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Getbig Main Boards => Politics and Political Issues Board => Topic started by: OzmO on December 24, 2007, 10:40:04 AM
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Hmmm Please discuss, i think i kind of like it.
Political suicide? Quite the opposite for the GOP White House hopeful -- so far. But many call the plan for a national levy 'crackpot' (even if it would shut down the IRS).
By Janet Hook, Los Angeles Times Staff Writer
December 24, 2007
WASHINGTON -- Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax.
The idea -- dubbed the "fair tax" by proponents -- has been a political asset for Huckabee; its well-organized backers have helped catapult him from the back of the presidential pack to its top tier.
Sales tax proponents have tapped into seething voter hostility toward the Internal Revenue Service to become a below-the-radar political force, popping up at campaign events and candidate forums in Iowa and elsewhere.
The efforts on Huckabee's behalf by sales tax advocates helped spur his surprise second-place showing in an August Iowa straw poll -- the breakthrough that marked the beginning of his rise in the state and nationwide.
He is the only major presidential candidate to make the idea central to his campaign. "The first thing I'd love to do as president: Put a 'going out of business' sign on the Internal Revenue Service," he said at one debate.
Some wonder, however, whether his embrace of the plan eventually could turn into a liability.
The sales tax proposal has been around for years but languished on the fringes of practical politics and policy. Tax professionals generally regard the idea as impractical, regressive and even "crackpot," as one critic puts it.
It has gone nowhere in Congress. The 2005 Presidential Advisory Panel on Federal Tax Reform soundly rejected the idea. And many politicians shy away from it because it is easy for opponents to portray it as a huge tax increase -- as Democrats did in a 2006 Senate race in South Carolina.
The front-runner, Republican Jim DeMint, faced an unexpectedly stiff contest because of his support for a national sales tax. "DeMint wants an extra 23% on nearly everything -- gas, food, clothing," one Democratic ad said.
DeMint responded that his position was being misrepresented, but he still suffered a sharp decline in the polls. He won in the end, but what many thought would be a cakewalk for him turned into a cliffhanger.
Grover Norquist, a conservative activist who, as head of Americans for Tax Reform, pushed candidates to take a no-tax-hike pledge, said promoting a national sales tax in the presidential election would be "political poison."
Still, the proposal inspires grass-roots passion, in large part because it would replace or abolish the Internal Revenue Service, one of the most hated federal agencies and a symbol of intrusive government in some conservative circles.
Among the early advocates of a national sales tax were members of the Church of Scientology, a group that battled the IRS for years to gain recognition as a legitimate religious institution eligible for tax-exempt status. Church leaders backed the establishment of Citizens for an Alternative Tax System in 1990 to advance the cause of replacing the income tax with a national sales tax.
Eventually, the church won tax-exempt status and the group faded. But the issue was taken up by another group, Americans for Fair Taxation -- better known as Fairtax.org -- founded in 1995 by a group of Texas millionaires.
Proponents of a national sales tax say it would be an improvement over the current system because it would increase the incentive to save, by taxing money spent instead of money earned.
Also, the proposal would rid the tax code of its myriad loopholes and would free taxpayers and businesses from the time-consuming, often costly task of preparing annual tax returns.
"What we would do with the fair tax is to eliminate all the taxes on productivity, which means you could earn anything you want," Huckabee said. "You wouldn't be penalized for saving, earning, for having a capital gain, making an investment."
Huckabee and Fairtax.org call for a 23% tax on virtually all purchases in place of federal income taxes, as well as payroll taxes to fund Social Security and Medicare.
To ease the effect on the poor, they propose a "prebate" -- a monthly cash payment to every family -- to cover sales taxes on spending up to the federal poverty level.
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oh my goodness...
this will crash the economy...
you just have no clue...
The poor CANNOT afford it. They'll stop buying. The market will crash. This will cause the rich (smug that they're saving 35% of thei money every year) to lose AT LEAST 35% of their net worth as the DOW drops to 9000 or worse.
Guys, the poor and mid class are already spending damn near everything they make. So they'll buy about a quarter less stuff when this happens. They'll still spend all their money, thye'll just buy less. The market will drop when WMT and others see sales drop 25% and they stop ordering as much from suppliers. Picture EVERY MARKET in america dropping 25%.
It's hucks' way of grabbing the RICH repub base for the primary.
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240 is right.
Any flat tax rate is a major tax increase on the poor.
Huckabee is pushing the same rightwing garbage with a smile and a "golllyyy"
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Any flat tax rate is a major tax increase on the poor.
And it's a retirement fund decrease for the middle class. And an portfolio tax on the rich. Most people here aren't poor, so they might not give a shit about the poor class. But, if they care about their own 401k or mutuals, they'll give a shit if the market drops a quarter or a third because american elective spending damn near stops in Q1 of the Huck Admin.
I used to LOVE the idea of a flat tax. Seems fair, and it is. But, since our system is very bottom heavy (lots more poor folk than millionaires), a flat tax will cripple us.
On the other hand, perhaps it'll be worth it when the supporters see their assets fall 50% in three years and many american firms move overseas where people actually CAN afford to buy things. The potential for "OWNED" graphics on pictures of former millionaires would be amusing.
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oh my goodness...
this will crash the economy...
you just have no clue...
The poor CANNOT afford it. They'll stop buying. The market will crash. This will cause the rich (smug that they're saving 35% of thei money every year) to lose AT LEAST 35% of their net worth as the DOW drops to 9000 or worse.
Guys, the poor and mid class are already spending damn near everything they make. So they'll buy about a quarter less stuff when this happens. They'll still spend all their money, thye'll just buy less. The market will drop when WMT and others see sales drop 25% and they stop ordering as much from suppliers. Picture EVERY MARKET in america dropping 25%.
It's hucks' way of grabbing the RICH repub base for the primary.
Wrong ! ! ! ! ! ! ! !
The poor would still hardly pay any taxes, just as they dont now,
If you took the time to read up on it, you would see that.
read : http://www.fairtax.org/site/PageServer (http://www.fairtax.org/site/PageServer)
But many of the people who dont pay any taxes on their income, like the mafia and etc... they would start paying taxes
read : http://www.fairtax.org/site/PageServer (http://www.fairtax.org/site/PageServer)
Details : http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf (http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf)
Low-income households experience a 26.7 percent welfare gain under the FairTax
• Middle-income households experience a 10.9 percent welfare gain
• High-income households experience a 4.7 percent welfare gain
and from : http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#3 (http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#3)
# How does the FairTax protect low-income and lower-middle-income families and individuals?
Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today.
Under the federal income tax, slow economic growth and recessions have a disproportionately adverse impact on lower-income families. Breadwinners in these families are more likely to lose their jobs, are less likely to have the resources to weather bad economic times, and are more in need of the initial employment opportunities that a dynamic, growing economy provides. Retaining the present tax system makes economic progress needlessly slow, thus harming low-income people the most.
In contrast, the FairTax dramatically improves economic growth and wage rates for all, but especially for lower-income families and individuals. In addition to receiving the monthly FairTax prebate, these taxpayers are freed from regressive payroll taxes, the federal income tax, and the compliance burdens associated with each. They pay no more business taxes hidden in the price of goods and services, and used goods are tax free.
Ron Paul supports it : http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
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I like the concept, although 23 percent sounds pretty high. Sort of a pay as you go. Gives people a lot more control over their money.
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wrong !
The poor would still hardly pay any taxes, just as they dont now,
If you took the time to read up on it, you would see that.
read : http://www.heritage.org/Research/Taxes/bg1866.cfm (http://www.heritage.org/Research/Taxes/bg1866.cfm)
It depends on how you define poor. First of all a word on the Heritage Foundation. It's a fraud organization that has been shown to be disingenuous in its work product. Daniel Mitchell is a supply-side nightmare.
Now on to the Fair sales tax. It's a tax cut for the well to do and a tax hike for nearly everybody else that pays taxes. That's a matter of fact.
How about buying a new car for $30,000? With the Fair Tax, that car is almost $40,000. Spread out those payments with interest and you'll see what I mean.
Are you liquid enough to buy a car with one payment? The wealthy are.
Kiss off your deductions and write-offs. They are gone.
How about buying a hundred dollars of groceries for the week....make that $123 plus State and Local taxes.
Won't a 23% sales tax create a massive Black Market for goods?
The country can't afford wasting time with this kind of nonsense.
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...# How does the FairTax protect low-income and lower-middle-income families and individuals?
Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today.
Under the federal income tax, slow economic growth and recessions have a disproportionately adverse impact on lower-income families. Breadwinners in these families are more likely to lose their jobs, are less likely to have the resources to weather bad economic times, and are more in need of the initial employment opportunities that a dynamic, growing economy provides. Retaining the present tax system makes economic progress needlessly slow, thus harming low-income people the most.
In contrast, the FairTax dramatically improves economic growth and wage rates for all, but especially for lower-income families and individuals. In addition to receiving the monthly FairTax prebate, these taxpayers are freed from regressive payroll taxes, the federal income tax, and the compliance burdens associated with each. They pay no more business taxes hidden in the price of goods and services, and used goods are tax free.[/color]
The destitute poor already pay no federal taxes. No change there.
A "rebate"? So this welfare program. Great they can afford the 23% markup on every single product they buy.
"Retaining the present tax system makes economic progress needlessly slow, thus harming low-income people the most." That's funny. More supply-side bullshit. No proof but it sounds good.
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It depends on how you define poor. First of all a word on the Heritage Foundation. It's a fraud organization that has been shown to be disingenuous in its work product. Daniel Mitchell is a supply-side nightmare.
link the proof of this fraud , don't just say it.
waiting........
Now on to the Fair sales tax. It's a tax cut for the well to do and a tax hike for nearly everybody else that pays taxes. That's a matter of fact.
nice try, but wrong again Lib,the poor would pay less than they do now, , so would the middle class,
How about buying a new car for $30,000? With the Fair Tax, that car is almost $40,000. Spread out those payments with interest and you'll see what I mean.
Are you liquid enough to buy a car with one payment? The wealthy are.
Kiss off your deductions and write-offs. They are gone.
and kiss off the IRS !
How about buying a hundred dollars of groceries for the week....make that $123 plus State and Local taxes.
you are keeping more of your paycheck, in the long run, you pay less, what is not to like about that ?
plus the poor will pay less that they do now, yes this is a fact, something you libs dont like
Won't a 23% sales tax create a massive Black Market for goods?
you mean like doing away with the IRS ? you mean like doing away with offshore accounts to hide money , nice try lib
we arleady are taxed when we buy things.
The country can't afford wasting time with this kind of nonsense.
better to just elect Hillary and get a tax increase on the middle class as well as the rich, yes, just as her husband raised taxed on the middle class
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ozark, no offense, but you're not actually arguing the points of decker.
you're just saying things like "nice try lib" which don't really help the debate.
How do you prove your belief that the poor who already don't pay taxes, suddenly faced with a 23% increase in everything they buy, will be BETTER OFF?
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The destitute poor already pay no federal taxes. No change there.
and so what is the problem ?
A "rebate"? So this welfare program. Great they can afford the 23% markup on every single product they buy.
once again, people would pay less than they do now.
"Retaining the present tax system makes economic progress needlessly slow, thus harming low-income people the most." That's funny. More supply-side bullshit. No proof but it sounds good.
you libs are funny,
you love to talk shit, with nothing to back it up, I have posted the link to the Fair Tax, people on here can read the facts, good or bad, all Decker does it spout his bullshit, with no facts
For the record, I dont like Huckebee, I am for Ron Paul, who would do away with the income tax altogether.
but if the only 2 choices were what we have now, and the Fair Tax, I would vote for the fair tax in a heartbeat.
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ozark, no offense, but you're not actually arguing the points of decker.
you're just saying things like "nice try lib" which don't really help the debate.
How do you prove your belief that the poor who already don't pay taxes, suddenly faced with a 23% increase in everything they buy, will be BETTER OFF?
240, I posted links to detailed info,
just take a minute 240, and read about the fair tax, before taking a side
and what has Decker done , but give his opinion ?
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once again, people would pay less than they do now.
How?
Manufacturers and sellers would suddenly have a huge fixed cost ADVANTAGE by operating at 75% capacity? COmpletely ass-backwards.
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Manufacturers and sellers would suddenly have a huge fixed cost ADVANTAGE by operating at 75% capacity? COmpletely ass-backwards.
240,
Do you pay any sales tax now at the store when you buy something ? YES
The system is already in place
if you would pay less taxes than you do now, and we would do away with the IRS, how is this bad ?
look at all the people who make millions in the drug business, that dont pay any to the IRS, well they do buy things , so they would be brought into the stream and start paying their fair share, thus lowering our share.
now if maybe you dont pay your true taxes on your income currently, then I could see why you might not like it.
but for the honest people, it is a better system, as you pay less.
maybe 240, does not report all the website income he makes ( hint hint) so this would not be good for him.
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240, do you pay any sales tax now at the store when you buy something ?
the system is already in place
if you would pay less taxes than you do now, and we would do away with the IRS, how is this bad ?
look at all the people who make millions in the drug business, that dont pay any to the IRS, well they do buy things , so they would be brought into the stream and start paying their fair share, thus lowering our share.
now if maybe you dont pay your true taxes on your income currently, then I could see why you might not like it.
but for the honest people, it is a better system, as you pay less.
maybe 240, does not report all the website income he makes ( hint hint) so this would not be good for him.
i'm scared shitless of the I, the R, and the S. I saw family members underpay, and family members get nailed for the rest of their lives for it. Much of my work comes from monthly contracts with bigger firms, so my SS goes in to the system and I get a pile of W-2s anyway. So it's not that I"m trying to dodge anything.
I worry that the tens of millions of people who don't have much money - and spend all of it on good every week - are suddenly going to start buying 25% less goods.
Throw taxes out the window - these bottom 30 mil don't pay them. But, they are very important to our society, as they pay a FIXED chunk of our national sales every year. This will drop significantly from the intro of the 23% alone. Then it'll drop again when their hours get cut by 25% (they're in the service sector and services are the first thing neglected as they are often elective costs).
When Forbes came up with his 17% number in 1992 (?) I LOVED it. I really did. But when I realized that there are tens of mil of poor people who already spend everything they have - and they keep the economy afloat - and I see that they're about to lose 25% of their buying power, it worries me.
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Type "heritage foundation" and "discredited" or "disingenuous".
How does paying 23% on every purchase compare to paying 10% or 15% on one's entire income?
Just b/c you say anything conclusive means nothing.
Are you foolish enough to think that there will be no enforcement/collection infrastructure with the demise of the IRS and implementation of the Fair Tax?
Oh that's right, proponents of the fair tax say there won't be a problem.
And you believe them.
Offshore accounts are irrelevant to a new Black Market for untaxed products.
Why don't you inform us of the numbers that support your Fair Tax?
Simply linking another page for support is what cowards do to avoid a discussion.
I showed you the idiocy of the Fair Tax by pointing out the insanely high cost of goods and that poor and lower middle class people already pay a much lower rate with deductions under the present progressive tax scheme.
You've shown me nothing but foolish talk.
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240,
Do you pay any sales tax now at the store when you buy something ? YES
The system is already in place
if you would pay less taxes than you do now, and we would do away with the IRS, how is this bad ?
look at all the people who make millions in the drug business, that dont pay any to the IRS, well they do buy things , so they would be brought into the stream and start paying their fair share, thus lowering our share.
now if maybe you dont pay your true taxes on your income currently, then I could see why you might not like it.
but for the honest people, it is a better system, as you pay less.
maybe 240, does not report all the website income he makes ( hint hint) so this would not be good for him.
You really have no understanding what you are talking about.
Who enforces the sales tax?
Why should drug dealers pay 23% for new products when they can buy black market items with zero tax?
Do you even think before you type?
How do you pay less when an income tax rate of 0% or 10% or 15% is substantially less than 23%? Is it all those rebate checks?
We'll pay for those with good intentions.
How about social security which is funded with 12% payroll tax paid by all workers?
That's right, we'll cover the cost of that with the 23% sales tax.
How about the hundreds of billions for the military--don't worry, Ozark has a plan!
A 23% sales tax.
I'd go on but this crap has been peddled before. It was unworkable then and it did not improve with age.
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Type "heritage foundation" and "discredited" or "disingenuous".
How does paying 23% on every purchase compare to paying 10% or 15% on one's entire income?
your keeping most of your income, plus you get a rebate from the government offsetting most if not all of the 23 % if you are lower income
Just b/c you say anything conclusive means nothing. wise advice for yourself lib
Are you foolish enough to think that there will be no enforcement/collection infrastructure with the demise of the IRS and implementation of the Fair Tax?
the sales tax is already in place, the system is already in.
Oh that's right, proponents of the fair tax say there won't be a problem.
And you believe them.
Offshore accounts are irrelevant to a new Black Market for untaxed products.
this is about the biggest pile garbage ever written on GetBig,
Why don't you inform us of the numbers that support your Fair Tax?
as written above, I dont support Huckabee, or the Fair tax, I support Ron Paul and him doing away with the IRS altogether
but if the only 2 choices were our current system, and the Fair Tax, then I go with the Fair Tax,
Simply linking another page for support is what cowards do to avoid a discussion.
where is your link, or your proof ? I see you have none, you just spout opinions with nothing to back it up, usuall lib bullshit
I showed you the idiocy of the Fair Tax by pointing out the insanely high cost of goods and that poor and lower middle class people already pay a much lower rate with deductions under the present progressive tax scheme.
you did nothing, as your point was false, as I wrote, the low income would get a rebate. thus making them pay zero of the 23 %
You've shown me nothing but foolish talk.
no, I have shown many details and the link to the Fair tax, all you have done is attack it with your bullshit opinions.
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You really have no understanding what you are talking about.
Who enforces the sales tax?
Why should drug dealers pay 23% for new products when they can buy black market items with zero tax?
example :when they go to buy a car, or a rolex and etc... they will pay taxes, that they do not pay now, thus lowering our share.
Do you even think before you type?
do you ever think before you vote ?
How do you pay less when an income tax rate of 0% or 10% or 15% is substantially less than 23%? Is it all those rebate checks?
yes,
We'll pay for those with good intentions.
you already pay taxes at the store, (good intentions or not )
How about social security which is funded with 12% payroll tax paid by all workers?
paid with the 23 % collected
How does the FairTax affect Social Security reform?
The FairTax.org plan does not change Social Security benefits or the structure of the Social Security system. All it does is replace the current revenue source (narrow, regressive payroll taxes) with a new revenue source (broad, progressive sales taxes paid by all consumers).
That's right, we'll cover the cost of that with the 23% sales tax. yes
How about the hundreds of billions for the military--don't worry, Ozark has a plan!
paid for with the 23 %
A 23% sales tax.
I'd go on but this crap has been peddled before. It was unworkable then and it did not improve with age.
or just vote for Hillary, and get a middle class tax increase, just like her hubby did to the middle class in 92/93
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Ozark, Currently there is no federal sales tax. The matter is handled by the states. Some states do not have sales tax. A separate enforcement/compliancy agency on the federal level would have to be established. Something like an IRS.
“Scrapping the Code and IRS” is code language for 2 things: 1. I don’t understand the legal basis for taxation in the US and 2. I want a huge tax cut for the wealthy with a huge tax increase for everyone else so that the federal government is starved of funding.
