Congress Should Debate The Fair Tax

December 17, 2012 16:57 pm

by Buzz Brockway · 88 comments

Received via press release:

Chambliss, Woodall Call for FairTax Consideration
Send letter to Joint Committee on Taxation

WASHINGTON- Today, U.S. Sen. Saxby Chambliss, R-Ga., and U.S. Rep. Rob Woodall, R-Ga-7, asked the Joint Committee on Taxation to produce a revenue estimate of H.R. 25 and S. 13, the FairTax bill. This estimate will allow the FairTax to be considered during congressional negotiations for tax reform.

Chambliss and Woodall have long urged Congress to support the FairTax legislation, which would implement a simpler, less-cumbersome tax code. Chambliss and Woodall have sponsored legislation in both the House and the Senate.

“The current tax code has become too burdensome and complex, and is filled with provisions that benefit only a few Americans at the expense of everyone else. That’s simply not right,” said Chambliss. “Now is the time to enact the FairTax, which would create a fairer, simpler tax code that allows every American the freedom to determine his or her own priorities and opportunities.”

Full release below the fold.

So, why should we keep our current, ridiculously complex tax code? Wouldn’t a national sales tax be much better? Several States have no income tax why not the entire U.S.?

Chambliss, Woodall Call for FairTax Consideration
Send letter to Joint Committee on Taxation

WASHINGTON- Today, U.S. Sen. Saxby Chambliss, R-Ga., and U.S. Rep. Rob Woodall, R-Ga-7, asked the Joint Committee on Taxation to produce a revenue estimate of H.R. 25 and S. 13, the FairTax bill. This estimate will allow the FairTax to be considered during congressional negotiations for tax reform.

Chambliss and Woodall have long urged Congress to support the FairTax legislation, which would implement a simpler, less-cumbersome tax code. Chambliss and Woodall have sponsored legislation in both the House and the Senate.

“The current tax code has become too burdensome and complex, and is filled with provisions that benefit only a few Americans at the expense of everyone else. That’s simply not right,” said Chambliss. “Now is the time to enact the FairTax, which would create a fairer, simpler tax code that allows every American the freedom to determine his or her own priorities and opportunities.”

“No matter what they do, honest, hardworking Americans are punished under our current tax code. Pass the FairTax, and we can unshackle America’s job creators and jump start this economy. Pass the FairTax, and we can reward all Americans who contribute to our economy—not just those who can afford the best tax lawyers and accountants,” Woodall said. “We, as a nation, can do better than relying on a tax code that picks winners and losers. Let’s level the playing field with the FairTax and restore more freedom to our economy, not more government.”

The FairTax would shift the federal government’s method of revenue collection from income to personal consumption. It would repeal all federal personal income taxes, corporate income taxes, payroll taxes, self-employment taxes, capital gains taxes and gift and estate taxes, and would replace those with a revenue-neutral, personal consumption tax on all retail sales of new goods and services.

Text of the letter is below:

Mr. Thomas A. Barthold
Chief of Staff
Joint Committee on Taxation
1625 Longworth House Office Building
Washington D.C. 20515

Dear Mr. Barthold:

Americans have long been calling for fundamental tax reform and it appears that Congress is finally poised to address the issue in a comprehensive fashion. Many competing visions for tax reform have been offered and there is no shortage of ideas worthy of debate. In close consultation with tax policy experts and leading economists, we have developed one such proposal. Therefore, we request that the Joint Committee on Taxation (JCT) produce a revenue estimate of the FairTax (H.R. 25/S. 13) for consideration by the House Committee on Ways and Means.

Sincerely,
Saxby Chambliss and Rob Woodall

atlanta_advocate December 17, 2012 at 5:08 pm

We should debate the FairTax, but only after we debate the massive spending cuts – which makes the fiscal cliff cuts look trivial by comparison – that adopting the FairTax would require.

(Not to mention the need to find jobs for all those laid off accountants and tax lawyers …)

Harry December 17, 2012 at 5:13 pm

The current tax code is too complex and lobbyist-driven, but the Fair Tax would also carry a huge bureaucratic complexity and entail checks to self-designated “low-income” people, and thus abuse. I like the idea to eliminate the Georgia income tax. Let’s do that.

David Staples December 17, 2012 at 5:33 pm

+1… Buzz – any chance we could see something like this in the upcoming legislative session? :-)

Buzz Brockway December 17, 2012 at 5:40 pm

I’m for it.

As I recall, during the hearings organized by the Special Council on Tax Reform, Georgia Public Policy Foundation estimated that the State sales tax rate would need to be around 10% in order to eliminate income taxes, and we’d need to put sales taxes on food again, something the Governor and Lt. Governor say they oppose.

I think we could do something like what the national Fair Tax folks propose so that low income folks don’t get smashed by this.

IndyInjun December 17, 2012 at 6:15 pm

OK, that 10% state sales tax rate would be tax exclusive and if you added that to the FT tax exclusive rate, you would be looking at a 40% combined sales tax rate, 41% in the Tsplost-cursed regions.

That won’t happen and it shouldn’t. That would kick the dog-poop out of previously taxed savings and fixed incomes.

Chambliss and Woodall should consult the hapless Max Burns on whether the “Fair”tax is salient.

Josh McKoon December 17, 2012 at 11:23 pm
David Staples December 18, 2012 at 9:08 am

Thanks, Josh! It wasn’t there when I last looked at the prefiles. :-)

Buzz Brockway December 17, 2012 at 5:38 pm

I think the IRS would be much smaller under the Fair Tax as proposed. There’s no income verification because everyone receives a check so that those up to a certain income level pay no taxes.

