is NOTHING like the pretty picture.

  19. yellowb says:

    I am new at posting on Peach Pundit, but I have been reading for a while. I am happy that Chris likes the idea of the Fair Tax. I am dissapointed in the negative predictions of what would happen. I humbly disagree with that prediction.

    I believe that the Fair Tax movement would be so large at the time that it hits the floors of Congress that any variation away from the original bill would not be tolerated.

    I will admit that the Fair Tax movement is more then just a lot of people who want a technical change in the way they are taxed. It is also a movement of people who are trying to put some power back in the hands of the US citizens. It is a passionate grass roots movement. If that is seen as a cult, then so be it.

    As far as the knock on Huckabee, I will only remind everyone that the party wanted nothing but to have a Reagan clone as its next Presidential candidate. I may be mistaken or did not hear correctly, but I do believe that the model of the modern day Republican party raised taxes during his tenure as Governor of California, and from what I recall, he did a great job as President of the United States. It’s about what you do as President that matters. I did not see one idea that Huckabee brought to the table that would lead me to believe that he would not be a Conservative President.

  20. IndyInjun says:

    Tax discussions are moot.

    Spending is the issue.

    The people are going to have to come to grips with spending, then a consumption tax will work.

    YellowB – Welcome to PP, but the Fair???tax has been cussed and discussed to death.

    What is curious here is that in these hyperinflationary times in which oil, 70% of which is imported and has nearly ZERO potential embedded US tax savings, is exploding in price outside of US control, people are still talking up a tax scheme that adds 30% to whatever the gas price might be.

    I really don’t think taxing gas and health care premiums (even employer paid) that are exploding in cost will be very popular when people actually start having to pay it.

  21. Goldwater Conservative says:

    we probably (realistically) need a little it of both an income and a consumption tax.

  22. griftdrift says:

    “Spending is the issue.”

    Yep.

    This is going to surprise some of you but I’m a flat taxer. But I also realize that no signficant tax reform will happen without spending cuts. Deep ones. Hard ones. The ones politicians shy away from like vampires from sunlight.

    I would be willing to consider the fair tax if anyone could convince me the math works. So far no dice.

    Until that point I have to agree with Chris. Very cultlike.

  23. CobbGOPer says:

    I support the FairTax, but discussions of the plan are moot until we get a Congress that is friendly to tax reform.

    But, as Indy points out, spending is the issue. And we’re never going to have a Congress that is averse to spending.

    God, how I long for the good old days when we used to start wars over legitimate arguments like taxes.

  24. Demonbeck says:

    Thank you for your admission, Jason. Beyond that, how much did health care costs for the state increase in that time? Did any of that budget go towards a reserve fund that was likely decimated during the budget crunch in his earlier years? Did any of the increased budgets go towards paying back accounting tricks used during those lean years?

    To say an increase of 50% is a lot and has been spun to make Huckabee sound bad. I am not saying that he is the thriftiest guy in the world, however, there are a lot of factors that go into budget increases. Look at the change in GA’s budget over that same time period.

  25. Goldwater Conservative says:

    Spending is an issue…not necessarily the issue.

    A war without objectives or a definition of victory that will cost us a couple more trillion is the biggest spending issue. Not having a war tax is another issue. Afterall, if we are not willing to pay more taxes for the war…then we should not be there.

    I see no problem with the federal government providing tax dollars to local police and fire departments for equipment and training, for rural urgent care facilities, r&d grants, nuclear power plants,…infrastructure that promotes democratic and economic stability. That can be interpreted rather broadly,…but that is the great thing about having lawyers in congress.

  26. Jason Pye says:

    I would encourage you to read the Club for Growth’s paper on Huckabee’s fiscal record. They obviously don’t like him, but the research is accurate.

  27. IndyInjun says:

    Goldwater , what you wrote about the war is a perfect accounting for why I am against it. The shocking thing is that the vast wasted resources cannot be recaptured and are not available for use elsewhere. Repayment of the debt is rolled over into future tax increases or , more immediately, into the INFLATION tax that is hitting us all.

    As to the Fair???tax and local governments, perhaps the most appalling aspect is that state and local governments have to PAY the fairtax on their purchases or charge the tax on their services to us.

    Any state legislator who is for the fairtax cannot possibly understand its impact on state and local governments. Maybe ours in Georgia can for they got a good dose of the limitations of ‘fair’taxation’ with GREAT.

  28. Painterman says:

    What needs to be done is reverse the 30’s Supreme Court decision that the “general welfare” part of the Constitution meant whatever congress wanted it too. Which flies in the face of what the letters our founding fathers wrote on the subject. The “general welfare” was to limit spending to only what was good for the entire nation, not for anyone particular region, people group or business. If we could put an end to that, spending would decrease drastically. I agree with the move to have all spending required to show where the Constitution allows congress to spend the money or it isn’t allowed.