I like your certainty that the numbers for the "Fair Tax" add up. I'm certain you were also a proponent of privatizing Social Security and were equally enthralled by your own convictions.
I like the way you call me “lib”. Now just replace the word “lib” with “jew” and you’ll see tactical template the Nazis used for belittling others. I can explain to you why, if you wish.
When did Clinton raise taxes on the middle class?
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Ozark, Currently there is no federal sales tax. The matter is handled by the states. Some states do not have sales tax. A separate enforcement/compliancy agency on the federal level would have to be established. Something like an IRS.
for the 3rd time, I don't support Huckabee, as he is a liberal at heart, or the fair tax, I perfer to get rid of the IRS and replace it with nothing, as Ron Paul wants to do. but given the current Tax system, and the fair tax, I would take the fair tax.
this is my first choice : http://www.youtube.com/watch?v=VkPUeFtLrPM (http://www.youtube.com/watch?v=VkPUeFtLrPM)
scrapping the Code and IRS” is code language for 2 things: 1. I don’t understand the legal basis for taxation in the US and 2. I want a huge tax cut for the wealthy with a huge tax increase for everyone else so that the federal government is starved of funding.wrong again,
lib, as pointed out earlier, the lower income class would pay still pay next to nothing or zero in taxes. You just jeep spouting your same bullshit over and over. But people who curently pay nothing like drug dealers, and the mafia, would be brought into the system, thus lowering our share.
I like your certainty that the numbers for the "Fair Tax" add up. I'm certain you were also a proponent of privatizing Social Security and were equally enthralled by your own convictions.
wrong again lib, i was never for that, as i knew that once a downturn came in the market, it would be hell to pay, with everyone blaming the government for their decrease in funds. I am against many things that Bush has done, ( or tried to do )this being just one of them.
I think his stance for not enforcing our borders is sad, and he should always be looked back on as a failure as President for this alone.
I like the way you call me Lib. Now just replace the word Lib with Jew and you'll see tactical template the Nazis used for belittling others. I can explain to you why, if you wish.
now this is funny ! ! considering you are a liberal, and yet you have a problem with me calling you this !
oh by the way, I am Jewish, so you fail in this statement all the way, Nice try though ::)
When did Clinton raise taxes on the middle class?
TAXES
Flip
"I want to make it very clear that this middle class tax cut, in my view, is central to any attempt we're going to make to have a short-term economic strategy and a longterm fairness strategy which is part of getting this country going again."
--Bill Clinton, New Hampshire primary debate, 1/19/92
Flop
"[My opponents] always made more of the middle-class tax cut that I did in my speeches."
--Bill Clinton (The Associated Press, 6/19/92)
Flip
"...I will tell you this: I will not raise taxes on the middle-class to pay for these programs."
--Bill Clinton, East Lansing, Mich., debate, 10/19/92
Flop
Bill Clinton raised taxes on the middle class as soon as he got in office: "To middle-class Americans who have paid a great deal over the last 12 years and from whom I ask a contribution tonight..."
--Bill Clinton, State of the Union Address, 2/17/93
Clinton referred to passage of his tax increase -- the largest tax increase in American history -- as "a great moment for me." ("CNN News," 4/13/95).
Flip
Clinton later admitted his tax increase had been a mistake: "Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them to much, too"
--Bill Clinton, Presidential Gala Dinner Houston, Texas 10/17/95
Flop
But two days later said: "I take full responsibility, proudly, for what we did. It [raising taxes] was the right thing to do."
--Bill Clinton, press conference, 10/19/95
Bill Clinton still thinks raising taxes is a good idea.
On January 6, 1996, he presented a budget that contained $60 billion in new taxes (The Washington Post, 1/9/96).
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I like the fact that this option gives the average citizen more control over their money. I think the 23% scares people because when you think of percentages and money, those kind of numbers scare you unless it's in terms of dividends.
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I like the fact that this option gives the average citizen more control over their money. I think the 23% scares people because when you think of percentages and money, those kind of numbers scare you unless it's in terms of dividends.
colossus,
there are a lot of americans without the brains to control their own money, would you agree?
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Ozark, Currently there is no federal sales tax. The matter is handled by the states. Some states do not have sales tax. A separate enforcement/compliancy agency on the federal level would have to be established. Something like an IRS.
for the 3rd time, I don't support Huckabee, as he is a liberal at heart, or the fair tax, I perfer to get rid of the IRS and replace it with nothing, as Ron Paul wants to do. but given the current Tax system, and the fair tax, I would take the fair tax.
this is my first choice : http://www.youtube.com/watch?v=VkPUeFtLrPM (http://www.youtube.com/watch?v=VkPUeFtLrPM)
scrapping the Code and IRS” is code language for 2 things: 1. I don’t understand the legal basis for taxation in the US and 2. I want a huge tax cut for the wealthy with a huge tax increase for everyone else so that the federal government is starved of funding.wrong again,
lib, as pointed out earlier, the lower income class would pay still pay next to nothing or zero in taxes. You just jeep spouting your same bullshit over and over. But people who curently pay nothing like drug dealers, and the mafia, would be brought into the system, thus lowering our share.
I like your certainty that the numbers for the "Fair Tax" add up. I'm certain you were also a proponent of privatizing Social Security and were equally enthralled by your own convictions.
wrong again lib, i was never for that, as i knew that once a downturn came in the market, it would be hell to pay, with everyone blaming the government for their decrease in funds. I am against many things that Bush has done, ( or tried to do )this being just one of them.
I think his stance for not enforcing our borders is sad, and he should always be looked back on as a failure as President for this alone.
I like the way you call me Lib. Now just replace the word Lib with Jew and you'll see tactical template the Nazis used for belittling others. I can explain to you why, if you wish.
now this is funny ! ! considering you are a liberal, and yet you have a problem with me calling you this !
oh by the way, I am Jewish, so you fail in this statement all the way, Nice try though ::)
When did Clinton raise taxes on the middle class?
TAXES
Flip
"I want to make it very clear that this middle class tax cut, in my view, is central to any attempt we're going to make to have a short-term economic strategy and a longterm fairness strategy which is part of getting this country going again."
--Bill Clinton, New Hampshire primary debate, 1/19/92
Flop
"[My opponents] always made more of the middle-class tax cut that I did in my speeches."
--Bill Clinton (The Associated Press, 6/19/92)
Flip
"...I will tell you this: I will not raise taxes on the middle-class to pay for these programs."
--Bill Clinton, East Lansing, Mich., debate, 10/19/92
Flop
Bill Clinton raised taxes on the middle class as soon as he got in office: "To middle-class Americans who have paid a great deal over the last 12 years and from whom I ask a contribution tonight..."
--Bill Clinton, State of the Union Address, 2/17/93
Clinton referred to passage of his tax increase -- the largest tax increase in American history -- as "a great moment for me." ("CNN News," 4/13/95).
Flip
Clinton later admitted his tax increase had been a mistake: "Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them to much, too"
--Bill Clinton, Presidential Gala Dinner Houston, Texas 10/17/95
Flop
But two days later said: "I take full responsibility, proudly, for what we did. It [raising taxes] was the right thing to do."
--Bill Clinton, press conference, 10/19/95
Bill Clinton still thinks raising taxes is a good idea.
On January 6, 1996, he presented a budget that contained $60 billion in new taxes (The Washington Post, 1/9/96).
This thread is about Huckabee’s Fair tax, but if you want to change the topic that’s fine with me. You don’t understand the point being made here. Sales tax is the province of the States. If Ron Paul wants to implement a national sales tax of 23% and scrap the IRS, there has to be some federal enforcement apparatus to oversee the enforcement of the new federal sales tax. The States have enough to do collecting their own sales tax.
Wishing the IRS into oblivion does not erase the need for a federal tax enforcement entity.
I can't watch youtube on my computer. Once again you fail to make a cogent argument. You just link to outside sources as if your point is now self-evident.
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Why would the wealthy or criminal elemenst be “brought into the system”? You still don’t explain that statement of yours. The wealthy can buy foreign goods to avoid the tax. The drug dealers are already criminals and would just deal in untaxed black market goods.
You miss a fundamental point at hand. For many people, any tax is too much and every effort will be made to avoid it. The current system is not perfect, but it is the best most fair one we have.
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So you are a fellow Jew. How ironic. You should know then that your attempt to belittle me by referring to me as a classification rather than a person is the same ham-handed technique the Nazis used to belittle Jews. Let the public see what kind of a human being you really are. You’re not a Nazi. You just use their techniques.
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Show me the Clinton middle class tax increase legislation that was passed. Or is that too much to ask from you?
I could point out the increase on the tax on gasoline as a “tax on the middle class” but that is as oblique as any of your so called arguments.
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And the largest tax increase in history was signed by Ronald Reagan and not Bill Clinton.
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And the largest tax increase in history was signed by Ronald Reagan and not Bill Clinton.
owned!
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owned!
It wasn't.
Treasury Tax Expert to Bush: Clinton's Increase WASN'T The Biggest.
"That 1982 tax increase only slightly exceeded Clinton's in inflation-adjusted dollars ($37 billion a year vs.. $32 billion) but it was much bigger in relation to the size of the economy. The '82 increase amounted to 0.8% of GDP (average for the first two years) while Clinton's was 0.5%."
http://www.factcheck.org/print_treasury_tax_expert_to_bush_clintons_increase.html
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When did Clinton raise taxes on the middle class ?
In 1993, it raised the taxes on the middle class, along with other raises that included :
* It created 36 percent and 39.6 income tax rates for individuals.
* It created a 35 percent income tax rate for corporations.
* The cap on Medicare taxes was repealed.
* Transportation fuels taxes were hiked by 4.3 cents per gallon.
* The taxable portion of Social Security benefits was raised.
* The phase-out of the personal exemption and limit on itemized deductions were permanently extended.
Vote for Ron Paul !
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Fuck Huckabee's Plan!
Ron Paul's Plan all the way!
Fuckabee is a wannabe!
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owned!
240,
how is the "owned " ?
waiting................. .....
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A free market economy can't run on that kind of taxation.
It would create a huge undergound economy.
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my first choice is to do away with the IRS altogether as Ron Paul wants to do,
but as far as a fair tax, it is better than the current tax system :
Pros:
1. A national sales tax discourages consumption, leading to a conservation of resources.
2. The removal of an income tax encourages saving and investing, which is the key to job growth.
3. Individuals would have an extra incentive to work hard and earn income, leading to a far more productive nation.
4. A sales tax would be a much simpler system, eliminating the need for individuals to comply with complex tax reporting requirements and freeing up all the money & time lost on the income tax process.
5. Tax rates can be targeted to encourage or discourage the consumption of certain items.
6. Consumer prices of certain items would fall since labor and tax compliance costs would be cheaper to businesses.
7.It would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax.
8. It's a tax system consistent with a free society; i.e. Americans have a choice regarding their taxes, unlike our current confiscation system.
1. A national sales tax discourages consumption, leading to a conservation of resources. One of the biggest complaints other countries around the world have about the U.S. is that we consume more than 25 percent of the world's resources despite comprising less than 4 percent of the population. Especially when it comes to scarce, non-renewable resources such as oil, few people would argue that we need to cut wasteful consumption. The basic economic law of supply & demand says that as prices go up for an item, demand will go down. Thus, as a society, our national consumption should decrease with a national sales tax.
2. The removal of an income tax encourages saving and investing, which is the key to job growth. The national savings rate is currently a putrid 4 percent of income. When Americans increase saving & investing, interest rates go down and the economy expands since banks and corporations have more funds to invest in new projects, new stores, new businesses, etc. A national sales tax would encourage increased saving & investing for two reasons: 1) Earnings from investments wouldn't be taxed; thus, the effective rate of return would increase; 2) Americans are never taxed unless they spend money, which they would have to do on much more expensive consumer goods; thus, they have extra incentive to refrain from frivolous spending.
3. Individuals would have an extra incentive to work hard and earn income, leading to a far more productive nation. Our tax system is completely backwards when you consider the fact that the majority of government revenues come from tax on our earned income. National employment drives the productivity of the country. Since we tax personal incomes, we are actually punishing people for working. What's worse is that we have a "progressive" tax system, meaning rates go up as you make more. This in effect punishes the most successful and the hardest workers. Corporations, which provide the greatest amount of national jobs, are even taxed twice: once at the corporate level plus a second time when earnings are distributed to shareholders. If you take away the income tax, you give every worker in America a raise (except those that don't pay an income tax), which encourages citizens to work more hours. Think about it, if your take-home pay was $20 per hour instead of $14 per hour, would you be willing to work more hours?
4. A sales tax would be a much simpler system, eliminating the need for individuals to comply with complex tax reporting requirements and freeing up all the money & time lost on the income tax process. Hundreds of billions of dollars are spent every year and billions of hours wasted complying with the incredibly complex American income tax system. Replacing the income tax with a national sales tax would free up all the resources necessary to fulfill those tax requirements. Only businesses that sell goods would be required to file federal tax returns, and the system would be much simpler since they would only have to multiply each sale by the specified rate. As a nation, we would no longer have to waste time & money figuring out depreciation recapture, itemized deduction phase-outs, alternative minimum taxes, charitable deduction caps, and so on. Think about how happy the environmentalists will be when they hear about all the trees that will be saved from the elimination of all those tax forms & schedules!
5. Tax rates can be targeted to encourage or discourage the consumption of certain items. A national sales tax doesn't mean one standard rate for every consumer good sold in the country. We can customize the rates to help the poor provide for basic necessities as well as discourage or encourage the consumption of certain items. For example, food and lower-priced clothing could be tax-free. Gasoline, cigarettes, fast food, alcohol, and fuel-guzzling automobiles could face steep tax rates. Hydrogen & electric-powered cars, equipment used in a business, and home improvement material could be given minimal tax rates. Get the picture? Once again, the economic law of supply & demand will increase/decrease consumption of particular items.
6. Consumer prices of certain items would fall since labor and tax compliance costs would be cheaper to businesses. Every cent that goes into producing a product or service is reflected in it's price. For example, if a law firm pays a clerk $25 per hour to service a client, it must charge the client at least that much to avoid losing money. Any business will usually add a certain markup to ensure an adequate profit for the effort and risk. Thus, if you cut the underlying cost, you cut the final price charged to consumers. Elimination of the income tax means a reduction in payroll taxes for businesses as well as the elimination of the need for much of the human resource & payroll departments. Consequently, the cost of offering related products & services drops.
7. It would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax. Drug dealers, prostitutes, black market dealers, and bookies are examples of people who earn income illegally. Since these and others engaging in illegal transactions obviously don't want the government to know about their activities, the income generated won't be reported on income tax returns. Thus, none of that money is subject to tax. However, with a sales tax, it doesn't matter how money is earned, since the tax is collected immediately by the seller.
8. It's a tax system consistent with a free society; i.e. Americans have a choice regarding their taxes, unlike our current confiscation system. Our Founding Fathers went to war with England in large part to get away from a stifling tax system like that which we currently face. The U.S.A. is supposed to be a free country with little government interference. However, in our current tax system, we must pay a significant portion of our earnings regardless if we use government services or not. Since our income is taxed and we all have to generate earnings to survive, we don't have a choice. If we institute a national sales tax, the amount of tax we pay is completely up to the individual. We aren't taxed a penny until we go out and spend. Thus, a national sales tax is consistent with the very idea and foundation of America.
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i just felt like using the word owned felt right at the time.
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and what has Decker done , but give his opinion ?
He stated his problems with the plan and specified why it's a bad idea. Sure, it's his opinion, but he argued his case.
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In 1993, it raised the taxes on the middle class, along with other raises that included :
* It created 36 percent and 39.6 income tax rates for individuals.
* It created a 35 percent income tax rate for corporations.
* The cap on Medicare taxes was repealed.
* Transportation fuels taxes were hiked by 4.3 cents per gallon.
* The taxable portion of Social Security benefits was raised.
* The phase-out of the personal exemption and limit on itemized deductions were permanently extended.
Vote for Ron Paul !
In 1993, he did not raise taxes on the middle class, he cut income taxes on the middle class. The omnibus budget reconciliation act raised taxes on the high end, not the middle class.
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my first choice is to do away with the IRS altogether as Ron Paul wants to do,
but as far as a fair tax, it is better than the current tax system :
Pros:
1. A national sales tax discourages consumption, leading to a conservation of resources.
2. The removal of an income tax encourages saving and investing, which is the key to job growth.
3. Individuals would have an extra incentive to work hard and earn income, leading to a far more productive nation.
4. A sales tax would be a much simpler system, eliminating the need for individuals to comply with complex tax reporting requirements and freeing up all the money & time lost on the income tax process.
5. Tax rates can be targeted to encourage or discourage the consumption of certain items.
6. Consumer prices of certain items would fall since labor and tax compliance costs would be cheaper to businesses.
7.It would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax.
8. It's a tax system consistent with a free society; i.e. Americans have a choice regarding their taxes, unlike our current confiscation system.
1. A national sales tax discourages consumption, leading to a conservation of resources. One of the biggest complaints other countries around the world have about the U.S. is that we consume more than 25 percent of the world's resources despite comprising less than 4 percent of the population. Especially when it comes to scarce, non-renewable resources such as oil, few people would argue that we need to cut wasteful consumption. The basic economic law of supply & demand says that as prices go up for an item, demand will go down. Thus, as a society, our national consumption should decrease with a national sales tax.
2. The removal of an income tax encourages saving and investing, which is the key to job growth. The national savings rate is currently a putrid 4 percent of income. When Americans increase saving & investing, interest rates go down and the economy expands since banks and corporations have more funds to invest in new projects, new stores, new businesses, etc. A national sales tax would encourage increased saving & investing for two reasons: 1) Earnings from investments wouldn't be taxed; thus, the effective rate of return would increase; 2) Americans are never taxed unless they spend money, which they would have to do on much more expensive consumer goods; thus, they have extra incentive to refrain from frivolous spending.
3. Individuals would have an extra incentive to work hard and earn income, leading to a far more productive nation. Our tax system is completely backwards when you consider the fact that the majority of government revenues come from tax on our earned income. National employment drives the productivity of the country. Since we tax personal incomes, we are actually punishing people for working. What's worse is that we have a "progressive" tax system, meaning rates go up as you make more. This in effect punishes the most successful and the hardest workers. Corporations, which provide the greatest amount of national jobs, are even taxed twice: once at the corporate level plus a second time when earnings are distributed to shareholders. If you take away the income tax, you give every worker in America a raise (except those that don't pay an income tax), which encourages citizens to work more hours. Think about it, if your take-home pay was $20 per hour instead of $14 per hour, would you be willing to work more hours?
4. A sales tax would be a much simpler system, eliminating the need for individuals to comply with complex tax reporting requirements and freeing up all the money & time lost on the income tax process. Hundreds of billions of dollars are spent every year and billions of hours wasted complying with the incredibly complex American income tax system. Replacing the income tax with a national sales tax would free up all the resources necessary to fulfill those tax requirements. Only businesses that sell goods would be required to file federal tax returns, and the system would be much simpler since they would only have to multiply each sale by the specified rate. As a nation, we would no longer have to waste time & money figuring out depreciation recapture, itemized deduction phase-outs, alternative minimum taxes, charitable deduction caps, and so on. Think about how happy the environmentalists will be when they hear about all the trees that will be saved from the elimination of all those tax forms & schedules!