Harry December 17, 2012 at 5:50 pm

I stand corrected. I had forgotten about the proposal that everybody gets a check. I guess my main problem with the Fair Tax is what Kennedy said about politics being “the art of the possible.” We can talk about the possibilities but from a political perspective I don’t see the Fair Tax really happening anymore than there would be a rollback of the federal government powers to Federalist principles. Yes, it would actually save the country if it would happen – but it won’t happen. We just have to make the best of this Obamanation road that we are on and look to implement reforms around the edges, like Michigan did the other day by implementing a right to work law.

IndyInjun December 17, 2012 at 6:25 pm

The IRS is supplanted by the state revenue agencies, under the FT.

Almost none of the promises of the “fairtax” as hyped are in the actual legislation.

It was so bad the Linder and Boortz flatly stated in the 2nd FT book that they would not debate the specific bill.

Fairtax, I suppose is a case of we have to pass another bill that no one has read or few have thought through. It is a prime reason that people are seeing that the GOP is on a par or even worse than the Dems, if you are retired or near retirement.

The thing taxes nursing home care at 30%, while giving $trillions of forgiveness of back taxes to corporations. Anyone who calls that “fair” is an imbecile. Any party who pushes it begs for euthanasia.

Buzz, since state purchases would be FTaxable, where are you going to come up with the money to pay the FT on state services? What would it do to Medicaid costs?

David Staples December 18, 2012 at 9:11 am

“while giving $trillions of forgiveness of back taxes to corporations”

So if corporations all of a sudden don’t have this tax liability, perhaps they pass those savings on to their customers, no?

IndyInjun December 18, 2012 at 10:47 am

Ha!

I worked for a corp who got $600 million refunded by doing a highly leveraged transaction. No, they didn’t give the money back to consumers, although they nervously watched their competitor’s pricing for a while.

David Staples December 19, 2012 at 9:16 am

So, what, are they just going to sit on it forever? Seems to me that long term, they only have a few options – spend it, lower prices to customers, return it to stockholders via dividends, etc. I mean, I suppose they could just buy a stack of gold bars and just throw them in the vault, but what good does that do them?

Napoleon December 19, 2012 at 10:44 am

To piggyback on David’s point, it depends on the corporation and the level of competition. It’s been more than a decade now, but there was a tax on the airlines that was removed. At first the prices of the tickets didn’t change as the airlines decided to take the amount of the tax as profit. Then, one airline used the cushion to start a price war. Eventually, competition did force prices down.

On the other side, if a lack of competition doesn’t force prices down, then, at least for publically traded companies, the extra profits will go to stock holders. In today’s America, most people do own stock, whether it is individually, through mutual funds are as a member of a pension plan/union retirement fund/etc. Even though that number is down from the high of 2/3 of families directly or indirectly owning stock in 2002, a majority of American families would still see some benefit.

As for the refunds, the idea would be the same as income taxes are filed today, however, the form would simply have where you live (to calculate the proverty level) and how many dependants. You would not need such a massive IRS bureaucracy as we have now to simply process those forms. As far as enforcement, there would still be a need to monitor the retail establishments for collection. One of the problems Georgia has is enforcement of sales tax collection by retailers. However, it is easier to police just retailers who act as collection points than it is to police individuals AND corporations.

Harry December 17, 2012 at 6:08 pm

From zerohedge.com
The world makes less sense every day. Little children are randomly slaughtered in their schoolrooms. Predator drones roam the skies over foreign countries exterminating bad guys, along with innocent women and children (collateral damage when it occurs in a foreign country). Drugged up mentally ill kids with no hope and no future live lives of secluded quiet desperation until they snap. Ignorant, government educated, welfare dependent drones with no self respect or respect for others, assault, kill and rob within their government created urban jungles. Sociopathic criminals who committed the largest financial crime in world history walk free and continue to occupy executive suites in luxury office towers in downtown NYC, collecting millions in bonuses as compensation for crushing the American middle class. Academics, whose theories have been thoroughly disproven, continue to steer our economy into an iceberg while accelerating the money printing and debt issuance that will sink our ship of state. Corrupt, bought off politicians pander to the lowest common denominator as their votes are only dependent upon who contributed the most to their election campaigns, which never end. Delusional, materialistic, egocentric, math challenged consumers (formerly known as citizens) live for today, enslave themselves in debt, vote themselves more entitlements, and care not for future generations. The alienation and isolation created by our sprawling, automobile dependent, technology obsessed, government controlled, debt financed society has spread like a cancerous tumor, slowly killing our country.

IndyInjun December 17, 2012 at 6:30 pm

Kuntsler nailed it in today’s column, Harry.

” I don’t think that our society can be redeemed in its current form. It has to pass through a tribulation that demands the reemergence of adult male humans who know how to be men in more than one dimension. And you who make it through to the other side will barely comprehend the monsters left behind, or how they made themselves that way.”

Getting to the other side has all of the attention I can muster. The Rule of Law is dead. What comes is incomprehensible in its furor.

David Staples December 18, 2012 at 9:22 am

Just a few thoughts here.

1. I’m not a fan of the prebate… seems like a lot of extra bureaucracy would probably follow something like that, and doesn’t really seem “fair”. Perhaps I should have said instead of passing the FT here in Georgia, simply transitioning to a consumption tax only.