  29. joe says:

    Indy,

    We should never fight a war, or refuse to fight one, based upon econmic principals alone. Wars are expensive, there is no doubt about that. Wars should or should not be fought based on some sort of moral principal, to include self preservation.

    While I happen to think that the current war in Iraq was inevitable for global political reasons, I do not think that it was prosecuted correctly. Neither of those things has to do with the economics. David Walker, former Comptroller General of the United Sates, often reported on the economic priority changes in the US. For example, in 1965, DOD spending was 43% of Federal spending, but by 2005, it had dropped to 20%.

  30. John Konop says:

    joe

    FYI

    Nobel Prize-winning economist: Iraq war ’caused slowdown in the US’

    This tell-us-something-we-don’t-already-know story from The Australian:

    THE Iraq war has cost the US 50-60 times more than the Bush administration predicted and was a central cause of the sub-prime banking crisis threatening the world economy, according to Nobel Prize-winning economist Joseph Stiglitz. The former World Bank vice-president yesterday said the war had, so far, cost the US something like $US3trillion ($3.3 trillion) compared with the $US50-$US60-billion predicted in 2003.

    Australia also faced a real bill much greater than the $2.2billion in military spending reported last week by Australian Defence Force chief Angus Houston, Professor Stiglitz said, pointing to higher oil prices and other indirect costs of the wars.

    Professor Stiglitz told the Chatham House think tank in London that the Bush White House was currently estimating the cost of the war at about $US500 billion, but that figure massively understated things such as the medical and welfare costs of US military servicemen. The war was now the second-most expensive in US history after World War II and the second-longest after Vietnam, he said.

    The spending on Iraq was a hidden cause of the current credit crunch because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit. “The regulators were looking the other way and money was being lent to anybody this side of a life-support system,” he said.

    That led to a housing bubble and a consumption boom, and the fallout was plunging the US economy into recession and saddling the next US president with the biggest budget deficit in history, he said.

  31. John Konop says:

    joe

    FYI

    GAO Chief David Walker: Economic Disaster Looms

    NM-AUSTIN, Texas – David M. Walker sure talks like he’s running for office. “This is about the future of our country, our kids and grandkids,” the comptroller general of the United States warns a packed hall at Austin’s historic Driskill Hotel. “We the people have to rise up to make sure things get changed.”

    But Walker doesn’t want, or need, your vote this November. He already has a job as head of the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

    Basically, that makes Walker the nation’s accountant-in-chief. And the accountant-in-chief’s professional opinion is that the American public needs to tell Washington it’s time to steer the nation off the path to financial ruin.

    READ MORE

    http://controlcongress.com/uncategorized/gao-chief-david-walker-economic-disaster-looms

  32. Holly says:

    Chris, there is a part of me that agrees with you. And fwiw, I like the flat tax idea more and more. However, I really like the idea of people voting for Gingrey’s amendments to cut spending. Yet only like 30 people vote for them each time. Sigh.

  33. Holly says:

    H.AMDT.410 and H.AMDT.725 are the only two that come up in THOMAS, but I know there having been proposals and amendments to reduce funding by 1% in overall legislation. . . clearly I’m going to have to do some digging to find them.

    H.AMDT. 725 actually passed.

  34. Dave Bearse says:

    FairTax proponents that won’t describe their proposal for what it is (national sales tax? value added tax?) then say it’s a 23% tax rate that will cost you $0.30 on your $1 purchase, can’t be trusted.

    One need only consider the Georgia legislature a few years ago beginning to exempt sales taxes on ice in connection with chilling poultry or vegetables and sales tax holidays for back to school, then this year beginning to exempt sales taxes on motor fuel in connection with swine production, to understand a national sales tax will be subject to the same exemptions and complications as the income tax.

    Add say over 10% in state and local sales taxes (state income taxes are history if they can’t piggyback on federal income taxes) to the 30% national sales tax (if not a higher rate), and there’s strong incentive to evade sales taxes.

  35. Annoyed Dawg says:

    I remember being in college and folks from Tennessee would come to Georgia to buy stuff because their sales tax was so high. To me, that’s much the same of what would happen if we had the Fair Tax.

  36. IndyInjun says:

    Things the Fair???taxers are dishonest about –

    1. The rate is 23%. ( As pointed out a 30 cents on the dollar tax is NOT 23%. How many folks say that the sales tax in most of GA is 6.542%?????)

    2. The price on the retailer’s shelf will include tax. (The BILL requires pricing without tax, the tax and the total on receipt, there is no requirement for retailers to do otherwise with advertised prices, and why would theygo out of their way to make the price look higher?)

    3. The retailer gets an allowance for collecting the tax. (The BILL caps this allowance at a nominal amount.)

    4. You get 100% of your paycheck. (only if your employer keeps bearing better than 1/2 of the embedded tax claimed as a savings in another FTer claim.)

    5. The rate is revenue neutral (It came a lot closer when there was a social security surplus being spent as fast as it came in back in the FT baseline year. This situation is gone by 2017 and a big part of the rate is for social security. YAY, they are cutting social security without saying so!!)