5. Tax rates can be targeted to encourage or discourage the consumption of certain items. A national sales tax doesn't mean one standard rate for every consumer good sold in the country. We can customize the rates to help the poor provide for basic necessities as well as discourage or encourage the consumption of certain items. For example, food and lower-priced clothing could be tax-free. Gasoline, cigarettes, fast food, alcohol, and fuel-guzzling automobiles could face steep tax rates. Hydrogen & electric-powered cars, equipment used in a business, and home improvement material could be given minimal tax rates. Get the picture? Once again, the economic law of supply & demand will increase/decrease consumption of particular items.
6. Consumer prices of certain items would fall since labor and tax compliance costs would be cheaper to businesses. Every cent that goes into producing a product or service is reflected in it's price. For example, if a law firm pays a clerk $25 per hour to service a client, it must charge the client at least that much to avoid losing money. Any business will usually add a certain markup to ensure an adequate profit for the effort and risk. Thus, if you cut the underlying cost, you cut the final price charged to consumers. Elimination of the income tax means a reduction in payroll taxes for businesses as well as the elimination of the need for much of the human resource & payroll departments. Consequently, the cost of offering related products & services drops.
7. It would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax. Drug dealers, prostitutes, black market dealers, and bookies are examples of people who earn income illegally. Since these and others engaging in illegal transactions obviously don't want the government to know about their activities, the income generated won't be reported on income tax returns. Thus, none of that money is subject to tax. However, with a sales tax, it doesn't matter how money is earned, since the tax is collected immediately by the seller.
8. It's a tax system consistent with a free society; i.e. Americans have a choice regarding their taxes, unlike our current confiscation system. Our Founding Fathers went to war with England in large part to get away from a stifling tax system like that which we currently face. The U.S.A. is supposed to be a free country with little government interference. However, in our current tax system, we must pay a significant portion of our earnings regardless if we use government services or not. Since our income is taxed and we all have to generate earnings to survive, we don't have a choice. If we institute a national sales tax, the amount of tax we pay is completely up to the individual. We aren't taxed a penny until we go out and spend. Thus, a national sales tax is consistent with the very idea and foundation of America.
Again, you list talking point conclusions as if they are facts.
Why the 23% Fair Sales Tax also cures impotence, cancer and extends natural life by 15 years.
So going after the whores and drug dealers is the best way to raise tax revenue? If drug dealers/criminals break the law to make their money, why should they follow the law by submitting 23% of their ill-gotten cash every time they buy a product? Think Tony Soprano.
So a national sales tax discourages consumption? You're damn right it does. When the low and middle class have to pay an additional 23% for every single food item, we'll see poverty start spike again.
You really should read the materials you cut and paste: "Tax rates can be targeted to encourage or discourage the consumption of certain items....Tax rates can be targeted to encourage or discourage the consumption of certain items. A national sales tax doesn't mean one standard rate for every consumer good sold in the country. We can customize the rates to help the poor provide for basic necessities as well as discourage or encourage the consumption of certain items."
So now you want to introduce some degree of progressivity to the "flat" tax?
Looks like we already have that with the current system.
The National Sales Tax has no federal branch for compliance or enforcement. A new federal entity must be created b/c you want the IRS scrapped. That'll cost a fortune in and of itself.
Rich people and crooks will avoid the tax by either buying black market (untaxed) goods or they'll stop buying american products all together. Therefore, the 23% tax cut for them puts the government in a bind to recover the lost revenue.
The rich see their taxes reduced from 36% to 23%.
The poor see their taxes go up from 10% or 15% to 23% but there's some sort of welfare rebate check that the government will provide them.
If the government slashes the tax rate for the high earners (who pay the majority of the taxes in the country) by 13%, where is the loss in tax revenue going to come from?
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Why the 23% Fair Sales Tax also cures impotence, cancer and extends natural life by 15 years.
Actually it is your liberal hero Hillary Clinton that is making all kinds of statements as this ...... if you vote for her, "free health Insurance", "free daycare", " lower oil cost" , etc........ :o
So going after the whores and drug dealers is the best way to raise tax revenue? If drug dealers/criminals break the law to make their money, why should they follow the law by submitting 23% of their ill-gotten cash every time they buy a product? Think Tony Soprano.
Wrong again lib,
Tax evasion is chronic under any system so complex as to be incomprehensible. As a percentage of gross domestic product (GDP), tax evasion in 2001 was beyond 2.6 percent, compared to 1.6 percent in 1991. This represents over 16 percent of taxes due. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. These IRS figures do not include taxes lost on illegal sources of income with a criminal economy estimated at a trillion dollars. All this, despite a major enforcement effort and assessment of tens of millions of civil penalties on American taxpayers in an effort to force compliance with the tax system. Disrespect for the tax system and the law has reached dangerous levels and makes a system based on taxpayer self-assessment less and less viable.
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
So a national sales tax discourages consumption? You're damn right it does. When the low and middle class have to pay an additional 23% for every single food item, we'll see poverty start spike again.
Wrong again lib,
Low-income households experience a 26.7 percent welfare gain under the FairTax
Middle-income households experience a 10.9 percent welfare gain
High-income households experience a 4.7 percent welfare gain
You really should read the materials you cut and paste: "Tax rates can be targeted to encourage or discourage the consumption of certain items....Tax rates can be targeted to encourage or discourage the consumption of certain items. A national sales tax doesn't mean one standard rate for every consumer good sold in the country. We can customize the rates to help the poor provide for basic necessities as well as discourage or encourage the consumption of certain items."
So now you want to introduce some degree of progressivity to the "flat" tax?
Looks like we already have that with the current system.
The National Sales Tax has no federal branch for compliance or enforcement. A new federal entity must be created b/c you want the IRS scrapped. That'll cost a fortune in and of itself.
Wrong again lib,
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
Rich people and crooks will avoid the tax by either buying black market (untaxed) goods or they'll stop buying american products all together. Therefore, the 23% tax cut for them puts the government in a bind to recover the lost revenue.
You mean to say that the current system is dealt with by the rich and crooks in an honest way ? give me a fuking break .
the fair tax is much harder for these 2 groups to abuse.
once again , The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
The rich see their taxes reduced from 36% to 23%.
Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.
Let’s look at a billionaire under the FairTax -- if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a prebate of $4,697 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.
Now, let’s look at a middle-income married couple with no children under the FairTax -- if they spend $50,000, they pay $6,803 net of their prebate for an effective tax rate of 13.6 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent!
The poor see their taxes go up from 10% or 15% to 23% but there's some sort of welfare rebate check that the government will provide them.
wrong again lib,
Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today.
If the government slashes the tax rate for the high earners (who pay the majority of the taxes in the country) by 13%, where is the loss in tax revenue going to come from?
lib, you are wrong as always, Their are billions hidden in foreign accounts, that could be brought back into our economy, increasing revenue, and as stated earlier, it would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax. Drug dealers, prostitutes, black market dealers, and bookies are examples of people who earn income illegally. Since these and others engaging in illegal transactions obviously don't want the government to know about their activities, the income generated won't be reported on income tax returns. Thus, none of that money is subject to tax. However, with a sales tax, it doesn't matter how money is earned, since the tax is collected immediately by the seller.
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colossus,
there are a lot of americans without the brains to control their own money, would you agree?
Yep, and they'd be no less worse off than they are now. That's just my opinion.
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Yep, and they'd be no less worse off than they are now. That's just my opinion.
dude.... people go broke and homeless now, and that's when the govt manages most of the their $.
You give them complete control to invest, spend, use up their money, and many will blow it all or put it all on the wrong stock and go broke.
You might say "okay, fukkem... who cares"...
But...
When we have 10 or 20 million new homeless people doing homeless things (spreading disease, committing crimes, putting strain on public health services), you will certainly see our american way of life decline.
People cannot manage their own money. Even if only 1% of them crap out, that's still 3 million new homeless people willing to stick a gun in your mouth for a bite of food. You can't let ppl destroy themselves because it DOES affect us.
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dude.... people go broke and homeless now, and that's when the govt manages most of the their $.
You give them complete control to invest, spend, use up their money, and many will blow it all or put it all on the wrong stock and go broke.
You might say "okay, fukkem... who cares"...
But...
When we have 10 or 20 million new homeless people doing homeless things (spreading disease, committing crimes, putting strain on public health services), you will certainly see our american way of life decline.
People cannot manage their own money. Even if only 1% of them crap out, that's still 3 million new homeless people willing to stick a gun in your mouth for a bite of food. You can't let ppl destroy themselves because it DOES affect us.
240, you have lost your mind.
You have turned into a communist ! :o :o :o :o
It is not the Governments right to control our money, that we have earned,
And thus being one of the main reasons our Founding Fathers created this great Country !
yes their are some idiots, but you don't control ( punish ) everyone because of this.
what's next ? you will want the government telling all of us what to do for a living ? and where to live ? and testing us to see if we are up to their requirements to have children ? all because some people are dumb, and the Government thinks we are not smart enough !
And if you re-read what Colossus wrote, it was nothing about not paying any taxes, it was "I like the fact that this option gives the average citizen more control over their money." 240, Do you really think this is a bad thing ? or are you just having fun debating on here ? because if it is the first, you really have lost it, and you should move to a Communist Country ! How about Cuba !
Your way of thinking is really messed up. That's just my opinion.
Vote for Ron Paul !
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I still like the idea, as I've read much of what people have said here. I believe we can find a way to make it "fair" in terms of not burdening the poor. Perhaps quarterly tax credits/rebates.
BTW, in California we don't pay sales tax on most food. I don't see why that couldn't be the case with this too.
Also, the annual retail sales per capita in Cali is about $10,000 while the average income per capita is $22,710. So it seems we'd pay about the same. Plus, collecting will be easier as the mechanism to collect is already in place.
Again, I realize i am not a economics major, or well informed in this, it just seems on paper to make sense.
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240, watch this :
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dude, it's not communism. It's common sense economics. Think about it.
You live in a beautiful house. You have 19 neighbors on your block who also live in beautiful homes. If they all lose their homes, do you think your quality of life will increase or decrease? There is a strong likelihood that at the very least, you'll have 19 families begging from you, and in worst case, 19 families robbing your home while you're at work, or worse.
I agree in capitalist principles. But imagine it to the extreme. imagine 10% of our people learn to "work" this new system and 90% of our people get swindled or just plain lose their $.
That 90% of people will no longer contribute to society. The opposite in fact - they'll spread disease, they'll sleep in our doorways, they'll be sticking us up for $ to eat. I am NOT for welfare. But I am for keeping a system in place that keeps most folks from wasting their $ on get-rich schemes.
BTW---> I used to think like that - who cares about everyone else. Then I releaized we live in an open society where the poor and desperate can very quickly fucck up the lives of the wealthy and happy.
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I like ron paul. he's right about most of the things he says. I'd be happy if he won. It would truly be a modern day revolution.
but...
I know there are a lot of uneducated americans. I know there are greedy and exploitive americans who would milk this. Imgine how many "Put your retirement savings HERE and double it in a year!" scams would be out there. And imagine how many ppl would fall for it.
Think in REALITY. What would happen if within 5 years, 50% of our population had wasted their retirement $? Bad bad things. I'm all for Paul's removing the BS agencies that take money and work on fear. But ending social security scares me.
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240,
Colossus nor I for that matter never mentioned anything about doing away with Social Security.
And with out the income Tax, the Government still has numerous other sources of income ( revenue )
once again 240, you should move to Cuba, you would fit in well.
and once again, you don't punish all because the stupid decisions of a few, ( unless you are a communist ! )
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dude, you're saying that ppl who don't like the idea of a 23% flat tax are communists?
you're kidding, right?
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dude, you're saying that ppl who don't like the idea of a 23% flat tax are communists?
you're kidding, right?
No, that is not what I am saying, not at all, and you know that.......... but nice try at deflecting! :o
but i do think that people that say :
" People cannot manage their own money. Even if only 1% of them crap out, that's still 3 million new homeless people willing to stick a gun in your mouth for a bite of food. You can't let ppl destroy themselves because it DOES affect us." - 240
.........are of a Communist way of thinking.
and as I wrote earlier, the 23 % fair tax is not my first choice, I prefer the Ron Paul way, to do away with the IRS,
I just think the 23 % fair tax is a better system than our current tax system, and deserves a defense on here.
240, Did you read anything about the Fair Tax ? I think not, as you seem to think it is doing away with the Social Security , as you just wrote:
"I know there are a lot of uneducated Americans. I know there are greedy and exploitive Americans who would milk this. Imagine how many "Put your retirement savings HERE and double it in a year!" scams would be out there. And imagine how many ppl would fall for it.
It is not doing away with the Social Security, it would be funded with the 23 % still,
also you keep saying how 90 % wont be paying taxes, where do you get this ?
You think the current system is without cheaters ? :o
Maybe you should read about it , before making such statements.
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
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can you give me info of the fair tax system - that comes from a group without a political bias toward the dark side?
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Actually it is your liberal hero Hillary Clinton that is making all kinds of statements as this ...... if you vote for her, "free health Insurance", "free daycare", " lower oil cost" , etc........ :o
The only debate you have any chance of winning is the one where you make my arguments for me, like above with the Hillary nonsense.
Wrong again lib,
Tax evasion is chronic under any system so complex as to be incomprehensible.....
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
I have a pretty good idea about what tax avoidance and evasion are. I'm a tax lawyer.
You on the other hand haven't a clue about what you write about and your desperate cutting and pasting just drives that point home.
And once again you do not answer the question. Why should criminals suddenly pay this absurd 23% sales tax when they can create/take advantage of untaxed black market items?
Why should the wealthy pay any tax when they can incorporate in the US to have a US source income and live abroad?
Wrong again lib,
Low-income households experience a 26.7 percent welfare gain under the FairTax
Middle-income households experience a 10.9 percent welfare gain
High-income households experience a 4.7 percent welfare gain
So you advocate another big government welfare program? Your numbers don't add up.
Look, everything's free, free, free. The gov. is just churning out welfare checks for everyone.
Wrong again lib,
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
Now here's a challenging cut and paste of yours. There will still be a need for a branch of the federal government for enforcement of your asinine tax proposal. It's a federal tax...not a state tax. It is the province of our federal sovereignty and not the states. Your simplistic argument, if I can call it that, makes no sense except to one such as yourself.
You mean to say that the current system is dealt with by the rich and crooks in an honest way ? give me a fuking break .
the fair tax is much harder for these 2 groups to abuse.
You keep saying this but you never explain how.
once again , The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.
How does the tax work for purchases if the items are not purchased from a US source? How does it tax them if the wealthy relocate abroad while retaining a US source of income?
Your Fair Tax undermines US productivity in that respect. As long as there's a tax, there will be tax avoidance and evasion.
Let’s look at a billionaire under the FairTax -- if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a prebate of $4,697 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.
Now, let’s look at a middle-income married couple with no children under the FairTax -- if they spend $50,000, they pay $6,803 net of their prebate for an effective tax rate of 13.6 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent! That's about the stupidest thing I've seen in some time. You've really outdone yourself. Do you really believe that a billionaire would subject his assets to the retarded, I mean regressive 23% tax? No no. These people view any tax as too much tax.
Prebates...that's hilarious. More welfare handouts to everyone. Look, Ozark wants government paying everybody.
The poor see their taxes go up from 10% or 15% to 23% but there's some sort of welfare rebate check that the government will provide them.
And speaking of retarded, You mention this billionaire and spending 10,000,000. How on god's green earth is that not a drastic reduction in tax revenue to the government? You see no difference between taxing 36% of total eligible income or 23% of income spent. The gov. will be severly underfunded.
Especially with all the welfare payouts you advocate.
wrong again lib,
Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today.
Where's the money coming from. Your song and dance numbers do not add up. You live in a fantasy land with this CURE ALL FAIR TAX.
Wake up!
But then again, you're pushing bullshit b/c you believe bullshit. Scrap the Code! Scrap the IRS!
Your childish banter shows me a level of sophistication of thought approaching that of an excited addle-minded teenager.
lib, you are wrong as always, Their are billions hidden in foreign accounts, that could be brought back into our economy, increasing revenue, and as stated earlier, it would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax. Drug dealers, prostitutes, black market dealers, and bookies are examples of people who earn income illegally. Since these and others engaging in illegal transactions obviously don't want the government to know about their activities, the income generated won't be reported on income tax returns. Thus, none of that money is subject to tax. However, with a sales tax, it doesn't matter how money is earned, since the tax is collected immediately by the seller.
Here we go again.
This guy starts out with "Wrong Lib" like it's some profound putdown (maybe in his mind it is, that's just sad) and then cuts and pastes some sloppy fantasyland bullshit he scarcely understands.
You got me shakin' in my boots little lady.
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Jesus, it's not rocket science. ::)
Such taxation would ruin our great free market economy and discourage competition. It's like that cock and bull idea that Dick Army or whoever came up with a while back.
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Jesus, it's not rocket science. ::)
Such taxation would ruin our great free market economy and discourage competition. It's like that cock and bull idea that Dick Army or whoever came up with a while back.
I like Ron Paul but the idea of a national sales tax has been analyzed to death by some fairly smart people:
http://www.exponentialimprovement.com/cms/fairtax.shtml
http://www.tax.org/thp/readings.nsf/cf7c9c870b600b9585256df80075b9dd/cfbe9de4a695d74f85257014004f1184?OpenDocument
And it really is a scam. It is anything but fair and it enables a whole new arm of criminality in dealing with black market untaxed items.
Here's a quote from one of the above articles: "But their "tax-inclusive" sales tax rate of ~23% tax is really a 30% "tax-exclusive" sales tax to which we generally refer. And to be revenue neutral, the rate would have to be a "tax-exclusive" sales tax of 56%."
I don't like taxes any more than the next guy--except for Ozark--but I'm not going to get hysterical about scrapping the IRS or the Code b/c I feel helpless in the matter.
Here's more cutting and pasting from me. I would like to hear Ozark's opinion on this narrow topic:
Everyone understands the sales tax. Most Americans pay one every day, and those who don't probably revel in the fiscal probity of their state lawmakers. Supporters of the national sales tax have capitalized on that familiarity, offering taxpayers an apparently simple alternative to the confusing federal income tax. But in the process, they have engaged in some dubious sleight of hand, quoting rates in tax-inclusive, rather than tax-exclusive terms. (Tax- exclusive rates reflect the ratio of the tax to the pretax price of an item, while tax-inclusive rates are the ratio of the tax to the after-tax price of the good, including the tax itself.)
Fair Tax advocates defend this fiscal legerdemain, insisting that it facilitates comparison with the income tax (the rates for which are typically quoted in tax-inclusive terms). Perhaps. But it also obscures comparison with state sales taxes, the only reasonable point of comparison for most taxpayers. http://www.tax.org/thp/readings.nsf/cf7c9c870b600b9585256df80075b9dd/cfbe9de4a695d74f85257014004f1184?OpenDocument
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Great stuff here. How would inflation come into play in this? Having this flat tax and possibly abolishing the IRS still won't stop the Fed from printing more and more money. The US's industrial base has been gutted almost completely so that right there stops one possible advantage of inflation that would otherwise make US goods cheaper. Everything is made dirt-cheap(and dirt quality) in China, so with those increased import prices, that means higher actual taxed amount.