B. 10%? I’m assuming that’s raising the current 4% to 10%… not adding another 10% to the current 4%, right?

III. I was talking to JD Van Brink, chair of the Georgia Tea Party not long ago about a concept he called the Simple Tax. From the way he explained it, it made a lot of sense to me. I believe he and some others are planning on reaching out to the GA to talk about it at some point, but it couldn’t hurt to start the dialogue. :-) I think their website is http://www.thesimpletax.org

Bob Loblaw December 17, 2012 at 6:39 pm

File under Re-Election campaign prep for 2014.

IndyInjun December 17, 2012 at 6:44 pm

John Barrow has had it there since 2002 and has wielded expertly against every proponent. Done.

The Last Democrat in Georgia December 17, 2012 at 7:17 pm

I LOVE the FairTax concept and think that it is an excellent idea, but the way that Republicans sell the concept to the public irritates me to no end.

The problem is that the Republican advocates of the FairTax explain and sell the concept the incorrectly where it can be easily demonized by opponents as being a 30% sales tax that will be added to every product that Americans buy.

When opponents of the FairTax falsely tell Americans that they will be paying an additional 30% national consumption tax on everything they buy, the public usually quickly dismisses the concept as one gigantic sales tax increase.

Instead of pushing the concept of a national sales tax that can be easily falsely portrayed by opponents as a consumption tax that will increase the cost of every product purchased by 30%, Republicans need to much better sell and explain the FairTax concept.

Republicans can must better sell the FairTax concept by just simply saying that they want to ELIMINATE all national, state and local income and sales taxes and replace them with one national CORPORATE tax of (no more than) 40% (with roughly 23% going to the feds, 10% going to state governments and 7% going to local governments).

Explaining the FairTax as a CORPORATE tax instead of a consumption tax in which the public mistakenly believes that consumer prices will increase by roughly an addition 30% is a much more effective way of selling the public on the concept.

By pushing the FairTax as an elimination of all personal income and sales taxes Americans will think that all of their taxes (and required dealings with the I.R.S.) will disappear and be replaced by a tax that only some other faceless guys at big, bad, mean corporations will have to pay.

Selling the FairTax as a corporate tax also makes sense because that is effectively what Americans are paying when they pay income and sales taxes.

Corporations don’t pay taxes, they pass those taxes along to their employees to pay in the form of income taxes and their customers to pay in the form of sales taxes.

Republicans and Conservatives just need to simply say that they want to eliminate everyone’s taxes so that they can make those big, bad rich corporate guys that everyone hates (like Wal-Mart, the oil companies, etc) pay them instead.

With that populist imagery of appearing to make big corporations pay everyone’s sales and personal income taxes, the FairTax would be a political concept that can’t lose.

IndyInjun December 17, 2012 at 7:41 pm

The math doesn’t work. Even Boortz had to admit that the “you get 100% of your paycheck” claim ran headlong into the claim of “22 to 26% embedded income tax.”

This thing was totally shredded and discredited on PP years ago. All you have to do is read it.

Bush 43′s tax reform committee vetted the FT and said that the tax exclusive rate would have to be 34% to be revenue neutral (and that was at the height of the ponzi economy). Linder agreed that rescoring the FT came in at 34% and said so on C-Span. Of course, he has not had the integrity to admit that to the FTers on a consistent basis.

If you add Buzz’s Georgia FT to that you get 44% tax rates on what you buy in exchange for maybe 14% in savings from eliminating the income taxes.

I hope the GOP goes for it. I want to see that party finish itself off.

mpierce December 17, 2012 at 8:22 pm

That 34% exclusive would be 25% inclusive. That would replace income tax and payroll taxes which are also quoted on an inclusive basis. Also the FT would not apply to used goods or educational services. You would also receive a prebate check to cover taxes on necessities.

IndyInjun December 17, 2012 at 8:28 pm

That prebate would go nowhere near covering Grandma’s $15,000 FT payments on her $50,000 nursing home care, would it?

Is your county government going to get a ‘prebate’ on the 23/30% FT on its payroll for police and fire protection? Where is that incremental cost coming from?

mpierce December 17, 2012 at 8:46 pm

Is your county government going to get a ‘prebate’ on the 23/30% FT on its payroll for police and fire protection?

Why would they pay sales tax on their payroll?

mpierce December 17, 2012 at 8:49 pm

That prebate would go nowhere near covering Grandma’s $15,000 FT payments on her $50,000 nursing home care, would it?

Don’t forget to remove the cost of embedded taxes in that nursing home care.

IndyInjun December 17, 2012 at 9:04 pm

The FT is an embedded cyanide capsule in the GOP’s clenching teeth.

Grandma is still a loser by about $10 grand.

Go ahead. Tell everyone their medical costs are gonna bear this 44% state and federal tax while the Fortune 500 get $1 trillion in foregiveness in back income taxes.

Death.

Wish.

mpierce December 17, 2012 at 9:23 pm

The fair tax is not a state tax. It’s 23-25% on an inclusive basis (which income taxes are also quoted on).

H.R. 25:
(b) Records- Federal records related to the administration of taxes repealed by title I of this Act shall be destroyed by the end of fiscal year 2015, except that any records necessary to calculate Social Security benefits shall be retained by the Social Security Administration and any records necessary to support ongoing litigation with respect to taxes owed or refunds due shall be retained until final disposition of such litigation.

IndyInjun December 17, 2012 at 10:24 pm

You missed the point.

Deferred income taxes will become permanently uncollectable as there would be no future income tax liability.

mpierce December 17, 2012 at 10:47 pm

I agree deferred taxes need to be dealt with and would expect amendments to be proposed with respect to them should any serious effort to pass the FairTax ever happen.