    6. The FT org is grassroots (The trunk, the limbs, and the green stuff is a different matter. Ain’t 501-3C grand?)

    7. The IRS goes away. (But the DOR takes its place, hires all RIFed agents, and they live happy double-dipping lives everafter.)

    8. Individuals don’t have to keep receipts (Oh they most certainly DO, it is is the BILL.)

    9. No more audits of your income (Yes, they are replaced by audits of your spending and property)

    10. No more record keeping of vehicle use (Wrong. You owe the FT on the personal use of a company vehicle. It is in the BILL.)

    It is the little unasked and unanswered things in life that kill.

  37. iLarynx says:

    MSBassSinger –
    There was no “right” for the feds to enact a federal income tax. All rights that the Constitution guards are personal rights. The federal government has no rights, only enumerated powers so as to restrict what they are able to do.

    Exactly so.
    Article I, section 8:
    The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States
    Ok. Maybe not exactly so. But the federal government is empowered by the Constitution “To lay and collect Taxes.”

  38. IndyInjun says:

    DK,

    The flat tax has been working remarkably well in Eastern Europe. Tax collections seem to shoot up.

    I am not opposed to a national sales tax. I like it a LOT. The Fair????tax is another matter entirely, as it is nothing like our existing state sales tax. The damned thing was funded by big oil for capital intensive companies.

    They brag on having spent $100 million and having several hundred thousand members. They are hiding behind 501 – 3c. I wanna know who is gushing forth all the cash hawking this!!!!

    Yeah, flat tax will do….national sales tax will do….just don’t try to ram a con job like HR 25 and I am just fine.

  39. iLarynx says:

    IndyInjun –
    “I wanna know who is gushing forth all the cash hawking this!!!!”

    Here’s a link and an excerpt from an article from the Wall Street Journal article on the “FairTax” group and who started it: Billionaire right-wingers – no surprises there. But take a look at the graph included in the article. It shows the ONLY ones benefiting from the “FairTax” scheme are the ones with income levels greater than $200,000. Everyone else will pay more in taxes. With the one exception of those making less than $15k annually, then the “prebate” kicks in. Apparently, this prebate gimmick was tacked on to help blunt the argument that the FairTax would only benefit the rich. The FairTax is structured specifically to benefit the wealthy at the detriment of the middle class. Typical right-wing class warfare.

    Boortz’s response to the article was a dodge. He gave his two-wrd assessment with no details whatsoever on his radio show after the article was published. Boortz said, “Oh, and that graph in the Wall Street Journal? It’s wrong.” Cut to commercial. BOORTZ!!!

    By the way, the graph in question was cited in the Wall Street Journal as being from the Treasury Dept. via George W’s President’s Advisory Panel on Federal Tax Reform.

    So, unless you’re dirt poor, or filthy rich, you lose in this tax scheme that was dreamed up by billionaire Texans, proposed in legislation by power-hungry politicians, and promoted by sycophantic millionaire right-wing radio pundits. 

    The article (excerpts):
    http://online.wsj.com/article/SB118756724732002330.html?mod=hpp_us_editors_picks

    For more than a decade, a group started among friends at Houston’s River Oaks Country Club and led by construction magnate Leo Linbeck Jr. has pushed to scrap the federal income tax for a national sales tax…

    Besides Mr. Linbeck, other big donors to the group include billionaire investors T. Boone Pickens and Robert C. McNair, major Republican contributors…

    Yet Americans for Fair Taxation — better known as FairTax.org — has regrouped in the past year. It is spending freely to tap a building anti-Washington mood and hoping to influence both who gets picked as the nation’s next leaders and what their agenda will be…

    The underdog’s finish [by Huckabee] in the Iowa straw poll behind winner Mr. Romney has raised his profile among party activists and donors — especially since he seemed to pull it off without paying for buses, barbecue and tickets for his voters to the extent Messrs. Romney and Brownback did. But FairTax.org paid for 10 buses and 550 of the $35 tickets to vote in the straw poll — and let supporters know that Mr. Huckabee was their ally.

  40. IndyInjun says:

    Thanks, iLarynx. The graph in the WSJ piece is most instructive.

    These folks are indeed a cult. When I pointed out on one of their message boards that Linder said in a November 2005 CSpan interview that the FT rate was being rescored by Global Insights, with the (tax inclusive)rate coming in at “24 to 26%”, the cultists jumped on me with both feet, because 26% tax inclusive translates into 35% tax exclusive – consistent with the Presidential commission.

    That Booknotes interview is available for purchase on CSpan. The interviewer was David Wessel.

    The cultists simply went bananas and called me a liar, with several admitting that if the rate was that high, their support would be GONE.

    Here and elsewhere they merrily post their talking points, as if they are incontrovertible.

    Bottom line is this – no politician can run on a 30% tax on grandma’s nursing home care that gives Big Oil $10’s of billions in forgiveness for back taxes.

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