Like 240 said as well, what of those who wish to finance a car, obtain a mortgage, or otherwise get a material good through financing? You'd end up financing even more due to the increased tax rate. I personally believe the Credit system is terrible and keeps a lot more people poor than they otherwise should, but it is there and it looms heavily on us all.
I don't make a lot of money, but I do live comfortably enough. Basically, it'd come down to number crunching. Would I save more by having my taxes appropriated from me via income tax, or see everything with a 23% increase? In addition, the Black Market price may even RISE to stay just below the taxed item prices.
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Great stuff here. How would inflation come into play in this? Having this flat tax and possibly abolishing the IRS still won't stop the Fed from printing more and more money. The US's industrial base has been gutted almost completely so that right there stops one possible advantage of inflation that would otherwise make US goods cheaper. Everything is made dirt-cheap(and dirt quality) in China, so with those increased import prices, that means higher actual taxed amount.
Like 240 said as well, what of those who wish to finance a car, obtain a mortgage, or otherwise get a material good through financing? You'd end up financing even more due to the increased tax rate. I personally believe the Credit system is terrible and keeps a lot more people poor than they otherwise should, but it is there and it looms heavily on us all.
I don't make a lot of money, but I do live comfortably enough. Basically, it'd come down to number crunching. Would I save more by having my taxes appropriated from me via income tax, or see everything with a 23% increase? In addition, the Black Market price may even RISE to stay just below the taxed item prices.
That is a good point. Credit spending will rise to new levels. The US already has a negative savings rate. People live well beyond their means. Just look at the mortgage problem. Everyone wants to live like they are wealthy when the fact of the matter is that most of us are average earners making less in real dollars than our parents earned.
Remember, the 23% rate is a provisional fiction designed to appeal to the masses.
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Remember, the 23% rate is a provisional fiction designed to appeal to the masses.
IMO, it's designed to appeal to the rich, republican voting base (The Forbians) that uses economic policy to select their candidate.
They'd LOVE to get 4 years off paying taxes, damn the longterm consequences to the USA.
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The only debate you have any chance of winning is the one where you make my arguments for me, like above with the Hillary nonsense.
Decker Dummy, you are too easy, so you are saying she did not say these things ?
watch : http://youtube.com/watch?v=yzBvQ9EeF3k (http://youtube.com/watch?v=yzBvQ9EeF3k)
I have a pretty good idea about what tax avoidance and evasion are. I'm a tax lawyer.
well if this is true, then we all now see why you are against such a change, as it would hurt your income .
The FairTax ends all record keeping and income tax filings of any kind for individuals, totally insulating them from the high costs and abusive tactics of tax preparers. Bad for Decker :o
It is estimated that Americans spend at least $265 billion a year to comply with the tax code -- nearly $900 for every man, woman, and child in America. That is greater than the current federal deficit ($205 billion). Billions of dollars in compliance costs are wasted each year, and we have nothing of value to show for this expenditure -- not one single productive service or product is added to our nation’s wealth. It is estimated that the FairTax dramatically cuts such compliance costs, perhaps as much as 95 percent. Bad for Decker :o :o
There are, of course, still some people who are involved in sales tax return preparation and sales tax administration under the FairTax, but many fewer than those involved with the income tax today. Those tax preparers, tax lawyers, and Internal Revenue Service employees, who are typically well educated and well equipped with transferable skills, will have to find other, more productive work. The projected 10.5 percent growth in the economy during the first year of the FairTax will provide plenty of new jobs. Very bad for Decker :o :o :o
You on the other hand haven't a clue about what you write about and your desperate cutting and pasting just drives that point home.
nice try again Decker Dummy, I have put links and the truth to all of your lies and attacks, each time you try to throw shit on the wall. I clean the wall with the facts, but continue as you will, this is fun making a fool of you. ;D
And once again you do not answer the question. Why should criminals suddenly pay this absurd 23% sales tax when they can create/take advantage of untaxed black market items?
once again Decker Dummy, you say this as though the wealthy pay their honest amount of Taxes currently.
read slowly this time lib :
Tax evasion is chronic under any system so complex as to be incomprehensible. As a percentage of gross domestic product (GDP), tax evasion in 2001 was beyond 2.6 percent, compared to 1.6 percent in 1991. This represents over 16 percent of taxes due. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. These IRS figures do not include taxes lost on illegal sources of income with a criminal economy estimated at a trillion dollars. All this, despite a major enforcement effort and assessment of tens of millions of civil penalties on American taxpayers in an effort to force compliance with the tax system. Disrespect for the tax system and the law has reached dangerous levels and makes a system based on taxpayer self-assessment less and less viable.
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
Why should the wealthy pay any tax when they can incorporate in the US to have a US source income and live abroad?
people moving abroad ? no way, oh you mean like all of the Corporations that have been moving abroad in the last 10 years, for their Benefit, the latest being Haliburton, and all the factories moving to Mexico, South America, India, and etc.....
Once again Decker Dummy, your argument is empty.
So you advocate another big government welfare program? Your numbers don't add up.
wrong again Decker Dummy..........
Administration
The Social Security Administration (SSA) will send out the monthly prebate on or before the first day of every month. Prebate payments can only be made to persons 18 years or older. If a family wishes to designate more than one person to receive the prebate, then the prebate payment will be divided evenly among those persons designated. Example: Two single people sharing the same residence are able to each get a prebate check.
Registration renewal
After the initial registration, any qualified family that fails to renew its registration each year, within 30 days of the family determination date, will cease receiving the prebate 90 days following the failure to register. However, the family can file to get up to six months of missed prebate checks later (with no interest on missed payments). A possible method of assigning registration renewal dates would be on the birth date of the person filing the application. 30 or more days before the annual registration date, the sales tax authority is required to mail a proposed registration to each qualified family that simply needs to be signed and mailed back in if the family’s circumstances have not changed.
Administrative cost
In accordance with instructions from each qualified family, SSA will provide the prebate in the form of a paper check via U.S. Mail, an electronic funds transfer to a bank account, or a “smart card” that can be used much like a bank debit card. (This method is already in use to provide other benefits from the federal government.) The National Taxpayers Union estimated that the cost of mailing monthly prebate checks via the U.S. Postal Service would be approximately $225 million. To the extent SSA uses electronic funds transfer and “smart card” technology, this amount would be reduced accordingly.
Fraud prevention
When the state sales tax authorities process the prebate applications they will validate all names and Social Security numbers against the SSA database. States already do this in relation to the administration of other state/federal cooperative programs such as unemployment benefits and child support enforcement. They will also check for duplicate Social Security numbers being claimed by different households to prevent more than one household from listing the same person as a household member. Any duplicate Social Security numbers will have to be resolved before the prebate payment is made.
It is unlawful to willingly and knowingly file a false prebate claim. HR 25 provides for both civil and criminal penalties. The civil penalty is equal to the greater of $500 or 50 percent of the claimed annual prebate amount not actually due, plus repayment of any falsely due prebate amounts. A criminal penalty of imprisonment for up to one year may also be imposed.
Fiscal impact
The number of households for 2007 is estimated to be 113 million. Assuming 100 percent participation, the cost of the prebate is estimated to be $489 billion for 2007 (assuming that all legally resident households participate). This amount is about half of the amount of tax expenditures (standard deductions, personal exemptions, Earned Income Tax Credit, mortgage interest and charitable deductions, and various other tax preferences) doled out under the current federal income tax system that are repealed when the FairTax is enacted. For 2006, the total of all of these tax breaks exceeded $945 billion (estimate by the congressional Joint Committee on Taxation,
Now here's a challenging cut and paste of yours. There will still be a need for a branch of the federal government for enforcement of your asinine tax proposal. It's a federal tax...not a state tax. It is the province of our federal sovereignty and not the states. Your simplistic argument, if I can call it that, makes no sense except to one such as yourself.
once again Lib :
How is the tax collected?
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
It makes the administrative costs of businesses in that state much lower. The state is paid a one-quarter of one percent fee by the federal government to collect the tax. For states that already collect a sales tax, this fee proves generous. A state can choose not to collect the federal sales tax, and either outsource the collection to another state, or opt to have the federal government collect it directly. If a state chooses to conform to the federal tax base, they will raise the same amount of state sales tax with a lower tax rate -- in some cases more than 50 percent lower -- since the FairTax base is broader than their current tax base. States may also consider the reduction or elimination of property taxes by keeping their sales tax rate at or near where it is currently. Finally, conforming states that are part of the FairTax system will find collection of sales tax on Internet and mail-order retail sales greatly simplified.
The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system
The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
And speaking of retarded, You mention this billionaire and spending 10,000,000. How on god's green earth is that not a drastic reduction in tax revenue to the government? You see no difference between taxing 36% of total eligible income or 23% of income spent. The gov. will be severly underfunded.
Nice try Lib, you being a Tax Lawyer, you know very well, that the rich dont pay 36 % percent of thier income in taxes, they pay accountants $$$$ to get that down to sometimes half that, and many times even lower than half, notice you used the word "eligible income " ::)
Plus, their are billions hidden in foreign accounts, that could be brought back into our economy, increasing revenue, and as stated earlier, it would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax. Drug dealers, prostitutes, black market dealers, and bookies are examples of people who earn income illegally. Since these and others engaging in illegal transactions obviously don't want the government to know about their activities, the income generated won't be reported on income tax returns. Thus, none of that money is subject to tax. However, with a sales tax, it doesn't matter how money is earned, since the tax is collected immediately by the seller.
But then again, you're pushing bullshit b/c you believe bullshit. Scrap the Code! Scrap the IRS!
The real truth :Poor Decker Dummy does not want to lose his job :o :o :o :o :o :o
Your childish banter shows me a level of sophistication of thought approaching that of an excited addle-minded teenager.
nice try Decker Dummy, we now both know the true reason for your hate of the Fair Tax, people wont need crooks Tax Lawyers much anymore. Then Decker will be saying in his new career......... " would you like to supersize that order ? "
You got me shakin' in my boots little lady.
Wow, a lawyer trying to put someone down ? who would have thought..... :o :o
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Great stuff here. How would inflation come into play in this? Having this flat tax and possibly abolishing the IRS still won't stop the Fed from printing more and more money. The US's industrial base has been gutted almost completely so that right there stops one possible advantage of inflation that would otherwise make US goods cheaper. Everything is made dirt-cheap(and dirt quality) in China, so with those increased import prices, that means higher actual taxed amount.
Like 240 said as well, what of those who wish to finance a car, obtain a mortgage, or otherwise get a material good through financing? You'd end up financing even more due to the increased tax rate. I personally believe the Credit system is terrible and keeps a lot more people poor than they otherwise should, but it is there and it looms heavily on us all.
I don't make a lot of money, but I do live comfortably enough. Basically, it'd come down to number crunching. Would I save more by having my taxes appropriated from me via income tax, or see everything with a 23% increase? In addition, the Black Market price may even RISE to stay just below the taxed item prices.
How does the plan affect economic growth?
With the penalty for working harder and producing more removed, Americans are free to keep every dollar they earn, and a new era of economic growth and job creation is unleashed. Hidden taxes are history, Americans are able to save more, and businesses invest more. Capital formation, the real source of job creation and innovation, is facilitated. Gross domestic product (GDP) increases by an estimated 10.5 percent in the first year alone. The FairTax as proposed raises the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent.
As U.S. companies and individuals repatriate, on a tax-free basis, income generated overseas, huge amounts of new capital flood into the United States. With such a huge capital supply, real interest rates remain low. Additionally, other international investors will seek to invest here to avoid taxes on income in their own countries, thereby further spurring the growth of our own economy.
How does the FairTax affect wages and prices?
Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.
How does this affect U.S. competitiveness in foreign trade?
Because the FairTax is automatically border adjustable, the 17 percent competitive advantage, on average, of foreign producers is eliminated, immediately boosting U.S. competitiveness overseas. American companies doing business internationally are able to sell their goods at lower prices but at similar margins, and this brings jobs to America.
In addition, U.S. companies with investments or plants abroad bring home overseas profits without the penalty of paying income taxes, thus resulting in more U.S. capital investment.
And at last, imports and domestic production are on a level playing field. Exported goods are not subject to the FairTax, since they are not consumed in the U.S.; but imported goods sold in the U.S. are subject to the FairTax because these products are consumed domestically.
How does the income tax affect our economy?
How does dragging an anchor affect the speed of a ship? Our entire economy is not dependent on the income tax. Instead, our economy is held back by the income tax. There was no income tax for the first 124 years of our history -- that’s more than half the time we have existed as a nation. A study by the Government Accountability Office estimated that the federal tax system imposed efficiency costs on the U.S. economy of two to five percent of GDP. Under the FairTax, within ten years average Americans will be at least 10 percent and probably 15 percent better off than they would be under the current system. That translates to an increase of $3,000 to $4,500 per household, per year.
What about the home mortgage ?
The FairTax has positive effects on residential real estate far beyond this narrow question. Today’s homeowners, if they itemize (and 70 percent do not), pay their interest with post-Social Security/pre-income tax dollars. They then pay their principal with post-SS/post-income tax dollars. Those who do not itemize get no advantages at all. Under the FairTax, all homeowners make their entire house payment with pre-tax dollars.
With the FairTax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls; this is a huge savings for consumers. For example, on a $150,000, thirty-year home mortgage at an interest rate of 7.00 percent, the monthly mortgage payment is $999.12 for principal and interest. On that same mortgage at a 5.25 percent interest rate, the monthly payment is $830.01. Over 30 years, the 1.75-percent decrease in interest rates in this instance results in a $60,879 cost savings to the consumer. Finally, first-time buyers save for that down payment much faster, as savings are not taxed.
Under the FairTax, home ownership is a possibility for many who have never had that option under the income tax system. Lower interest rates, the repeal of the income tax, the repeal of all payroll taxes, and the prebate mean that people have more money to spend and have an increased opportunity to become homeowners.
Do corporations get a windfall with the abolition of the corporate tax?
Corporations are legal fictions that have not, do not, and never will bear the burden of taxation. Only people pay taxes. Corporations pass on their tax burden in the form of higher prices to consumers, lower wages to workers, and/or lower returns to investors. The idea that taxing a corporation reduces taxes on, say the working poor, is a cruel hoax. A corporate tax only makes what the working poor buy more expensive, costs them jobs, lowers their lifestyle, or delays their retirement. Under the FairTax Plan, money retained in the business and reinvested to create jobs, build factories, or develop new technologies, pays no tax. This is the most honest, fair, productive tax system possible. Free market competition will do the rest.
How does the plan affect economic growth?
With the penalty for working harder and producing more removed, Americans are free to keep every dollar they earn, and a new era of economic growth and job creation is unleashed. Hidden taxes are history, Americans are able to save more, and businesses invest more. Capital formation, the real source of job creation and innovation, is facilitated. Gross domestic product (GDP) increases by an estimated 10.5 percent in the first year alone. The FairTax as proposed raises the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent.
As U.S. companies and individuals repatriate, on a tax-free basis, income generated overseas, huge amounts of new capital flood into the United States. With such a huge capital supply, real interest rates remain low. Additionally, other international investors will seek to invest here to avoid taxes on income in their own countries, thereby further spurring the growth of our own economy.
What economic changes come at the retail level with the FairTax?
Our baby boom generation has been trained to spend money before inflation eats it up or savings is taxed away. This group, for good or evil, will likely spend their initial pay raise. Others will recognize the advantages of savings and investment. There will be a whole new round of home refinancings. There will likely be a lot of interest in the actual cost of the federal government when consumers see their most recent contribution at the bottom of each retail receipt.
Since the FairTax plan is revenue neutral, the same amount of resources is extracted from the economy as is extracted under current law. These funds are, however, extracted in a less economically damaging way. Every known economic projection shows the economy doing better, often much better, under the FairTax.
Because the economy grows, is more efficient and more productive, that means investment, wages, and consumption are higher than they are under the income tax.
What happens to interest rates?
First, interest rates drop quickly by approximately one-quarter. Interest rates include compensation to the lender for the tax that they must pay on interest you pay them. That is why taxable bonds bear a higher interest rate than tax-exempt bonds. When the tax on interest is removed, interest rates will drop toward today’s tax-exempt rate.
Second, under the current system, savings and investments are taxed. Under the FairTax, savings and investments are not taxed at all. As Americans save more money, the pool of funds in lending institutions grows. When you add to this the flood of capital currently trapped offshore, we realize a huge increase in the pool of capital, thereby causing the cost of borrowing funds to drop.
What happens to the stock market, mutual funds, and retirement funds?
Investors prosper greatly under this plan, since corporations face lower operating costs and individuals have more money to save and invest. The reform significantly enhances the retirement savings and/or retirement spending power of most Americans. The purchase of stocks is considered a purchase for investment purposes and not personal consumption so they are purchased tax free. The service fees charged by the broker, however, are personal consumption and therefore subject to tax.
How does this affect U.S. competitiveness in foreign trade?
Because the FairTax is automatically border adjustable, the 17 percent competitive advantage, on average, of foreign producers is eliminated, immediately boosting U.S. competitiveness overseas. American companies doing business internationally are able to sell their goods at lower prices but at similar margins, and this brings jobs to America.
In addition, U.S. companies with investments or plants abroad bring home overseas profits without the penalty of paying income taxes, thus resulting in more U.S. capital investment.
And at last, imports and domestic production are on a level playing field. Exported goods are not subject to the FairTax, since they are not consumed in the U.S.; but imported goods sold in the U.S. are subject to the FairTax because these products are consumed domestically.
What about border issues?
It is unlikely that “shopping across the border” in Canada or Mexico will result in any cost savings to the consumer. Remember, the FairTax is revenue neutral and therefore price neutral. This means the relative cost of retail goods and services after the FairTax remains very close to the same levels found in the marketplace today. With regard to interstate competition, since all states have the same federal sales tax rate, the federal sales tax is not an incentive to cross state lines to avoid the tax.
What other significant economies use such a tax plan?
Two of the largest economies in the world rely almost solely on sales taxes: Florida and Texas. Many civilizations in history have relied solely on transaction-based consumption taxes: A percentage of a grain shipment in exchange for a safe harbor. Even a cursory study of history shows that nation/states that relied on consumption taxes flourished and prospered, supported democracies/republics, had expanding economies, and high levels of civil rights for their citizens. The exact opposite is true for empires that relied on income/poll/head taxes. These taxes were used to support despots, eventually collapsed the economies in which they were applied, and sundered civil rights.
The sales tax is a familiar tax, being a major source of revenue in 45 states and the District of Columbia. It is true, however, that no post-industrial nation, until now, has ever repealed its income tax and replaced it with a federal retail sales tax. However, England did repeal its detested income tax upon the defeat of Napoleon and enjoyed the fastest, longest expansion of its economy in its long history. An expansion that ended only with the -- you guessed it -- re-imposition of an income tax.
No other country has a system of government like ours, and no other country has led the world in so many fields as ours. It was France and Germany that forced the imposition of a VAT in addition to income taxes across the European Community. Shall we follow France’s lead?
In contrast, we can observe the Irish Miracle that stems from their refusal to join the EU members in imposing high tax rates and their choice to follow their own path on taxation. Thus, we should simply strive to have the best tax system, period.