IndyInjun December 17, 2012 at 8:56 pm

Because it is in HR 25, the fairtax bill. Anyone who provides taxable services either has to charge the end consumer the FT for said services or pay the FT on payroll. The FT is a tax on services and even Boortz/Linder admit that government isn’t exempt. Otherwise the rate skyrockets.

BTW this is the way the state sales tax works. If you own a liquor store, buying booze free of sales tax under a resale cert, you have to pay a use tax on the booze if you give it away or have a party with it. In such event, the retailer becomes the consumer.

People have no clue about how sales taxes work. The FT is designed to work and to be enforced in the same manner. The states have BROAD POWERS to audit for the corresponding use tax. They don’t find it effective to use these POWERS on the broader public at 7% rates, but will they show restraint when they are charged with collecting the federal FT AND the state is totally dependent on the FT? 44% rates make the people a very lucrative target.

mpierce December 17, 2012 at 9:53 pm

H.R. 25:

SEC. 704. GOVERNMENT ENTERPRISES.

‘(a) Government Enterprises To Collect and Remit Taxes on Sales- Nothing in this subtitle shall be construed to exempt any Federal, State, or local governmental unit or political subdivision (whether or not the State is an administering State) operating a government enterprise from collecting and remitting tax imposed by this subtitle on any sale of taxable property or services., Government enterprises shall comply with all duties imposed by this subtitle and shall be liable for penalties and subject to enforcement action in the same manner as private persons that are not government enterprises.

‘(b) Government Enterprise- Any entity owned or operated by a Federal, State, or local governmental unit or political subdivision that receives gross payments from private persons is a government enterprise, except that a government-owned entity shall not become a government enterprise for purposes of this section unless in any quarter it has revenues from selling taxable property or services that exceed $2,500.

I don’t see how police and fire would qualify as taxable services under H.R. 25

mpierce December 17, 2012 at 9:58 pm

BTW this is the way the state sales tax works.

Really, I’ve been pulled over in 4 different states and don’t remember ever paying a sales tax in any of them!

IndyInjun December 17, 2012 at 11:34 pm

States don’t aggressively collect sales tax at single digit rates, but that doesn’t mean that you are not required to pay use tax on untaxed purchases. Make that rate a combined number well north of 30% and their level of interest intensifies.

The Last Democrat in Georgia December 17, 2012 at 8:32 pm

I just wanna get rid of personal income taxes and the annual interaction with the I.R.S. that they require. I don’t care what name they call them, I just would like to personally not have to deal with the I.R.S. anymore.

IndyInjun December 17, 2012 at 8:48 pm

Yes, but the FT puts the liability on the consumer, who is still required to file a return. It is in HR 25, the Fairtax bill.

You believe the hype without knowing the bill. Isn’t that the Pelosi method of legislation?

mpierce December 17, 2012 at 9:07 pm

who is still required to file a return

Not really. You have to file form with name and social security number of each person in your household in order to get your prebate. Not exactly a tax return as we know it.

Salary info will be provided by your employer for Social security and medicare benefit qualification purposes.

IndyInjun December 17, 2012 at 9:13 pm

Wrong. The consumer is liable for the tax and is required to file a return and keep receipts to prove that he paid the tax on taxable transactions.

This is straight out of HR 25.

You really need to go back and read PP circa 2009. This was very well documented.

mpierce December 17, 2012 at 9:31 pm

SEC. 302. QUALIFIED FAMILY.
‘(d) Annual Registration- In order to receive the family consumption allowance provided by section 301, a qualified family must register with the sales tax administering authority in a form prescribed by the Secretary. The annual registration form shall provide–

‘(1) the name of each family member who shared the qualified family’s residence on the family determination date,

‘(2) the Social Security number of each family member on the family determination date who shared the qualified family’s residence on the family determination date,

‘(3) the family member or family members to whom the family consumption allowance should be paid,

‘(4) a certification that all listed family members are lawful residents of the United States,

‘(5) a certification that all family members sharing the common residence are listed,

‘(6) a certification that no family members were incarcerated on the family determination date (within the meaning of subsection (l)), and

‘(7) the address of the qualified family.

Said registration shall be signed by all members of the qualified family that have attained the age of 21 years as of the date of filing.

‘(e) Registration Not Mandatory- Registration is not mandatory for any qualified family.

mpierce December 17, 2012 at 9:40 pm

(d) Liability for Tax-

‘(1) IN GENERAL- The person using or consuming taxable property or services in the United States is liable for the tax imposed by this section, except as provided in paragraph (2) of this subsection.

‘(2) EXCEPTION WHERE TAX PAID TO SELLER- A person using or consuming a taxable property or service in the United States is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from such person a purchaser’s receipt within the meaning of section 509.

IndyInjun December 17, 2012 at 10:30 pm

You have to pay use tax where sales tax is not paid. Ignorance of the law is no excuse.

What that section says is that GOVERNMENTS DO PAY THE TAX and can only exempt their purchases of goods and services when said goods and services are ‘resold’ and the FT collected from the user of the government service.

Straight out services provided to the consumer at no charge are not “government enterprises” within Section 702-704 and those are taxable services bringing forth the requirement to tax payroll at FT rates.

Where is the money coming from?

mpierce December 17, 2012 at 11:22 pm

You have to pay use tax where sales tax is not paid. Ignorance of the law is no excuse.

Correct.

What that section says is that GOVERNMENTS DO PAY THE TAX and can only exempt their purchases of goods and services when said goods and services are ‘resold’ and the FT collected from the user of the government service.

I never said they don’t pay the FT on their purchases.

Straight out services provided to the consumer at no charge are not “government enterprises” within Section 702-704 and those are taxable services bringing forth the requirement to tax payroll at FT rates.

SERVICE shall not include any service performed by an employee for which the employee is paid wages or a salary–

‘(I) by an employer in the regular course of the employer’s trade or business

IndyInjun December 17, 2012 at 11:30 pm

That definition of “service” has to be there to keep an employer from having to pay the tax on his payroll where there is an end consumer or customer to be charged the tax. This is to prevent double taxation, not prevent the FT from being charged on payrolls for end taxable services.

mpierce December 18, 2012 at 12:13 am

I stand corrected. Thanks.

The Last Democrat in Georgia December 17, 2012 at 9:17 pm

Personally, I don’t even care about receiving prebates, I just wanna not have to be required to interact with the I.R.S. anymore.

If it requires the use of prebates to get public support so that people think that they are getting ‘free money’ from the government, then so be it. I just wanna get the Feds outta my hair, off of my back and outta my life for good.

The Last Democrat in Georgia December 17, 2012 at 9:11 pm

Like I stated before, the place where advocacy for the FairTax fails is that the onus appears to be put on the consumer, which is why the FairTax will likely never gain any steam in the court of public opinion.

If the onus appears to be (and actually is put on) corporations, with all income and sales taxes being eliminated and replaced with one CORPORATE flat tax, then the FairTax concept would likely not only pickup steam, but also catch on like wildfire with an American public whose only favored part of interacting with the I.R.S. is when they receive their annual tax refunds.

IndyInjun December 17, 2012 at 9:17 pm

No it isn’t.

I just got through compiling my 2012 internet purchases so I can file my Georgia Use Tax return AS REQUIRED BY GEORGIA LAW.

Are you? If not, the reason you do not “interact” with the revenuers is because you commit sales/use tax evasion.

Read and follow the law.

The Last Democrat in Georgia December 17, 2012 at 9:25 pm

I don’t purchase anything over the internet and haven’t done so since at least like 2004 or 5 when I purchased a street atlas from the now-defunct Alexandria Drafting Company (ADC) and that was in another state, so that’s not a problem for me at the moment.

IndyInjun December 17, 2012 at 10:31 pm

Congrats on being frugal and buying locally.

IndyInjun December 17, 2012 at 7:45 pm

“Corporations don’t pay taxes, they pass those taxes along to their employees to pay in the form of income taxes and their customers to pay in the form of sales taxes. ”

In recent years the General Assembly cut sales taxes in Georgia by an aggregate amount that approaches $1 billion a year. Most of those taxes were in the manufacture of products exported outside of Georgia, so that others paid.

At the same time that those taxes were in effect, Georgia obligated itself to billions for retirees and teachers that had to be funded from those taxes.

Now the money collected by corporations and remitted to Georgia is GONE, but the obligations remain.

That isn’t conservatism, that is lunacy.

Dave Bearse December 17, 2012 at 9:18 pm

It’s a waste of time debating proponents that won’t call their proposal a national sales or value added tax when a first grader understands the concept of a sales tax.

It’s a waste of time debating revenue neutrality with proponents that don’t know that a 25 cent sales tax on a 75 cent sale is a 33% sales tax, and claim that it’s a revenue neutral where everyone pays less, when a fifth grader can do the math.

Come back when you’re ready to conduct the debate at the middle school level.

The Last Democrat in Georgia December 17, 2012 at 9:45 pm

Mr. Bearse….Your comments underscore the point that I’ve been talking about.

That most Americans cringe when told that they would a 30% sales tax, even though they would no longer have to pay personal income taxes under the FairTax proposal.

Most people get caught in the concept of paying a 30% sales tax and possibly losing their annual income tax refunds (that is their own money, btw).

It is the fear of a 30% increase in consumer prices and loss of tax refunds that makes the FairTax a hard sell the way that Republicans attempt (often unsuccessfully) to explain it.

But if they explained and sold the concept as eliminating federal, state and local income and sales taxes and replacing it with a tax that only corporations would be responsible for paying, they might have a lot more success in selling the concept to the public.

It’s all in the wording.

IndyInjun December 17, 2012 at 10:40 pm

TLDIG -

Wording isn’t its Achilles Heel.

That is the math.

mpierce December 17, 2012 at 10:16 pm

If you spend $1, of which 25 cents is tax, then 25% of what you spent was tax. Both 25% and 33% are accurate depending on how you look at it. The current income and payroll taxes are generally quoted on and inclusive basis. When comparing the FT to the taxes it replaces, they should both be quoted on the same basis.

The FairTax is not a VAT.
FairTax is a national sales tax with a prebate program. Happy now?

You just want to ignore the prebate and you exclusive rates to make it look unfavorable to the tax code monstrosity we have today.

Dave Bearse December 18, 2012 at 8:40 pm

Supporters would better promote their cause by using common language and calculation.

mpierce December 19, 2012 at 1:05 am

It is common calculation! I have yet to see anybody quote to income or payroll taxes on an exclusive basis. Again you just want a false comparison.

Calling it a national sales tax would be false. Sales taxes are rightly seen as regressive. Because of the prebate the Fair Tax untaxes the poor and is not regressive. Also the Fair Tax does not tax used goods, which to poor would be more apt to buy. Again you want it called a national sales tax to provide a false impression.