Is the FairTax just another conservative tax scheme? Or just another liberal tax scheme?
The FairTax has nonpartisan support from people in all walks of life. From both major parties and several third parties. Its supporters need only have one common belief: That it is a fairer, simpler, more efficient way to raise federal revenue. The FairTax delivers these benefits to all American people and more. More government accountability for taxpayer dollars, a tax system that is less susceptible to being manipulated by special interests, a tax system that will make it easier -- not harder -- for the average person to get ahead, and perhaps most importantly, a tax system that provides real, honest, and transparent tax relief for those who need it most.
How does the income tax affect our economy?
How does dragging an anchor affect the speed of a ship? Our entire economy is not dependent on the income tax. Instead, our economy is held back by the income tax. There was no income tax for the first 124 years of our history -- that’s more than half the time we have existed as a nation. A study by the Government Accountability Office estimated that the federal tax system imposed efficiency costs on the U.S. economy of two to five percent of GDP. Under the FairTax, within ten years average Americans will be at least 10 percent and probably 15 percent better off than they would be under the current system. That translates to an increase of $3,000 to $4,500 per household, per year.
How does this plan affect compliance costs?
It is estimated that Americans spend at least $265 billion a year to comply with the tax code -- nearly $900 for every man, woman, and child in America. That is greater than the current federal deficit ($205 billion). Billions of dollars in compliance costs are wasted each year, and we have nothing of value to show for this expenditure -- not one single productive service or product is added to our nation’s wealth. It is estimated that the FairTax dramatically cuts such compliance costs, perhaps as much as 95 percent.
What about value-added taxes (VATs), like they have in Europe and Canada? Are they not consumption taxes?
While VATs are also consumption taxes, and better than income taxes, the FairTax is not a VAT. A VAT works very differently. It taxes every stage of production. It is much more complex and is typically hidden from the retail consumer. Second, in industrialized countries that have a VAT, it coexists with high-rate income tax, payroll, and many other taxes that, in some instances, have led to marginal tax rates as high as 70 percent. Third, all other industrialized countries, except Australia and Japan, have a much larger tax burden than the U.S., which requires higher rates and makes tax administration much more difficult. Lastly, a VAT is a lobbyist’s dream, allowing them to install their loopholes unbeknownst to the purchaser. A retail sales tax, in contrast, is a lobbyist’s nightmare, applied as it is under the bright lights of the retail counter.
I know the FairTax rate is 23 percent when compared to current income and Social Security rate quotes. What is the rate of the sales tax at the retail counter?
30 percent. This issue is often confusing, so we explain more here.
When income tax rates are quoted, economists call that a tax-inclusive quote: “I paid 23 percent last year.” For every $100 earned, $23 went to Uncle Sam. Or, “I had to make $130 to have $100 to spend.” That’s a 23-percent tax-inclusive rate.
We choose to compare the FairTax to income taxes, quoting the rate the same way, because the FairTax replaces such taxes. That rate is 23 percent.
Sales taxes, on the other hand, are generally quoted tax exclusive: “I bought a $77 shirt and had to pay that same $23 in sales tax." This is a 30-percent sales tax. Or, “I spent a dollar, 77¢ for the product and 23¢ in tax.” This rate, when programmed into a point-of-purchase terminal, is 30 percent.
Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.
Spend that same $100 under a sales tax, you pay that same tax of $30, and the rate is quoted as 30 percent.
Perhaps the biggest difference between the two is that under the income tax, controlling the amount of tax you pay is a complex nightmare. Under the FairTax, you may simply choose not to spend, or to spend less.
Like 240 said as well, what of those who wish to finance a car, obtain a mortgage, or otherwise get a material good through financing? You'd end up financing even more due to the increased tax rate. I personally believe the Credit system is terrible and keeps a lot more people poor than they otherwise should, but it is there and it looms heavily on us all.
The good news is, that sales price will be lower, due to the fact that the price of the car will no longer include all of those embedded taxes (you know, taxes and costs added to the price of the car all along the manufacturing line and up through the retail level)
The purchasing costs of a new car are predicted to be lower by about 10% (14% for self-employed people), and that lower amount INCLUDES the FairTax. There is a chart in the FairTax.org website, a white paper under Industries/automobiles, that shows this prediction. It shows the total new car cost, including taxes, to be $43,537 under the present income tax system, and $39,160 under the FairTax, a difference of $4,377. That difference amounts to 10.05% less under the FairTax.
Another reason for a lower price under the FairTax is interest rates. Interest rates are projected to fall 25-35% under the FairTax, which would be a substantial amount given the high price of new cars today.
Also, you will be buying this new car with pre-tax dollars, thereby increasing your buying power.
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IMO, it's designed to appeal to the rich, republican voting base (The Forbians) that uses economic policy to select their candidate.
They'd LOVE to get 4 years off paying taxes, damn the longterm consequences to the USA.
wrong 240,
many Republicans are against this, so you cant say that .
http://www.fairtax.org/site/PageServer?pagename=news_presScorecard (http://www.fairtax.org/site/PageServer?pagename=news_presScorecard)
If the FairTax were passed by Congress and you were President, would you sign the bill into law?
(http://www.fairtax.org/images/scorecard/Giuliani_Rudy-t.jpg)
Rudy Giuliani No
(http://www.fairtax.org/images/scorecard/Huckabee_Mike-t.jpg)
Mike Huckabee Yes
(http://www.fairtax.org/images/scorecard/McCain_John-t.jpg)
John McCain No
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Ron Paul Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
(http://www.fairtax.org/images/scorecard/Romney_Mitt-t.jpg)
Mitt Romney No
(http://www.fairtax.org/images/scorecard/Thompson_Fred-t.jpg)
Fred Thompson Noncommittal
(http://www.fairtax.org/images/content/pagebuilder/13697.jpg)
Democrat Mike Gravel Yes "I subscribe to a sales tax system, most of which is included in what is called the Fair Tax. The Fair Tax meets the fairness criteria: simplicity, transparency and no exceptions." http://www.gravel2008.us/?q=fair_tax (http://www.gravel2008.us/?q=fair_tax)
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most repub candidates are against it. most repubs are against it.
IMO, someone whispered in huck's ear that he could grab up a chunk of like-minded power player donations if he suddenly made this a huge platform issue.
A week away from Iowa, he's winning and has momentum, and suddenly he rocks the boat with something like this? Not something you'd think he'd do when ahead. Unless he was motivated properly.
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most repub candidates are against it. most repubs are against it.
IMO, someone whispered in huck's ear that he could grab up a chunk of like-minded power player donations if he suddenly made this a huge platform issue.
A week away from Iowa, he's winning and has momentum, and suddenly he rocks the boat with something like this? Not something you'd think he'd do when ahead. Unless he was motivated properly.
Once again 240, you are wrong,
Huckabee has had the "Fair Tax" in his platform from the beginning of his Candidacy for President.
and his support is coming from people who think Romney and Giuliani are not conservative enough on social issues, not from his support of the "Fair Tax".
Based on Huckabee's record as Governor, I think he would be a terrible President,
Vote for Ron Paul
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lol... finally we agree on something!
Ron Paul.
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From Democrat Mike Gravel's Website :
http://www.gravel2008.us/?q=fair_tax (http://www.gravel2008.us/?q=fair_tax)
Fair Tax
DEMOCRATIC PRESIDENTIAL CANDIDATE MIKE GRAVEL IS FOR REAL TAX REFORM:
* ABOLISH THE INCOME TAX AND THE IRS
* SET UP A PROGRESSIVE SALES TAX
It’s called a FAIR TAX.
The way in which a government raises revenue is a critical indication of how fair it will be to its citizens.
The U.S. Income Tax system is unfair to its citizens and crippling to the economy.
Both the Income Tax and the Sales Tax systems are generically progressive:
* with Income, you’re taxed on what you earn
* with Sales, you’re taxed on what you spend
But the U.S. Income Tax system is unfair and regressive because Americans earning less than $97,400 pay a larger portion of their income in taxes than those who earn more than $97,400.
The following applies to both Income and Sales tax systems:
* To be fair, a tax system must have total transparency––each taxpayer must know what s/he is paying and what everyone else is paying.
* To be fair, a tax system cannot have any exceptions. One exception opens the door to those who can afford to game the system.
* To be fair, a tax system must be simple. The more complex it is, the easier it is to game the system.
Our income tax code is riddled with exceptions and incentives that the 30,000 lobbyists in Washington have secured and continue to secure for their clients. Little wonder the code is incomprehensible and has a compliance cost to the private sector of $270 billion a year.
After serving eight years on the Senate Finance Committee, my choice to meet the fairness criteria is to junk the income tax with all its exceptions, close the IRS, and establish a sales tax––without exceptions.
Much demagoguery swirls around issues of taxation:
* “Soak the rich” is one approach, but it never happens regardless of whether the liberals or conservatives hold political power. The wealthy have the money to game the system.
* “Tax the corporations” is another approach, but corporate taxes are built into the cost of products or services, so consumers are actually paying those taxes, too. It’s a hidden sales tax.
I subscribe to a sales tax system, most of which is included in what is called the Fair Tax. The Fair Tax meets the fairness criteria: simplicity, transparency and no exceptions.
What sales tax rate will be applied to all new products and services?
The goal is to keep tax reform revenue-neutral. It is not a tax-cut program. Whatever the tax rate on new goods and services that will produce the same amount of money currently raised by the income tax is the sales tax rate. Best estimates indicate that the rate would be somewhere between 20 and 25%. Also, best estimates indicate that it would take a year to transition from one system to the other.
The PREBATE
One of the most exciting features of the Fair Tax is the monthly payments to individuals and/or families to reimburse them for the tax they pay on the essentials of life (food, shelter, clothing, medicine). The amount of the Prebate is calculated by multiplying the cost of essentials by the tax rate. The resulting tax is divided into 12 equal payments and sent on the first of each month to consumers who have registered annually for the program. The progressiveness of the Fair Tax can be determined by adjusting the amounts selected for the prices paid for essentials, which should not be taxed in the first place. However, giving these essentials an exception from the sales tax opens the door for wealth to game the system and we are back with the problems we have in the income tax system.
The Congress will never enact such a radical reform because it dilutes their power to control and focus the economy to accomplish social goals and ,of course, limits their ability of Congress to reward their special-interest friends who donate money to their political campaigns. In my judgment, Americans will have to vote to enact the National Initiative, becoming legislators like their elected lawmakers, in order to make the Fair Tax the law of the land. (www.NationalInitiative.u s)
Fair Tax Facts
Taxes you on what you spend––not on what you earn. So American consumers with low or moderate incomes will automatically pay less in taxes.
Government revenues from individuals are presently funded by payroll deductions from 110 million workers, and from corporate taxes. Under the Fair Tax, government revenues will be funded by more than 300 million consumers, including visiting tourists, and tax cheats who previously reported little or nothing to the IRS.
Eliminates federal deductions on your paycheck for income taxes, Social Security and Medicare.
Social Security and Medicare will be fully funded by the Fair Tax
Restores individual privacy. The government no longer needs to know where you work, what you earn, or what you do with your earnings.
Saves up to $270 billion per year that federal tax compliance currently costs our economy.
Dramatically reduces the price of new products and services, estimated at 20-25%, because corporations no longer need to hide these costs in the retail prices that are now passed on to consumers. This reduction equals the present income taxes being paid.
Creates jobs and economic growth in the U.S. by reducing operating costs to companies.
Encourages international investment in the American economy.
Businesses, and state and local governments collecting the sales tax will keep a small percentage to reimburse themselves for the cost of collecting and forwarding the funds to the U.S. Treasury.
Encourages the re-use products and the purchase of tax-free, pre-owned products.
Changes our consumption-based economy to a savings-based economy, warding off the oncoming fiscal crisis over commercial and private debt.
Saves about 300,000 trees each year that are currently needed to produce all the paperwork for IRS compliance and tax forms
Makes U.S. goods more competitive overseas and more affordable at home, thereby increasing job creation while reducing our balance of payments deficit.
Eliminates corporate taxes and the costs of compliance. These costs are currently hidden in the price consumers pay for the company’s product or services
Changes the American economy – the largest economic entity in the world – into the largest tax haven in the world, enticing international investments in the American economy. Also creates a level of growth (estimated at 10%) and prosperity that will permit the nation to lower government debt and balance the budget, better finance education, health care, transportation, and the rebuilding of our national infrastructure.
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lol... finally we agree on something!
Ron Paul.
240,
If you support Ron Paul, then please watch this video :
http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
and give your comment
:)
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I've had the pleasure of slapping you around in this "debate" and now it is time to put an end to your crapola.
Look at the Clinton statement that you addressed and answered below, you can't even maintain a train of thought to discuss this topic so I'll dispense with all your cut and paste propaganda and naive observations and meanderings.
Oh yes, how old are you? In your tortured mind 'lib' and 'Decker Dummy' are devastating attacks. You're a punk. I don't mind it if someone is witty or thoughtful but you are neither. Your a sad tool of propaganda.
But I am here to help you out. I believe in second chances and I'm going to give you one.
Since you never addressed my question to you about whether the Fair Tax's rate is inclusive or exclusive, I'll do it for you.
For those of you reading this, I'm sorry that I have to ask and answer my own questions, but Ozark is incapable of maintaining a conversation.
The Fair Tax at the outset is a scam b/c the 23% rate is an inclusive tax rate. That means that to get a 23% rate, the people scamming you are including the tax itself in the computation! No sales tax in the US is computed that way--State Sales taxes across the country are exclusive.
Example: $100 for a radio and pay $30 in sales tax. That should be a 30% sales tax right. Not to the scam artists pushing the Fair Tax scam. They call this a 23% tax b/c 23% of the final purchase price of $130 is the tax itself.
So the real rate is 30% right. Wrong.
These Fair Tax scammers use assumptions that would make the Social Security Privatizers blush: The scammers assume a reduction of $300-500 billion dollars per year in annual government spending, they assume ZERO tax avoidance or evasion (there is a difference) and these scammers assume that the general public is too stupid to catch on to their shell game...Ozark, this includes you.
When you analyze the Fair Tax in with conservative assumptions, the inclusive rate is btn 35-43% and the exclusive tax rate would be between 50-100%.
To continue funding the bulk of existing federal programs, the new sales tax would have to be extremely high. An analysis by researchers at the Institute on Taxation and Economic Policy estimates that the sales tax rate required for revenue neutrality in 2005 would be between 45 and 53 percent, with higher sales tax rates in subsequent years. An analysis by the Brookings Institution found that matching expected federal revenues over the next decade with a national sales tax would require a sales tax rate of about 60 percent.
Doesn't look so good any more does it?
How would you like to buy a new house or car on mortgage/credit and pay an additional 45% or 50% of the price?
Now for the policy reasons that the Fair Tax is a scam.
+It would hurt the economy b/c people would stop buying new products to avoid the crushing tax.
+Black Markets will grow like a cancer across our country--cheaper untaxed goods
+Some form of federal collection and enforcement will be necessary: whose going to oversee the welfare prebate checks and guage the accountability of collections? Oh that's right, tax evasion will disappear.
And this is just scratching the surface.
Good luck with your Fair Tax Scam...you and your plutocratic comrades will need it.
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From Democrat Mike Gravel's Website :
http://www.gravel2008.us/?q=fair_tax (http://www.gravel2008.us/?q=fair_tax)
Fair Tax
...But the U.S. Income Tax system is unfair and regressive because Americans earning less than $97,400 pay a larger portion of their income in taxes than those who earn more than $97,400.
....
Right off the bat you're wrong.
The US income tax is progressive--not regressive--b/c as income rises so does the rate of taxation--that is the definition of progressive rates whereas regressive rates are flat. It looks like your $97,400 is a mistatement of the Social Security wage base. I think you are referring to payroll taxes instead of income taxes.
I'm here to help you.
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I've had the pleasure of slapping you around in this "debate" and now it is time to put an end to your crapola.
Want to take a poll on GetBig ? and see who got spanked ?
If you have had pleasure, then you enjoy being made a fool of. :o
Lets see, on one side, we have Ron Paul, who said "Yes " he would vote for the Fair Tax
and on the other side, we have Decker, who is against it , who is a bloodsucking Tax Lawyer, who makes his living from the current tax code, and would lose big time if the Fair Tax became law
Oh yes, how old are you? In your tortured mind 'lib' and 'Decker Dummy' are devastating attacks. You're a punk. I don't mind it if someone is witty or thoughtful but you are neither. Your a sad tool of propaganda.
You Decker, are a bloodsucking tax lawyer, who's self interest outweighs what is good for our Country, and you have the audacity to say I am a tool of propaganda ? LMFAO ! ! ! ! ! ! !
But I am here to help you out. I believe in second chances and I'm going to give you one.
No, you are only here to try and spread lies and bullshit about the Fair Tax, in hopes of convincing people that the Fair Tax is bad, as your own livelihood depends on it, as you are a self centered, self righteous piece of garbage.
Since you never addressed my question to you about whether the Fair Tax's rate is inclusive or exclusive, I'll do it for you.
For those of you reading this, I'm sorry that I have to ask and answer my own questions, but Ozark is incapable of maintaining a conversation.
The Fair Tax at the outset is a scam b/c the 23% rate is an inclusive tax rate. That means that to get a 23% rate, the people scamming you are including the tax itself in the computation! No sales tax in the US is computed that way--State Sales taxes across the country are exclusive.
Example: $100 for a radio and pay $30 in sales tax. That should be a 30% sales tax right. Not to the scam artists pushing the Fair Tax scam. They call this a 23% tax b/c 23% of the final purchase price of $130 is the tax itself.
First of all used items, including houses, will not be taxed. Secondly the 30% exclusive tax rate (tax applied external to the actual price of the item) under The Fair Tax you refer to is the 23% inclusive tax rate included in the price of every item bought today. Consequently the dollar amount collected from the inclusive tax rate will become the 30% exclusive rate on an item with the Fair tax. Example: $100 item today includes 23% or $23 in hidden taxes. The actual cost is $77. That will be the price listed on the bill with The Fair Tax. The $23 in tax will be collected on that $77 for a rate of 30%(23/77). The bottom line is the dollar amount collected will be the same as it is with the inclusive tax rate collected on items today.
The FairTax Rate: a 23% tomato or a 30% tomato?
As the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.
Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.
Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.
If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.
If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.
Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.
(http://www.fairtax.org/images/content/pagebuilder/12920.jpg)
We may report the tax rate as $25/$125 = 20 percent, which is the tax-inclusive rate (meaning that the tax is included in the base). Alternately, we may think of the tax rate as $25/$100 = 25 percent, which is the tax-exclusive rate (meaning the tax is excluded from the base). The 23 percent FairTax rate set out in HR 25/S 1025 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, FairTax.org gives the tax rate both ways. Both rates are relevant, since the FairTax is replacing an income tax system, and 23 percent correctly represents the tax burden compared to the current system.
These Fair Tax scammers use assumptions that would make the Social Security Privatizers blush: The scammers assume a reduction of $300-500 billion dollars per year in annual government spending, they assume ZERO tax avoidance or evasion (there is a difference) and these scammers assume that the general public is too stupid to catch on to their shell game...Ozark, this includes you.