IndyInjun December 17, 2012 at 10:35 pm

Dave Bearse – Thank you.

IndyInjun December 17, 2012 at 10:39 pm

Section 103

`(b) Tax To Be Remitted by Purchaser in Certain Circumstances-

`(1) IN GENERAL- In the case of taxable property or services purchased outside of the United States and imported into the United States for use or consumption in the United States, the purchaser shall remit the tax imposed by section 101.

`(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 101.

`(c) Conversion of Business or Export Property or Services- Property or services purchased for a business purpose in a trade or business or for export (sold untaxed pursuant to section 102(a)) that is subsequently converted to personal use shall be deemed purchased at the time of conversion and shall be subject to the tax imposed by section 101 at the fair market value of the converted property as of the date of conversion. The tax shall be due as if the property had been sold at the fair market value during the month of conversion. The person using or consuming the converted property is liable for and shall remit the tax.

`(d) Barter Transactions- If gross payment for taxable property or services is made in other than money, then the person responsible for collecting and remitting the tax shall remit the tax to the sales tax administering authority in money as if gross payment had been made in money at the tax inclusive fair market value of the taxable property or services purchased.

The tax is on the consumer. Liability is that of the consumer. That consumer has to keep receipts proving that he paid the tax and to prove that everything he bought he paid tax upon.

These requirements are necessary to be able to force consumers to file returns and to determine that a consumer should have filed a return.

This is no less onerous than IRS requirements now.

mpierce December 17, 2012 at 11:34 pm

These requirements are necessary to be able to force consumers to file returns

EXCEPTION WHERE TAX PAID TO SELLER- A person using or consuming a taxable property or service in the United States is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from such person a purchaser’s receipt within the meaning of section 509.

You are not required to make purchases overseas, convert business property to personal use or barter; thus there is no requirement to file tax returns.

IndyInjun December 17, 2012 at 11:39 pm

You are required to keep receipts showing the tax has been paid and you are subject to audit on that requirement. If on audit, untaxed transactions are found, then you will have the return filed for you.

Bear in mind that there is no statute of limitations when no return is filed, so those receipts might have to be kept a very long time. That alone is enough reason to file returns.

mpierce December 18, 2012 at 12:27 am

Bear in mind that there is no statute of limitations when no return is filed

SEC. 508. RECORDS.

‘Any person liable to remit taxes pursuant to this subtitle shall keep records (including a record of all section 509 receipts provided, complete records of intermediate and export sales, including purchaser’s intermediate and export sales certificates and tax number and the net of tax amount of purchase) sufficient to determine the amounts reported, collected, and remitted for a period of 6 years after the latter of the filing of the report for which the records formed the basis or when the report was due to be filed. Any purchaser who purchased taxable property or services but did not pay tax by reason of asserting an intermediate and export sales exemption shall keep records sufficient to determine whether said exemption was valid for a period of 7 years after the purchase of taxable property or services.

IndyInjun December 18, 2012 at 8:11 am

Aha, so they fixed that egregious punishment by limiting it to 7 years. Good read and I learned something. I guess,however, that the probability of getting anything past 7 years is like getting blood out of a turnip because the cascading penalties and interest more than double the audit liability, hence becoming unpayable.

Harry December 17, 2012 at 11:37 pm

There is absolutely nothing so dead as the Fair Tax. It will never be seriously considered. It’s an empty suit argument to even discuss it. Meanwhile, as Drudge points out, more taxes and more debt are currently under negotiation in Congress.

IndyInjun December 17, 2012 at 11:40 pm

Yep, every GOPer who ever ran on it had to beat a retreat.

This is further proof that Chambliss and Woodall are the types of GOP flotsam we need to be rid of.

mpierce December 18, 2012 at 12:45 am

Moving taxes from production to consumption makes our exports cheaper and our imports more expensive. That will help make U.S. products more competitive.

IndyInjun December 18, 2012 at 8:16 am

Only if the embedded tax savings are not exceeded by the wage arbitrage from going offshore. As pronounced as the wage difference is in manufacturing, what you would see is a HUGE incentive to buy the cheapest goods available, which would magnify the problem.

For example, after the effects of embedded US taxes are eliminated and a US consumer has the prospect of saving $1 by buying the foreign good, he will save $1.30 to $1.34 including the FT savings in an environment in which he is assailed by egregious FT on all goods and services he buys.

IndyInjun December 18, 2012 at 8:18 am

You also have to consider the massive abuse of import exemption certs. FT has no teeth with respect to enforcement and the import exemption cert allows import free of tax, after which distribution can be made to the far corners of the country with no tax ever being collected.

mpierce December 18, 2012 at 9:07 am

I’m not saying that the difference will overcome wage disparity. I’m saying that it will lessen the gap making buying U.S. products a more compelling option than they are now.

IndyInjun December 18, 2012 at 8:25 am

Overall, I think this is the most valid point that the FTers make. However, it doesn’t work without strong enforcement by something perhaps more onerous than the IRS.

mpierce December 18, 2012 at 9:25 am

Most states already implement sales taxes. Do any of them approach as onerous as the IRS?

Joseph December 18, 2012 at 5:18 am

While I am always up for spirited debate about TAX policy, I think it’s a moot point as we have a SPENDING problem at ALL levels of Government.

I’m tired of Bureaucrats and the Executive Branch side of all levels of Government looking at my wallet as an endless piggy bank or using the full faith and credit of the American people to print endless amounts of “money”.