Decker is a Tax Lawyer, who makes a living out of people having a problem with the current tax code, Do any of you on GetBig really think he would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
When you analyze the Fair Tax in with conservative assumptions, the inclusive rate is btn 35-43% and the exclusive tax rate would be between 50-100%.
To continue funding the bulk of existing federal programs, the new sales tax would have to be extremely high. An analysis by researchers at the Institute on Taxation and Economic Policy estimates that the sales tax rate required for revenue neutrality in 2005 would be between 45 and 53 percent, with higher sales tax rates in subsequent years. An analysis by the Brookings Institution found that matching expected federal revenues over the next decade with a national sales tax would require a sales tax rate of about 60 percent.
More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
The FairTax rate of 23% (when calculated inclusively like income tax rates) has been thoroughly researched to provide all the revenues now collected under both the income tax system and through FICA payroll taxes. Reports otherwise are largely based on the President's Advisory Panel on Tax Reform which declared the rate would have to be much higher. What the Panel failed to make clear in an amazingly shameless sleight-of-hand is that they never studied the FairTax legislation as it exists in pending legislation. They ignored $22 million of FairTax research and, instead, quietly devised their own national consumption tax which they loaded with the exemptions and deductions they felt were "politically realistic". They also failed to calculate the effects of elimination of the FICA tax on annual taxpayer burdens or on the distributional effects of the FairTax across the income spectrum. Upon completion--and after declaring a national consumption tax flawed--they then refused to publish their underlying assumptions and the top two former Senators who led the exercise found employment in K Street income tax lobbying firms.
Great public policy changes do not happen easily. We believe, however, in the promise of the Founding Fathers that this is a nation, "of, by and for the people". In the last year we have seen more Congressional co-sponsors come on board faster than ever before. We have seen five of eight GOP candidates and one Democratic candidate embrace the FairTax. With increased media coverage, as at least one candidate has made this a central plank of his campaign, more and more Americans have come to understand the powerful benefits the FairTax offers the nation. They are, in turn, joining our growing citizen army and are beginning to communicate their wishes to their elected officials. All of this progress is a consequence of the body politic first learning about and then accepting the FairTax. As our ranks grow such pressure will increase on Members of Congress and at some point, the voice of the people will eclipse the voices of the relatively small number of Washingtonians who profit working the income tax system at great cost to the nation. Enactment of the FairTax will require advanced citizenry and a resurgence of what has been too often forgotten--public policy can and should be driven by the public. All that is required is that we all dare to be fair and remind our elected official that they work for their constituents--not for the narrow self-interests of the tax writing committee, the lucrative tax lobby business or the academicians who have built careers around the complexity of the tax code.
Consumption is a more stable source of revenue than income, as shown in Figure 3. The chart compares the yearly changes in the tax bases for the income tax (adjusted gross income -- AGI) and the FairTax (personal consumption expenditures -- PCE) for years 1974 to 2004. PCE has always grown from year to year, whereas AGI dropped from 2000 to 2001 and from 2001 to 2002 -- two years in a row. The higher growth rates of AGI in boom years result in overspending and then when the economy slows down either budget cuts are needed or, what is more often the case, taxes are raised or the budget deficit increases.
(http://www.fairtax.org/images/content/pagebuilder/11763.gif)
Doesn't look so good any more does it?
Looks great to Ron Paul , he said he would vote for it. http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
The one that it does not look good for is you, the self-centered. bloodsucking, tax lawyer, as you would be out of work. :o
How does the FairTax affect income tax preparers, accountants ?
There are, of course, still some people who are involved in sales tax return preparation and sales tax administration under the FairTax, but many fewer than those involved with the income tax today. Those tax preparers, tax lawyers, and Internal Revenue Service employees, who are typically well educated and well equipped with transferable skills, will have to find other, more productive work. The projected 10.5 percent growth in the economy during the first year of the FairTax will provide plenty of new jobs.
and Decker does not want you to know this :
The heavy compliance costs of the income tax are like an anchor holding back economic growth. We have nothing to show for the $265 billion (greater than the current federal deficit -- $205 billion) that we spend each year measuring, tracking, sheltering, documenting, and filing our annual income. Surely these valuable labor and capital resources can be employed more productively -- for example, in following the money trails left by terrorist, drug, and other criminal enterprises, rather than in tracking every American wage earner.
How would you like to buy a new house or car on mortgage/credit and pay an additional 45% or 50% of the price?
Another lie from the blood sucking tax lawyer Decker
Here is the truth :
What about the home mortgage deduction?
The FairTax has positive effects on residential real estate far beyond this narrow question. Today’s homeowners, if they itemize (and 70 percent do not), pay their interest with post-Social Security/pre-income tax dollars. They then pay their principal with post-SS/post-income tax dollars. Those who do not itemize get no advantages at all. Under the FairTax, all homeowners make their entire house payment with pre-tax dollars.
With the FairTax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls; this is a huge savings for consumers. For example, on a $150,000, thirty-year home mortgage at an interest rate of 7.00 percent, the monthly mortgage payment is $999.12 for principal and interest. On that same mortgage at a 5.25 percent interest rate, the monthly payment is $830.01. Over 30 years, the 1.75-percent decrease in interest rates in this instance results in a $60,879 cost savings to the consumer. Finally, first-time buyers save for that down payment much faster, as savings are not taxed.
Under the FairTax, home ownership is a possibility for many who have never had that option under the income tax system. Lower interest rates, the repeal of the income tax, the repeal of all payroll taxes, and the prebate mean that people have more money to spend and have an increased opportunity to become homeowners.
Now for the policy reasons that the Fair Tax is a scam.
+It would hurt the economy b/c people would stop buying new products to avoid the crushing tax.
another lie, addressed above
+Black Markets will grow like a cancer across our country--cheaper untaxed goods
another lie, read above
+Some form of federal collection and enforcement will be necessary: whose going to oversee the welfare prebate checks and guage the accountability of collections? Oh that's right, tax evasion will disappear.
another lie from Decker, here is the truth :
All businesses are tax collectors today. They withhold income and payroll taxes from their employees. Moreover, the vast majority of retail businesses operating in states with a sales tax (45 states currently use a sales tax) are already sales tax collectors. Under the FairTax, retailers are paid a fee equal to one-quarter of one percent of federal sales tax they collect and remit. In addition, of course, retailers no longer bear the cost of complying with the income tax, including the uniform capitalization requirements, the various depreciation schemes, and the various employee benefit and pension rules. Finally, the economic growth resulting from the aggregate, beneficial effects of dramatically lower income tax compliance costs and no payroll or income taxes, customers having substantially more money -- the greatest influence on retail sales -- and a reasonable fee for collecting the FairTax, all ensure that retailers do quite well.
How does the prebate work?
All valid Social Security cardholders who are U.S. residents receive a monthly prebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The prebate is paid in advance, in equal installments each month. The size of the prebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc.
And this is just scratching the surface.
Good luck with your Fair Tax Scam...you and your plutocratic comrades will need it.
You are the one who will need luck, when and if people get sick of the current system, and vote in someone like Ron Paul , and put bloodsucking scum like you out of a job. ;D
and lastly , I say again, Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So the question is : Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
Vote for Ron Paul
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It depends on how you define poor. First of all a word on the Heritage Foundation. It's a fraud organization that has been shown to be disingenuous in its work product. Daniel Mitchell is a supply-side nightmare.
Now on to the Fair sales tax. It's a tax cut for the well to do and a tax hike for nearly everybody else that pays taxes. That's a matter of fact.
How about buying a new car for $30,000? With the Fair Tax, that car is almost $40,000. Spread out those payments with interest and you'll see what I mean.
Are you liquid enough to buy a car with one payment? The wealthy are.
Kiss off your deductions and write-offs. They are gone.
How about buying a hundred dollars of groceries for the week....make that $123 plus State and Local taxes.
Won't a 23% sales tax create a massive Black Market for goods?
The country can't afford wasting time with this kind of nonsense.
Why would you need write-offs and deductions if there is no income tax?
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my first choice is to do away with the IRS altogether as Ron Paul wants to do,
but as far as a fair tax, it is better than the current tax system :
Pros:
1. A national sales tax discourages consumption, leading to a conservation of resources.
2. The removal of an income tax encourages saving and investing, which is the key to job growth.
3. Individuals would have an extra incentive to work hard and earn income, leading to a far more productive nation.
4. A sales tax would be a much simpler system, eliminating the need for individuals to comply with complex tax reporting requirements and freeing up all the money & time lost on the income tax process.
5. Tax rates can be targeted to encourage or discourage the consumption of certain items.
6. Consumer prices of certain items would fall since labor and tax compliance costs would be cheaper to businesses.
7.It would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax.
8. It's a tax system consistent with a free society; i.e. Americans have a choice regarding their taxes, unlike our current confiscation system.
1. A national sales tax discourages consumption, leading to a conservation of resources. One of the biggest complaints other countries around the world have about the U.S. is that we consume more than 25 percent of the world's resources despite comprising less than 4 percent of the population. Especially when it comes to scarce, non-renewable resources such as oil, few people would argue that we need to cut wasteful consumption. The basic economic law of supply & demand says that as prices go up for an item, demand will go down. Thus, as a society, our national consumption should decrease with a national sales tax.
2. The removal of an income tax encourages saving and investing, which is the key to job growth. The national savings rate is currently a putrid 4 percent of income. When Americans increase saving & investing, interest rates go down and the economy expands since banks and corporations have more funds to invest in new projects, new stores, new businesses, etc. A national sales tax would encourage increased saving & investing for two reasons: 1) Earnings from investments wouldn't be taxed; thus, the effective rate of return would increase; 2) Americans are never taxed unless they spend money, which they would have to do on much more expensive consumer goods; thus, they have extra incentive to refrain from frivolous spending.
3. Individuals would have an extra incentive to work hard and earn income, leading to a far more productive nation. Our tax system is completely backwards when you consider the fact that the majority of government revenues come from tax on our earned income. National employment drives the productivity of the country. Since we tax personal incomes, we are actually punishing people for working. What's worse is that we have a "progressive" tax system, meaning rates go up as you make more. This in effect punishes the most successful and the hardest workers. Corporations, which provide the greatest amount of national jobs, are even taxed twice: once at the corporate level plus a second time when earnings are distributed to shareholders. If you take away the income tax, you give every worker in America a raise (except those that don't pay an income tax), which encourages citizens to work more hours. Think about it, if your take-home pay was $20 per hour instead of $14 per hour, would you be willing to work more hours?
4. A sales tax would be a much simpler system, eliminating the need for individuals to comply with complex tax reporting requirements and freeing up all the money & time lost on the income tax process. Hundreds of billions of dollars are spent every year and billions of hours wasted complying with the incredibly complex American income tax system. Replacing the income tax with a national sales tax would free up all the resources necessary to fulfill those tax requirements. Only businesses that sell goods would be required to file federal tax returns, and the system would be much simpler since they would only have to multiply each sale by the specified rate. As a nation, we would no longer have to waste time & money figuring out depreciation recapture, itemized deduction phase-outs, alternative minimum taxes, charitable deduction caps, and so on. Think about how happy the environmentalists will be when they hear about all the trees that will be saved from the elimination of all those tax forms & schedules!
5. Tax rates can be targeted to encourage or discourage the consumption of certain items. A national sales tax doesn't mean one standard rate for every consumer good sold in the country. We can customize the rates to help the poor provide for basic necessities as well as discourage or encourage the consumption of certain items. For example, food and lower-priced clothing could be tax-free. Gasoline, cigarettes, fast food, alcohol, and fuel-guzzling automobiles could face steep tax rates. Hydrogen & electric-powered cars, equipment used in a business, and home improvement material could be given minimal tax rates. Get the picture? Once again, the economic law of supply & demand will increase/decrease consumption of particular items.
6. Consumer prices of certain items would fall since labor and tax compliance costs would be cheaper to businesses. Every cent that goes into producing a product or service is reflected in it's price. For example, if a law firm pays a clerk $25 per hour to service a client, it must charge the client at least that much to avoid losing money. Any business will usually add a certain markup to ensure an adequate profit for the effort and risk. Thus, if you cut the underlying cost, you cut the final price charged to consumers. Elimination of the income tax means a reduction in payroll taxes for businesses as well as the elimination of the need for much of the human resource & payroll departments. Consequently, the cost of offering related products & services drops.
7. It would allow a greater collection of tax money from those carrying out illegal transactions, since their income is hid from the income tax system but will be taxed when they spend it in a sales tax. Drug dealers, prostitutes, black market dealers, and bookies are examples of people who earn income illegally. Since these and others engaging in illegal transactions obviously don't want the government to know about their activities, the income generated won't be reported on income tax returns. Thus, none of that money is subject to tax. However, with a sales tax, it doesn't matter how money is earned, since the tax is collected immediately by the seller.
8. It's a tax system consistent with a free society; i.e. Americans have a choice regarding their taxes, unlike our current confiscation system. Our Founding Fathers went to war with England in large part to get away from a stifling tax system like that which we currently face. The U.S.A. is supposed to be a free country with little government interference. However, in our current tax system, we must pay a significant portion of our earnings regardless if we use government services or not. Since our income is taxed and we all have to generate earnings to survive, we don't have a choice. If we institute a national sales tax, the amount of tax we pay is completely up to the individual. We aren't taxed a penny until we go out and spend. Thus, a national sales tax is consistent with the very idea and foundation of America.
This stuff is making my eyes roll back in my head, but I have to say it really does sound like a good idea to me.
I can't comment on all of the points raised in this thread, but regarding enforcement, I don't really see a huge problem, because businesses already collect sales taxes in most states. Wouldn’t take much to have them collect a federal sales tax as well.
The whole idea here is to allow us to keep more of our own money. We should all be in favor of that concept.
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Want to take a poll on GetBig ? and see who got spanked ?
That I would like.
First of all used items, including houses, will not be taxed. Secondly the 30% exclusive tax rate (tax applied external to the actual price of the item) under The Fair Tax you refer to is the 23% inclusive tax rate included in the price of every item bought today. Consequently the dollar amount collected from the inclusive tax rate will become the 30% exclusive rate on an item with the Fair tax. Example: $100 item today includes 23% or $23 in hidden taxes. The actual cost is $77. That will be the price listed on the bill with The Fair Tax. The $23 in tax will be collected on that $77 for a rate of 30%(23/77). The bottom line is the dollar amount collected will be the same as it is with the inclusive tax rate collected on items today.
This paragraph that you cutnpasted makes no sense.
The merchants are supposed to make up the difference for the Fair Tax Scam by absorbing the cost of the truer 30% rate?
That’s not how econometricians calculate the effects of inclusive sales taxes.
Then you steal someone else’s work to provide an irrelevant comparison between inclusive income taxation and inclusive sales taxation. Comparing an income tax with a sales tax is apples and oranges. Just b/c your source claims the comparison is apt, does not make it so. Either the Fair Tax Scam is inclusive resulting in a tax rate that does not show the true costs of the tax or it is not.
++++++++++++++++++++++++++++
Then I mention the ridiculous assumptions that this Fair Tax Scam (40+% sales tax rate) is based upon and here’s how you respond:
Decker is a Tax Lawyer, who makes a living out of people having a problem with the current tax code, Do any of you on GetBig really think he would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
Way to avoid the topic at hand. Sort of like when you confused the payroll tax with the income tax. Let’s face it, you don’t know what you are talking about and your cutnpaste nonsense is catching up with you.
Now back to providing you an education free of charge.
Here is one of my sources: http://www.factcheck.org/taxes/print_unspinning_the_fairtax.html
I suggest you read it b/c you show an intolerable inability to comprehend anything I seem to say. It is a fairly comprehensive explanation of why the Fair Tax is really built on deception and cooked numbers. It analyzes the H.R. 25 Natl. Sales Tax legislation which Ron Paul apparently co-opted for his presidential bid.
Assumptions:
*The Fair Tax scammers assume that there will be no tax evasion with the Fair Tax scam. Zero. None. As long as there have been taxes, there has been evasion/avoidance. Fantasy land.
*The Fair Tax scammers assume that the Fed. Gov. will reduce spending by HALF A TRILLION DOLLARS A YEAR annually. Fantasy land.
*The Fair Tax scammers, in calculating federal revenue, assumed a 30% inclusive rate for Governmental Purchases. But in calculating the Federal Expenditures, the scammers EXCLUDED the 30% sales tax cost. That increases the Gov.’s tax intake and reduces the Gov.’s tax liability. What a scam! William Gale, director of the economic studies program at the Brookings Institute, calculates that a 39.3 percent exclusive rate would be necessary for revenue neutrality. Criminal Fantasy Land
Conclusion: The Fair Tax works in fantasy land.
At some point, I will address the scams of prebate checks and show how the middle class will bear the brunt of paying taxes while the rich will receive a healthy tax cut.
We’ll also look at how the US Treasury Department analyzed the merits of the Fair Tax Scam and concluded that it is indeed nonsense.
Conclusion:
We stand behind our earlier analysis of the FairTax. The proposal to which Gov. Huckabee referred is not a 23 percent tax, but rather a 30 percent tax. And it is revenue-neutral only through an accounting trick. It will collect more money from those earning between $15,000 and $200,000 per year and less from those earning more than $200,000 per year. It is possible that the FairTax would make most people better off, but much of that gain would be a direct result of making the tax code less fair.
http://www.factcheck.org/taxes/print_unspinning_the_fairtax.html
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Why would you need write-offs and deductions if there is no income tax?
I don't know where you are going with this question...I was pointing out a feature of the Fair Tax Scam.
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This stuff is making my eyes roll back in my head, but I have to say it really does sound like a good idea to me.
I can't comment on all of the points raised in this thread, but regarding enforcement, I don't really see a huge problem, because businesses already collect sales taxes in most states. Wouldn’t take much to have them collect a federal sales tax as well.
The whole idea here is to allow us to keep more of our own money. We should all be in favor of that concept.
Of course it looks good to you. You haven't done any research into the validity of Ozark's conclusions. Do you really believe that:
The low and lower middle class will live tax free b/c of prebate checks? Who pays for the prebate checks?
Tax evasion and avoidance will not exist b/c of the FT?
No federal enforcement branch will be needed? Whose going to write all those checks and track compliance of the merchants?
Gov. will reduce spending a 1/2 trillion dollars a year annually?
If you believe any of that, I have investments in a bridge you might be interested in.
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I don't know where you are going with this question...I was pointing out a feature of the Fair Tax Scam.
I'm not going anywhere. Just asked you to clarify the following statement you made: "Kiss off your deductions and write-offs. They are gone."
I don't do my own taxes and I don't know much about tax law, nor do I want to, but aren't "deductions and write-offs" related to reducing your adjusted gross income, which is hit primarily by income taxes? If so, then why would we need "deductions and write-offs" if there is no income tax?
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Of course it looks good to you. You haven't done any research into the validity of Ozark's conclusions. Do you really believe that:
The low and lower middle class will live tax free b/c of prebate checks? Who pays for the prebate checks?
Tax evasion and avoidance will not exist b/c of the FT?
No federal enforcement branch will be needed? Whose going to write all those checks and track compliance of the merchants?
Gov. will reduce spending a 1/2 trillion dollars a year annually?
If you believe any of that, I have investments in a bridge you might be interested in.
No I haven't done any research. I'm talking about how the concept makes sense. Why aren't you in favor of a concept that allows people to keep more of their own money?