We must rein in spending and decide what services are important and worth the forcible taking of Citizens’ earnings. This never ending cycle of “we need more money to do x, y, and z” must stop. I’ll give you inflation, but that’s it.

All levels of Government spend too much doing too little and no matter what the Income side of equation looks like for Government, as long as the expense side equals Infinity, we will always be in trouble.

mpierce December 18, 2012 at 9:44 am

It’s certainly less of a problem than out of control spending, but it’s hardly a moot point. Compliance costs, lobbying for special tax breaks, and global competitiveness all have real effects on our economy.

IndyInjun December 18, 2012 at 8:22 am

Amen.

Also, what about the OTHER $16 trillion that the Fed created to bail out the banks?

How do you curtail defense and social programs and leave THAT intact?

A collapse cometh. No one will give and inch in a nation where the RULE OF LAW is DEAD.

I think I need to buy an AR-15 – free of the fair tax.

Dave Bearse December 18, 2012 at 9:14 pm

Indy’s probably alluded to if not made this point elsewhere, but in event he hasn’t, a national sales tax would be another beat down on savers. Savers have spent their working careers paying 30%+ of their savings as federal and state income taxes, and imposition of a national sales tax would tax those savings another 30%+ when spent.

The abolition of income taxes also eliminates a check on criminals and criminal enterprise. Many crooks have been taken down on income tax evasion without being convicted of other crime(s)—Bill Campbell for one comes to mind.

mpierce December 19, 2012 at 1:28 am

Savers have spent their working careers paying 30%+ of their savings as federal and state income taxes, and imposition of a national sales tax would tax those savings another 30%+ when spent.

Quoting income taxes inclusive and FT exclusive to make a false comparison???

a national sales tax would be another beat down on savers.

Neither the fair tax nor a national sales tax taxes savings; they tax consumption. So in the long run savers are much better off under the fair tax. There will be some people who take a hit under the switch. Although that is not 30% as you state. The 23% fair tax minus the 15% of imbedded taxes already in the price of goods. So your talking an 8% hit. That could be lessened with a transitional tax system similar to Cain’s 9-9-9 plan.

The abolition of income taxes also eliminates a check on criminals and criminal enterprise.

The fair tax would tax the underground economy (drug dealers, prostitutes, illegal aliens, undeclared tips, etc) which don’t get taxed under our current system.

Dave Bearse December 19, 2012 at 9:49 am

“Quoting income taxes inclusive and FT exclusive to make a false comparison?” No, I mastered fifth grade math 45 years ago.

“Neither the fair tax nor a national sales tax taxes savings….” Didn’t you write that the fair tax WAS a national sales tax?

In the not so long run I’ll be dead. A national sales tax would have been a much better idea had income taxes not become established. The dislocations of a change to a national sales tax would be massive, and there would likely be unanticpated and unintended consequences.

A 40% sales tax (national, existing state and local, plus an increase in state to account for the loss of state income taxes) would create a new type of underground economy. There’s not much not incentive to fraulently avoid a few percent sales tax, nor to spend a lot on an enforcement bureaucracy insuring taxes are paid.

mpierce December 20, 2012 at 6:12 am

No, I mastered fifth grade math 45 years ago.

Then you should know inclusive and exclusive are different and to do an accurate comparison use would either use exclusive for both or inclusive for both.

Didn’t you write that the fair tax WAS a national sales tax?

FairTax is a national sales tax with a prebate program. The prebate was added for a reason. Without the prebate you still have a national sales tax, but not the Fair Tax, thus they are not equivalent.

In the not so long run I’ll be dead. A national sales tax would have been a much better idea had income taxes not become established. The dislocations of a change to a national sales tax would be massive, and there would likely be unanticpated and unintended consequences.

Heaven forbid we actually consider what’s best for the country in the long term. Instead we should stick with the crappy system we have now because you’ll be dead before you get the benefits on switching.

A 40% sales tax (national, existing state and local, plus an increase in state to account for the loss of state income taxes) would create a new type of underground economy. There’s not much not incentive to fraulently avoid a few percent sales tax, nor to spend a lot on an enforcement bureaucracy insuring taxes are paid.

Like we don’t have an underground economy now? I’m sure you give 1099′s to you wait staff every time you leave a tip to make sure the IRS knows how much they made in tips. I’ll bet all those day laborers keep impeccable records and report all of their income too.

The vast majority of states already have sales taxes and enforcement. Easier to just enforce a sales tax, than both sales AND income taxes. My guess is that most of the sales tax issues come from internet sales. Compliance would be higher and easier to enforce if all internet merchants had to apply sales tax at time of purchase.

analogkid December 18, 2012 at 11:33 pm

The Fair Tax is fatally flawed. Here’s why: The common argument for the FT is, “You get to keep your *entire* paycheck. Plus, because companies will no longer have to pay taxes in the supply chain, the cost of goods will go down, which will make up for the increase in sales taxes that you pay.”

The problem is that both of those statements can’t be true.

If you doubt the truthiness of the above statement, please turn your attention to the 41:48 mark of this debate between a college professor and none other than Neal Boortz: http://www.c-spanvideo.org/program/TaxDeb (Spoiler alert: Boortz admits that “keeping your entire paycheck” means what you currently receive in “take home” pay at 45:00).

mpierce December 19, 2012 at 1:35 am

That doesn’t mean the Fair Tax fatally flawed; it means that argument is fatally flawed.

analogkid December 19, 2012 at 6:31 am

It’s both. FT supporters, by and large, think they’re getting a pay increase. If the FT bill was ever debated in Congress (and it won’t be), more people would become aware of this fact and support for the FT would wither.