Regarding the other items you mentioned:
What are "prebate checks"?
We will always have people who break the law, including tax cheats. That shouldn't preclude us from trying to reduce our tax burden.
Why can't we use the IRS as an enforcement branch?
If Hillary Clinton is president and we have a liberal Democrat Congress, no I don't believe spending will ever be reduced. :)
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No I haven't done any research. I'm talking about how the concept makes sense. Why aren't you in favor of a concept that allows people to keep more of their own money? -BeachBum
BeachBum,
The reason Decker is against this, is people would no longer need the services of bloodsucking tax lawyers, ( which Decker is )
Any simplification of our current system, is bad news for Decker, plain and simple.
Asking Decker's opinion on doing away with our current tax system, is like asking a health Insurance salesman what he thinks about a universal health Insurance plan, the Health Insurance Salesman is of course going to talk shit about, no matter if it is good or bad, all that matters is that it would end his current income stream. And this is why you should take Decker's attack of this, and throw it in the garbage, as he has everything to lose, if the system is fixed, and people no longer have to pay him.
Just think about it, with a Fair Tax, no more filing tax returns, no more individuals being audited, and having to pay high cost tax lawyers. and this is very bad news for Decker.
read :
How does the FairTax affect income tax preparers, accountants ?
There are, of course, still some people who are involved in sales tax return preparation and sales tax administration under the FairTax, but many fewer than those involved with the income tax today. Those tax preparers, tax lawyers, and Internal Revenue Service employees, who are typically well educated and well equipped with transferable skills, will have to find other, more productive work. The projected 10.5 percent growth in the economy during the first year of the FairTax will provide plenty of new jobs. (bad for Decker )
and Decker does not want you to know this :
The heavy compliance costs of the income tax are like an anchor holding back economic growth. We have nothing to show for the $265 billion (greater than the current federal deficit -- $205 billion) that we spend each year measuring, tracking, sheltering, documenting, and filing our annual income. Surely these valuable labor and capital resources can be employed more productively -- for example, in following the money trails left by terrorist, drug, and other criminal enterprises, rather than in tracking every American wage earner. ( very bad for Decker )
Decker used a hit piece from factcheck.org, that if full of untruths, just read this:
http://www.fairtax.org/site/PageServer?pagename=news_myths_factcheck (http://www.fairtax.org/site/PageServer?pagename=news_myths_factcheck)
(from the above link )
3a) The most blatant factual error in Mr. Miller’s article is that the one graph and accompanying text in the article that purports to show that the FairTax would raise taxes on all Americans with incomes between $15,000 and $200,000 was produced by the Treasury Department as part of an analysis of a proposal other than the FairTax and is so labeled. That the graph does not relate to the FairTax is made even more clear in the text of the Treasury study. The graph looked at a proposal with a different tax base and that did not repeal the regressive payroll tax. The FairTax repeals the regressive payroll tax.
3b) One of the most glaring pieces of evidence of bias in the article was Mr. Miller's assertion that we have misled the public by defining the FairTax rate as 23 percent using the "inclusive" method of calculation. Mr. Miller states that as a result, “many FairTax supporters do not understand that the 23 percent number is tax inclusive.” Notwithstanding our very own explicit notation of "inclusive," he insists that we intend to mislead, even though, as we tried to patiently explain, the coporate tax, individual income tax, capital gains taxes and estate and gift taxes, the flat tax proposal, and every other tax reform proposal introduced uses the exact same method of calculation.
Mr. Miller goes on to concede that 85 percent of those who wrote to FactCheck.org understood the difference between tax-inclusive and exclusive, and then he tellingly spins the remaining 15 percent who misunderstood as evidence that we have misled the public. He ignored our point to him that numerous places on our Web site and in our materials we define the difference between "inclusive" and "exclusive" and he was similarly unmoved by our honest plea that our only alternative for those seeking a comparison to the present system was to express income tax rates in "exclusive" terms which we feel would make us subject to the very charges of misleading the public we are now suffering at Mr. Miller's hands. He also seemed unmoved that, in light of his first stated discomfort, we published again in a most visible manner yet another explanation of the different calculation methods on our Web site.
Doesn’t the fact that 85 percent of the FairTax supporters who contacted FactCheck.org to express their displeasure with the illogical conclusions of the article understood the difference present plain evidence that an overwhelming number of supporters understand the exclusive vs. inclusive rate differences? The only data he uses to justify the statement that most FairTax supporters are unaware of the difference between “inclusive” and “exclusive” taxation nomenclature is the fact that 85 percent of FairTax respondents who made contact with him did understand the difference. How can we or any other reader when presented these facts not conclude that Mr. Miller's logic is either flawed or his conclusions fundamentally disingenuous in presentation?
If in your polling you found the United States Congress had reached an 85 percent approval rating, would you declare that "15 percent of Americans disapprove of Congress?" Certainly not.
4) Another explicit example of your unfair presentation of the FairTax is your statement that the only way the FairTax Plan becomes revenue neutral is via an “accounting trick.” We spent a considerable amount of time with Mr. Miller on the phone Friday even offering to conference in Dr. Laurence Kotlikoff, a respected economist who has written on this very area in an effort to put Mr. Miller's charges of an "accounting trick” to rest. When he refused this offer, we suggested that he, at the very least, modify his language to more fairly indicate that a difference of opinion on this highly complex subject exists and that Dr. Kotlikoff’s scholarly paper on the subject published in Tax Notes, to date has not been refuted or criticized even by Mr. Miller’s advisor, Mr. Gale, who recently lost a debate at AEI on the subject. We had understood from Mr. Miller that he would, at the very least, use less pejorative language that would indicate a difference of opinion on this subject by experts, but such a change has not been made to the article.
This unfounded accusation of “trickery” on the part of me, my board of directors, my staff, consulting team, independent researchers, and our hundreds of thousands of supporters nationwide is insulting and without merit and would seem to require of any fair editor the wholesale revision of this section, if not deletion.
5) I was stupefied that Mr. Miller did not bother to take the time to investigate our assertion that the President’s Advisory Panel did not conduct an in-depth study of the FairTax Plan itself, but instead based its findings regarding the benefits of a national retail sales tax on a study of a self-created consumption tax plan. While Mr. Miller briefly mentions the fact that the panel failed to release its methodology, why not take the time to investigate our supportable assertion that the presidential panel never conducted an in-depth analysis of the FairTax Plan itself? In fact, I specifically asked Mr. Miller to request clarification on this point from the Treasury Department and/or from members of the 2005 panel a responsible request that seems to have fallen on deaf ears.
6) It is also concerning to me that your organization’s first contact with Americans For Fair Taxation/FairTax.org regarding your story was merely the afternoon prior to your hoped-for publication date. Certainly it would have been fairer had we been given a greater opportunity to work through Mr. Miller’s questions on the FairTax days in advance a benefit that was undoubtedly bestowed upon FairTax detractors. Our sources indicate that some of your “advisors” on this article were contacted about a month ago.
Gentlemen, I have provided you with a concise rebuttal to many of the glaring inaccuracies and biased commentary found in the at-issue article. This type of unfair writing is inexcusable and does great harm to our honest effort. It is for these reasons and more that I must assure you that we will do what is necessary to make these facts known.
Therefore, I must once again reiterate my request that you immediately take down the article in question and/or allow us to post our attached rebuttal on your Web site. Furthermore, I ask that you immediately schedule a time where we can meet with Mr. Miller and a FactCheck.org editor to discuss our stated concerns.
Should you not meet this request, I will be posting our rebuttal on our Web site and will publicly release our claims after 2:00 p.m. EDT today. My hope is that we can work towards a fair and amicable resolution of this issue without having to move our conversation to the public forum.
and once again : The truth is the reason Decker is against this, is people would no longer need the services of bloodsucking tax lawyers, ( which Decker is )
any simplification of our current system, is bad news for Decker, plain and simple.
Asking Decker's opinion on doing away with our current tax system, is like asking a health Insurance salesman what he thinks about a universal health Insurance plan, the Health Insurance Salesman is of course going to talk shit about, no matter if it is good or bad, all that matters is that it would end his current income stream. And this is why you should take Decker's attack of this, and throw it in the garbage, as he has everything to lose, if the system is fixed, and people no longer have to pay him.
So once again, the question is : Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
Both Ron Paul and Mike Gravel, (both anti-establishment ) and with no axe to grind, are both for the Fair Tax, and have stated so.
But Decker ( the self centered blood sucking tax lawyer ) wants you to believe him, and not Ron Paul or Mike Gravel.
take your pick.
http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
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Great idea.
Ron Paul also supports the Fair Tax Act.
Of course the who are pro big government, tax lawyers, and socialist-liberals will be completely against this.
Ron Paul 2008!
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(http://www.fairtax.org/images/scorecard/Thompson_Fred-t.jpg)
Fred Thompson Noncommittal
That about sums up Fred... noncommittal
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Ozark. You’re done. You’ve been exposed as a cheerleader. So put down the pom pons and take the sparklers from your teeth. Stop the cartwheels.
I’m guilty of being a retirement tax attorney and you are guilty of: not addressing the obvious revenue failings of the Fair Tax Scam, incessant stealing of other people’s work and presenting it as your own (it does happen on forum debates but you always present other’s work as your own), and being a cheerleader for a scam that you don’t understand.
Now to dispense with your latest cutnpaste defense that you stole from FairTax.org and passed off as your own:
3a) The most blatant factual error in Mr. Miller’s article is that the one graph and accompanying … was produced by the Treasury Department as part of an analysis of a proposal other than the FairTax and is so labeled….
The Fair Tax is a national sales tax—here is roughly the same conclusion, from a different source http://www3.brookings.edu/articles/1999/09taxes_gale.aspx , that the Scam increases the tax burden on the middle class while cutting taxes on the Wealthy Elites.
The difference between a National Sales Tax and the Fair Tax Scam is that the Scam promises to eliminate more instances of taxation while offering big welfare payouts with no reduction in Federal Tax Revenue. That’s quite a trick.
As usual with the Pro-Scam crowd, this ‘mistake’ is a disingenuous attempt to discredit valid criticism.
3b) One of the most glaring pieces of evidence of bias …..
Well boo-hoo. I have News for you Einstein, everyone is biased in some manner. Even Ron Paul is biased in favor of strict construction of original intent for Constitutional interpretation…that’s why he wants to “scrap” the IRS and the Code and replace it with a consumption tax used 200 years ago. How does that change the fact that the Fair Scam’s 23% rate is a hoax and that the Scam depends on ‘cooked’ numbers from wildly optimistic assumptions? It doesn’t.
4) Another explicit example of your unfair presentation of the FairTax…that would indicate a difference of opinion on this subject by experts, but such a change has not been made to the article.
Waaaaahhh---the critics are too harsh. Give me a break. The numbers don’t add up under a national sales tax or Fair Tax and the Scammers present their tax info in a duplicitous manner—23% is really 30% but shhhhhhh….tell the public that 23% is the real tax rate.
5) I was stupefied that Mr. Miller did not bother to take the time to investigate our assertion that the President’s Advisory Panel did not conduct an in-depth study of the FairTax Plan itself, but instead based its findings regarding the benefits of a national retail sales tax on a study of a self-created consumption tax plan.
Not much of a difference between the National Sales Tax and the Fair Tax except the Fair Tax Scam offers more free give-aways to rope in the rubes for support…are you reading this Ozark?
....The truth is the reason Decker is against this, is people would no longer need the services of bloodsucking tax lawyers, ( which Decker is )…
I missed your rebuttal of my criticism of the Fair Tax Scam’s ridiculous assumptions.
Instead you focus on me. How disingenuous and dishonest of you.
Strange how your cutnpaste responses are devoid of any discussion of the underlying economics of the Fair Tax Scam.
Your analysis is wholly unsupported conclusions: Scrap the IRS and the Code and cut everyone’s taxes and eliminate all taxes except for a 23% sales tax…which won’t even apply to many big purchases like new homes. Sure. And I crap chocolate bars and piss lemonade.
If it sounds too good to be true, it probably is.
To paraphrase P.T. Barnum: There’s an Ozark born every minute.
But don’t take my word for it. Since you won't address the obvious shortfalls of the Fair Tax Scam, let’s look at Dr. Paul’s own plan and his own thoughts about the Fair Tax:
Four Pinocchios for Ron Paul
http://blog.washingtonpost.com/fact-checker/2007/11/four_pinocchios_for_ron_paul.html (this is called citing your source Ozark.)
"I lean toward a flat tax. But I want to make it real flat, like zero."
--Ron Paul
There was..."$2.6 trillion in revenues collected by the federal government in financial year 2007. (I got the figures from the Final Monthly Treasury Statement for September 2007.) It shows that income tax accounted for roughly 45 percent of the total, not 33 percent, as Paul claims on his website. The next largest chunk--34 percent--comes from social security taxes. Customs and excise duties--which formed the bulk of federal revenues in the pre-1913 period which Paul praises so highly--account for less than four per cent of total revenue."
Now regarding..."the outlays. If Paul is going to get rid of the federal income tax, he will have to find $1.2 trillion in savings on today's budget. He says he will not take this money from social security. Instead he will focus on the "costs of empire." But even if he pulled all U.S. troops back home from Iraq and Afghanistan ($152 billion), abolished the entire foreign aid budget, ($22 billion), got rid of the State Department, ($6 billion), and withdrew from the United Nations, ($2 billion), he would only save around $180 billion. If he stopped all federal spending on education and ended agricultural price subsidies, as he has also proposed, he might save another $100 billion."
"That's still a long way from $1.2 trillion."
The numbers just don’t add up.
What the hell is this about?:
Russert Q: If you replace the income tax with a flat tax, a 30% consumption tax, that would be very, very punishing to the poor and middle class.
Paul A: Well, I know. That's why I don't want it.
Russert Q: So you have nothing?
Paul A: I want to cut spending. I want to use the Constitution as our guide, and you wouldn't need the income tax.
Source: Meet the Press: 2007 "Meet the Candidates" series Dec 23, 2007
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I'm not going anywhere. Just asked you to clarify the following statement you made: "Kiss off your deductions and write-offs. They are gone."
I don't do my own taxes and I don't know much about tax law, nor do I want to, but aren't "deductions and write-offs" related to reducing your adjusted gross income, which is hit primarily by income taxes? If so, then why would we need "deductions and write-offs" if there is no income tax?
It was a reminder that there are no deductions or write-offs to save you from the 39-50% true sales tax rate for big ticket purchases.
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No I haven't done any research. I'm talking about how the concept makes sense. Why aren't you in favor of a concept that allows people to keep more of their own money?
Regarding the other items you mentioned:
What are "prebate checks"?
We will always have people who break the law, including tax cheats. That shouldn't preclude us from trying to reduce our tax burden.
Why can't we use the IRS as an enforcement branch?
If Hillary Clinton is president and we have a liberal Democrat Congress, no I don't believe spending will ever be reduced. :)
I am for a strict graded income tax. But politics has its players and exceptions are always made.
I am not against people keeping more their money. But as an adult, I admit that there are bills to be paid by our government and superficial selfishness to deny that reality in favor of keeping "more of my money" is a loser.
Prebate checks are offered under some Fair Tax proposals to eliminate or greatly reduce the consumption taxes paid by the poor and lower middle class. They will cost the gov. btn 500 and 700 billion dollars and no one seems to know how to pay for them. Besides, it's not a good idea to totally eliminate the tax payments of any class completely...it disenfranchises that class. Even the working poor pay payroll taxes.
The IRS and Department of Labor enforce various tax laws and regs. The Fair Tax people live under the illusion that tax collection, enforcement and accountability will magically happen and that the IRS can be scrapped. That tells me right there that these are not serious people.
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Let's look at that exchange again:
Russert Q: If you replace the income tax with a flat tax, a 30% consumption tax, that would be very, very punishing to the poor and middle class.
Paul A: Well, I know. That's why I don't want it.
Russert Q: So you have nothing?
Paul A: I want to cut spending. I want to use the Constitution as our guide, and you wouldn't need the income tax.
Source: Meet the Press: 2007 "Meet the Candidates" series Dec 23, 2007
+++++++++++++++++++++++++++++++++++++++++++++++++
Ozark since you are an expert on Ron Paul's Fair Tax, could you please provide us with the detailed economic policy paper that Dr. Paul uses to support your fantastic claims re the Fair Tax?
I'm serious. If we are going to understand the merits of a Fair Tax, we should at least see the underlying economic assumptions upon which Dr. Paul's tax proposal is based.
I reference white papers written ten years ago on the matter.
Since the Fair Tax is a flat tax that is also a consumption tax, I am at a bit of a loss for Dr. Paul's statement that: "...I don't want it."
Why would such a smart man make such a big mistake about his own tax platform?
You see, this "Fair Tax" came up ten years ago and Ron Paul supported the legislation to the extent that it would amend the Constitution to get rid of the 16th amendment and get rid of withholding taxes. But he wasn't for the "Fair Tax". Here's a letter asking for his support from FAIRTAX.ORG http://fairtaxscorecard.com/LettersTo/Paul_Ron_Nov2005.rtf
You see, I can't find where Dr. Paul even states that the Fair Tax is his tax plan. Here's his own website http://www.ronpaul2008.com/articles/?tag=Taxes He prefers the Fair Tax over the current income tax system b/c of what I see as his misunderstanding and mistaken assumptions of its simplicity and transparency.
In the Dr.'s own words: "In other words, why change the tax structure if spending stays the same? Once we accept that the federal government needs $2.7 trillion from us-- and more each year-- the only question left is from whom it will be collected. Until the federal government is held to its proper constitutionally limited functions, tax reform will remain a mirage." http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/
So, when you have the chance Ozark, please provide a link to the policy paper laying out the economic assumptions on which the Fair Tax is based. That would be Dr. Paul's Fair Tax.
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Now regarding..."the outlays. If Paul is going to get rid of the federal income tax, he will have to find $1.2 trillion in savings on today's budget. He says he will not take this money from social security. Instead he will focus on the "costs of empire." But even if he pulled all U.S. troops back home from Iraq and Afghanistan ($152 billion), abolished the entire foreign aid budget, ($22 billion), got rid of the State Department, ($6 billion), and withdrew from the United Nations, ($2 billion), he would only save around $180 billion. If he stopped all federal spending on education and ended agricultural price subsidies, as he has also proposed, he might save another $100 billion."
"That's still a long way from $1.2 trillion."
The numbers just don’t add up.
What the hell is this about?:
Russert Q: If you replace the income tax with a flat tax, a 30% consumption tax, that would be very, very punishing to the poor and middle class.
Paul A: Well, I know. That's why I don't want it.
Russert Q: So you have nothing?
Paul A: I want to cut spending. I want to use the Constitution as our guide, and you wouldn't need the income tax.
Source: Meet the Press: 2007 "Meet the Candidates" series Dec 23, 2007
Decker,
I see that you conveniently left off the rest of the discusion :o
so here is the rest, where it shows he would drastically cut spending, to match doing away with the IRS,
MR. RUSSERT: Let's talk about some of the ways you recommend.
"I'd start bringing our troops home, not only from the Middle East but from Korea, Japan and Europe and save enough money to slash the deficit."
How much money would that save?