IndyInjun December 19, 2012 at 10:47 am

Every time the FT has actually made it into a campaign, its proponents have been bloodied with it.

Linder is author of the FT Bill and the FT Book, so why do they differ so widely that the second FT book won’t defend the bill – HR 25?

FT has a dedicated cult that ironically supports the Pelosi theory of legislation – make it up as you go or as it suits your fancy to propagandize. Just don’t read the bill.

Personally, I like the opportunities that would arise at passage, having studied the reality of that bill.

John Konop December 20, 2012 at 10:54 am

Indy,

I do think replacing the payroll tax and Medicare tax with a VAT or NST would help the economy for the following reasons:

1) It would help with the ratios of less workers more retries
2) It would spur job growth and increase consumption among workers
3) It would tax black market money
4) It would use foreign tourism to help pay for it

IndyInjun December 20, 2012 at 11:25 am

John: When we go through the ultimate collapse and begin anew, a NRST or VAT would be high on my list for the reasons you cite. However, doing that now means folks never would quit paying SS and Medicare taxes, even after they are retired. I am not sure about job growth is fostered by a consumption tax in a consumer-based economy, but the collapse will take care of that for good. No tax at such high rates is gonna tax the black market, it will transform it. I don’t think foreign tourism is what is coming. I think foreign ownership is coming.

vipersandthieves December 20, 2012 at 5:33 pm

As long we continue to tax our income, our economy will continue to suffer. Common sense appears to be near non-existent in this country when we continue to make the mistake of thinking the current tax code can be fixed and made to work in an economy that is supposed to run on free enterprise. Common sense (should) tell us that this is impossible. The argument that a consumption tax would destabilize the economy is complete garbage. In order to destabilize the economy, you must first have an existing stable one. This economy has not been stable for a long time. Anyone that says different should think about whether or not it’s possible to have and retain a stable economy when all the FED chairman has to do is clear his throat the wrong way to send it spooling toward recession after recession. A stable economy is a myth when it is backed by monopoly money printed from thin air. It has been suggested many times that taxing our income is borderline slavery. This is not true. There is no borderline. It either is, or it isn’t. Any hope of recovery, of getting back on track where our potential should be as a country… fully depends on whether or not enough eyes have been opened to the truth. If you truly do not believe we are slaves, then by all means get in your car and go back to work right away so you can contribute nearly half your paycheck to more programs that enable the government to worsen the economy and remove more of your personal liberties. Too much time has been wasted trying to fix a tax system that has no business in a free enterprise based economy. The more time that is wasted, the more tax hikes will constrict the economy and drive up the “actual” jobless rate. Debt will continue to grow at an exponential rate and who knows, maybe before the end of his final term as president, Obama will be the first to welcome us all to the Totalitarian States of America.

IndyInjun December 20, 2012 at 6:18 pm

Glad you posted about the Fed. It brings up yet another nail in the FT coffin.

Why on earth should we want to pass a tax that rewards government for creating hyperinflation by raising taxes in lockstep with their inflation?

Look at what the Fed has done to the $US dollar! Compounding their inflation tax with a pyramiding NRST will finish off the USA.

Common sense tells us that having a tax system like that is insane.

There aren’t many issues where the majority has it right, but this is one of them.

John Konop December 20, 2012 at 6:24 pm

One more thing collecting sales tax on top of local taxes will create a ton of breakage ie just look at all the sales tax liens…….that is why a VAT is so much cleaner……btw your point is why I would only use it as a replacement for payroll taxes…….the fix for income tax is simple stop all the lobbyist driven deals and flatten it out. Creat a few brackets and no special interest write offs.

IndyInjun December 20, 2012 at 7:57 pm

It is all going to collapse and then we can start with a clean slate and a minimalistic government.

At that point you can call me Mr. Fair Tax. (Actually I have a pretty good game plan in the event that it passes to gut its revenues – hey that is the American WAY……..innovation conquers taxation. )

Truth is, the FT would collect negligible revenue, but that is its proponent’s goal, isn’t it?

John Konop December 20, 2012 at 8:16 pm

Indy,

I am not as negative as you for a few reasons.

1) Unlike a real business the government does not need to ever pay back the money or even keep proper lending ratios

2) Countries like China are screwed when we pay them back with money that is worth less. Yet they need us to consume via the low wages they pay their workers.

3) The problems are fixable with the right leadership

4) We are fixing are energy situation and we produce a lot food

5) We are still the best place to park money in the west

6) We have a strong university system which is key to a future artificial intelligence driven economy

I get the negative stuff, but artificial intelligence is moving at such a rapid pace we will see solutions we never thought of. It is amazing how fast technology is improving……..As you know I have many of the same concerns you have, and do appreciate the education you give all of us with your comments.

IndyInjun December 21, 2012 at 6:07 pm

I don’t disagree, but the degree and pace of monetization, coupled with fraud being rewarded, threatens the very nature of “money” as a store of value. There are NO RETURNS on ‘safe’ investments – you must agree that government obligations were once ‘safe.’ 70 million Boomers are in grave danger with respect to retirement funds.

Then our vaunted technology is just a means to increase the looting.

The FT capitalizes on that. IF we return RULE OF LAW, then I am perhaps more optimistic than you are. If we don’t well we are fixin’ to see what that breeds in a country with 300 million guns and a $quadrillion in derivatives.

Maybe they can paper or electronically bombard all of the fraud away, but the fraudsters got rewarded and now even have bigger tools to loot with, Where am I wrong on that?

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