REP. PAUL: To operate our total foreign policy, when you add up everything, there's been a good study on this, it's nearly a trillion dollars a year. So I would think if you brought our troops home, you could save hundreds of billions of dollars. It's, you know, it's six months or one year or two year, but you can start saving immediately by changing the foreign policy and not be the policeman over the world. We should have the foreign policy that George Bush ran on. You know, no nation building, no policing of the world, a humble foreign policy. We don't need to be starting wars. That's my argument.
MR. RUSSERT: How many troops do we have overseas right now?
REP. PAUL: I don't know the exact number, but more than we need. We don't need any.
MR. RUSSERT: It's 572,000. And you'd bring them all home?
REP. PAUL: As quickly as possible. We--they will not serve our interests to be overseas. They get us into trouble. And we can defend this country without troops in Germany, troops in Japan. How do they help our national defense? Doesn't make any sense to me. Troops in Korea since I've been in high school?
MR. RUSSERT: What...
REP. PAUL: You know, it doesn't make any sense.
MR. RUSSERT: Under President Paul, if North Korea invaded South Korea, would we respond?
REP. PAUL: I don't--why should we unless the Congress declared war? I mean, why are we there? Could--South Korea, they're begging and pleading to unify their country, and we get in their way. They want to build bridges and go back and forth. Vietnam, we left under the worst of circumstances. The country is unified. They have become Westernized. We trade with them. Their president comes here. And Korea, we stayed there and look at the mess. I mean, the problem still exists, and it's drained trillion dollars over these last, you know, 50 years. So stop--we can't afford it anymore. We're going bankrupt. All empires end because the countries go bankrupt, and the, and the currency crashes. That's what happening. And we need to come out of this sensibly rather than waiting for a financial crisis.
MR. RUSSERT: So if Iran invaded Israel, what do we do?
REP. PAUL: Well, they're not going to. That is like saying "Iran is about to invade Mars." I mean, they have nothing. They don't have an army or navy or air force. And Israelis have 300 nuclear weapons. Nobody would touch them. But, no, if, if it were in our national security interests and Congress says, "You know, this is very, very important, we have to declare war." But presidents don't have the authority to go to war.
MR. RUSSERT: You...
REP. PAUL: You go to the Congress and find out if they want a war, do the people want the war. But it's totally unnecessary. I mean, that, that, to me, is an impossible situation...
MR. RUSSERT: If...
REP. PAUL: ...for the Iranians to invade Israel.
MR. RUSSERT: This is what you said about Israel. "Israel's dependent on us, you know, for economic means. We send them" "billions of dollars and they," then they "depend on us. They say, `Well, you know, we don't like Iran. You go fight our battles. You bomb Iran for us.' And they become dependent on us."
Who in Israel is saying "Go bomb Iran for us"?
REP. PAUL: Well, I don't know the individuals, but we know that their leaderships--you read it in the papers on a daily--a daily, you know, about Israel, the government of Israel encourages Americans to go into Iran, and the people--I don't think that's a--I don't think that's top secret that the government of Israel...
MR. RUSSERT: That the government of Israel wants us to bomb Iran?
REP. PAUL: I, I don't think there's a doubt about that, that they've encouraged us to do that. And of course the neoconservatives have been anxious to do that for a long time.
MR. RUSSERT: Would you cut off all foreign aid to Israel?
REP. PAUL: Absolutely. But remember, the Arabs would get cut off, too, and the Arabs get three times as much aid altogether than Israel. But why, why make Israel so dependent? Why do we--they give up their sovereignty. They can't defend their borders without coming to us. If they want a peace treaty, they have to ask us permission. They can't--we interfere when the Arab leagues make overtures to them. So I would say that we've made them second class citizens. I, I think they would take much better care of themselves. They would have their national sovereignty back, and I think they would be required then to have a stronger economy because they would have to pay their own bills.
You see, I can't find where Dr. Paul even states that the Fair Tax is his tax plan. Here's his own website
I never said it was his tax plan, go back and re-read what I wrote.
What I said was he would support it, and vote yes for the Fair Tax, and have provided a link to his words on a video.
Here is his Ron Paul's exact words :
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.."
watch the video of Ron Paul saying this : http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
In the Dr.'s own words: "In other words, why change the tax structure if spending stays the same? Once we accept that the federal government needs $2.7 trillion from us-- and more each year-- the only question left is from whom it will be collected. Until the federal government is held to its proper constitutionally limited functions, tax reform will remain a mirage." http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/
How about we post the entire page ( and not just the part you like ) : :o
http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/ (http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/)
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by Ron Paul, Dr. October 16, 2006
October 16, 2006
In Washington we hear a lot of talk about tax cuts, but the rhetoric does not always match the reality. For most Americans, taxes remain too complex and too high. After the tumult of the upcoming midterm election, it is imperative that Congress gets back to basics and addresses our terrible tax system.
Lower taxes benefit all Americans by increasing economic growth and encouraging wealth creation. I’m in favor of cutting everybody’s taxes – rich, poor, and otherwise. Whether a tax cut reduces a single mother’s payroll taxes by forty dollars a month, or allows a business owner to save thousands in capital gains and hire more employees, the net effect is beneficial. Both either spend, save, or invest the extra dollars, which helps all of us more than if those dollars were sent to the black hole known as the federal Treasury.
Many conservatives have touted the Fair Tax proposal as an issue in the upcoming election. A pure consumption tax like the Fair Tax would be better than the current system only if we truly did away with the income tax by repealing the 16th amendment. Otherwise, we could end up with both the income tax and a national sales tax. A consumption tax also provides more transparency and less complexity. But the real issue is total spending by government, not tax reform. In other words, why change the tax structure if spending stays the same? Once we accept that the federal government needs $2.7 trillion from us-- and more each year-- the only question left is from whom it will be collected. Until the federal government is held to its proper constitutionally limited functions, tax reform will remain a mirage.
I apply a very simple test to any proposal to overhaul the tax code: Does it reduce or eliminate an existing tax? If not, then it amounts to nothing more than a political shell game that pits taxpayers against each other in a lobbying scramble to make sure the other guy pays. True tax reform is as simple as cutting or eliminating taxes. No studies, panels, committees, or hearings are needed. When reform proposals seem complicated, they almost certainly don’t cut taxes. Congress should simply focus on cutting existing taxes and reducing spending, instead of complicated overhauls of the system.
The question to ask yourself is this: What would I do with the money withheld from my paycheck each month? The answer is simple: you would spend, save, or invest the money, all of which do more for the economy and society than sending it to Washington. Thanks to the deception of income tax withholding, however, some people actually look forward to tax time and a much-anticipated refund. Imagine how quickly Americans would demand lower taxes and spending if they had to write the federal government a check each month!
Tax relief is important, but members of Congress need to back up tax cuts with spending cuts- and they need to vote NO on every wasteful appropriations bill until we start over with the federal budget. True fiscal conservatism combines both low taxes and low spending.
Cutting spending would not be hard if Congress simply showed the political will to tackle the problem. I’m not talking about cutting the rate at which government spending grows, but cutting the actual amount of money spent by the federal government in a single year.
If federal spending grows at 5% rather than 7% one year, that’s hardly a great achievement on the part of Congress. The current federal budget of around $2.7 trillion could be cut to $2.5 trillion quite easily. The vast majority of Americans would not even notice. But we must begin chipping away at the federal budget if we hope to address the underlying problem of government debt.
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So, when you have the chance Ozark, please provide a link to the policy paper laying out the economic assumptions on which the Fair Tax is based. That would be Dr. Paul's Fair Tax.
Decker the smart ass, Once again where did I say that the Fair Tax was Ron Paul's ?
What I said was he would support it, and vote yes for the Fair Tax, and have provided a link to his words on a video.
Yes "I'll vote for the FairTax if it comes up.." Ron Paul http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
The Fair Tax is a national sales tax—here is roughly the same conclusion, from a different source http://www3.brookings.edu/articles/1999/09taxes_gale.aspx , that the Scam increases the tax burden on the middle class while cutting taxes on the Wealthy Elites.
also from that page :
I see a lot of hypocrites in here who don't care about Congressman Dr. Ron Paul planes, the are here for bashing, discrediting him, are you afraid! YES THERE IS A RISK HE COULD WIN! Yes I will vote for him, because I am smart enough to decide for my self!
Yes, he has many plans. Yes he wants to shrink the gov. :
A small government, cut cut and cut budget wherever he can without hurting the American people nor the economy.
He wants that the fruits of your labor stay with you: so every one can afford a health care coverage and take care of themselves, the government is not your NANY! Grow up and take responsibility for yourself and your family.
He doesn't want to put anybody who is dependant on the Medicare or Social security on the street, but give the ones who want to get out of it the possibility to do so.
He wants to let you choose, make your own choices, that's called liberty: Are you now afraid? Because since you were born you were used to the gov. taking your hand and showing you the 'RIGHT' way!? The way they think it is good for you!?
If we stop printing money out of the thin air and sending it overseas for useless wars, and an empire that is so costly (To the 'fact checker': the us has more than 170 army bases overseas) we are going to save more than what we are getting out of the income taxes MR. Pinocchio!
Dr. Paul is a man with integrity, a honest man, his folk in the different texas districts he is being elected since 10 terms, are not a single issue voters like the most of you! All they care about is that they have the chance to have a representative that is honest and close to them, is there when they need him and is not a puppet of the lobbies.
Sure, you got used to liars and dishonest people, who will never serve your interests but the interests of those who pays for their campaigns. You got in love with the hypocrites that you don't care any more about the person and their plans!!
Fortunately, people are waking up, they can't believe there luck, that there is a man out there, a honest man with integrity and principles, who is ready to sacrifice the next years of his life to restore the constitution, restore the republic and give you America back. WE THE PEOPLE.
Vote Congressman Dr. RON PAUL and be part of it.
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And lastly,
Once again : Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! ! :o :o :o
Vote for Ron Paul
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Ozark. You’re done. You’ve been exposed as a cheerleader. So put down the pom pons and take the sparklers from your teeth. Stop the cartwheels.
Decker,
A few day's ago, you agreed, and said you would like to take a vote on Getbig, to see who likes the idea of a Fair Tax, and who does not.
Well since that time, everyone who has stated an opinion on here, has been for it, 2- 0 , that means you lose , "Mr smarter than everybody Lawyer" loses ! :o
2;) Or if you prefer to take the poll from the very beginning of this discussion, we can do that as well.
For against
Ozmo 240
Colossus 500 camel jockey
BeachBum
w8tlftr
and after the facts have been posted on here recently, it seems 240 and camel jockey have been silent, seems like they might have jumped from your ship, or at the very least, are not 100 % against it anymore. but even counting them on your side, that is still 4-2, that still means Mr Big tax lawyer loses ! :o
3.) And lastly, You came on GetBig, being "Mr big lawyer", (you had to point it out on here that you were a tax lawyer, thinking that would impress us, but all it did was show your true intentions, and you got called on it by me ) thinking you could easily persuade all of us dumber than you, average joe's, as you are the smart one, the lawyer, but what happened ? You lost !! :o
So either the majority of people reading this believe the Fair Tax is a better system than our current, or you suck at being a lawyer :o
Vote for Ron Paul http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
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Great idea.
Ron Paul also supports the Fair Tax Act.
Of course the who are pro big government, tax lawyers and socialist-liberals will be completely against this.
Ron Paul 2008!
w8tlftr
exactly !
Decker does not want you to watch these :
http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
and
http://www.youtube.com/watch?v=IWfIhFhelm8 (http://www.youtube.com/watch?v=IWfIhFhelm8)
Vote for Ron Paul
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Decker,
I see that you conveniently left off the rest of the discusion :o
so here is the rest, where it shows he would drastically cut spending, to match doing away with the IRS,
MR. RUSSERT: Let's talk about some of the ways you recommend.
"I'd start bringing our troops home, not only from the Middle East but from Korea, Japan and Europe and save enough money to slash the deficit."
How much money would that save?
REP. PAUL: To operate our total foreign policy, when you add up everything, there's been a good study on this, it's nearly a trillion dollars a year. So I would think if you brought our troops home, you could save hundreds of billions of dollars. It's, you know, it's six months or one year or two year, but you can start saving immediately by changing the foreign policy and not be the policeman over the world. We should have the foreign policy that George Bush ran on. You know, no nation building, no policing of the world, a humble foreign policy. We don't need to be starting wars. That's my argument.
MR. RUSSERT: How many troops do we have overseas right now?
REP. PAUL: I don't know the exact number, but more than we need. We don't need any.
MR. RUSSERT: It's 572,000. And you'd bring them all home?
REP. PAUL: As quickly as possible. We--they will not serve our interests to be overseas. They get us into trouble. And we can defend this country without troops in Germany, troops in Japan. How do they help our national defense? Doesn't make any sense to me. Troops in Korea since I've been in high school?
MR. RUSSERT: What...
REP. PAUL: You know, it doesn't make any sense.
MR. RUSSERT: Under President Paul, if North Korea invaded South Korea, would we respond?
REP. PAUL: I don't--why should we unless the Congress declared war? I mean, why are we there? Could--South Korea, they're begging and pleading to unify their country, and we get in their way. They want to build bridges and go back and forth. Vietnam, we left under the worst of circumstances. The country is unified. They have become Westernized. We trade with them. Their president comes here. And Korea, we stayed there and look at the mess. I mean, the problem still exists, and it's drained trillion dollars over these last, you know, 50 years. So stop--we can't afford it anymore. We're going bankrupt. All empires end because the countries go bankrupt, and the, and the currency crashes. That's what happening. And we need to come out of this sensibly rather than waiting for a financial crisis.
MR. RUSSERT: So if Iran invaded Israel, what do we do?
REP. PAUL: Well, they're not going to. That is like saying "Iran is about to invade Mars." I mean, they have nothing. They don't have an army or navy or air force. And Israelis have 300 nuclear weapons. Nobody would touch them. But, no, if, if it were in our national security interests and Congress says, "You know, this is very, very important, we have to declare war." But presidents don't have the authority to go to war.
MR. RUSSERT: You...
REP. PAUL: You go to the Congress and find out if they want a war, do the people want the war. But it's totally unnecessary. I mean, that, that, to me, is an impossible situation...
MR. RUSSERT: If...
REP. PAUL: ...for the Iranians to invade Israel.
MR. RUSSERT: This is what you said about Israel. "Israel's dependent on us, you know, for economic means. We send them" "billions of dollars and they," then they "depend on us. They say, `Well, you know, we don't like Iran. You go fight our battles. You bomb Iran for us.' And they become dependent on us."
Who in Israel is saying "Go bomb Iran for us"?
REP. PAUL: Well, I don't know the individuals, but we know that their leaderships--you read it in the papers on a daily--a daily, you know, about Israel, the government of Israel encourages Americans to go into Iran, and the people--I don't think that's a--I don't think that's top secret that the government of Israel...
MR. RUSSERT: That the government of Israel wants us to bomb Iran?
REP. PAUL: I, I don't think there's a doubt about that, that they've encouraged us to do that. And of course the neoconservatives have been anxious to do that for a long time.
MR. RUSSERT: Would you cut off all foreign aid to Israel?
REP. PAUL: Absolutely. But remember, the Arabs would get cut off, too, and the Arabs get three times as much aid altogether than Israel. But why, why make Israel so dependent? Why do we--they give up their sovereignty. They can't defend their borders without coming to us. If they want a peace treaty, they have to ask us permission. They can't--we interfere when the Arab leagues make overtures to them. So I would say that we've made them second class citizens. I, I think they would take much better care of themselves. They would have their national sovereignty back, and I think they would be required then to have a stronger economy because they would have to pay their own bills.
I never said it was his tax plan, go back and re-read what I wrote.
What I said was he would support it, and vote yes for the Fair Tax, and have provided a link to his words on a video.
Here is his Ron Paul's exact words :
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.."
watch the video of Ron Paul saying this : http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
How about we post the entire page ( and not just the part you like ) : :o
http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/ (http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/)
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by Ron Paul, Dr. October 16, 2006
October 16, 2006
In Washington we hear a lot of talk about tax cuts, but the rhetoric does not always match the reality. For most Americans, taxes remain too complex and too high. After the tumult of the upcoming midterm election, it is imperative that Congress gets back to basics and addresses our terrible tax system.
Lower taxes benefit all Americans by increasing economic growth and encouraging wealth creation. I’m in favor of cutting everybody’s taxes – rich, poor, and otherwise. Whether a tax cut reduces a single mother’s payroll taxes by forty dollars a month, or allows a business owner to save thousands in capital gains and hire more employees, the net effect is beneficial. Both either spend, save, or invest the extra dollars, which helps all of us more than if those dollars were sent to the black hole known as the federal Treasury.
Many conservatives have touted the Fair Tax proposal as an issue in the upcoming election. A pure consumption tax like the Fair Tax would be better than the current system only if we truly did away with the income tax by repealing the 16th amendment. Otherwise, we could end up with both the income tax and a national sales tax. A consumption tax also provides more transparency and less complexity. But the real issue is total spending by government, not tax reform. In other words, why change the tax structure if spending stays the same? Once we accept that the federal government needs $2.7 trillion from us-- and more each year-- the only question left is from whom it will be collected. Until the federal government is held to its proper constitutionally limited functions, tax reform will remain a mirage.
I apply a very simple test to any proposal to overhaul the tax code: Does it reduce or eliminate an existing tax? If not, then it amounts to nothing more than a political shell game that pits taxpayers against each other in a lobbying scramble to make sure the other guy pays. True tax reform is as simple as cutting or eliminating taxes. No studies, panels, committees, or hearings are needed. When reform proposals seem complicated, they almost certainly don’t cut taxes. Congress should simply focus on cutting existing taxes and reducing spending, instead of complicated overhauls of the system.
The question to ask yourself is this: What would I do with the money withheld from my paycheck each month? The answer is simple: you would spend, save, or invest the money, all of which do more for the economy and society than sending it to Washington. Thanks to the deception of income tax withholding, however, some people actually look forward to tax time and a much-anticipated refund. Imagine how quickly Americans would demand lower taxes and spending if they had to write the federal government a check each month!
Tax relief is important, but members of Congress need to back up tax cuts with spending cuts- and they need to vote NO on every wasteful appropriations bill until we start over with the federal budget. True fiscal conservatism combines both low taxes and low spending.
Cutting spending would not be hard if Congress simply showed the political will to tackle the problem. I’m not talking about cutting the rate at which government spending grows, but cutting the actual amount of money spent by the federal government in a single year.
If federal spending grows at 5% rather than 7% one year, that’s hardly a great achievement on the part of Congress. The current federal budget of around $2.7 trillion could be cut to $2.5 trillion quite easily. The vast majority of Americans would not even notice. But we must begin chipping away at the federal budget if we hope to address the underlying problem of government debt.
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Decker the smart ass, Once again where did I say that the Fair Tax was Ron Paul's ?
What I said was he would support it, and vote yes for the Fair Tax, and have provided a link to his words on a video.
Yes "I'll vote for the FairTax if it comes up.." Ron Paul http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
also from that page :
I see a lot of hypocrites in here who don't care about Congressman Dr. Ron Paul planes, the are here for bashing, discrediting him, are you afraid! YES THERE IS A RISK HE COULD WIN! Yes I will vote for him, because I am smart enough to decide for my self!
Yes, he has many plans. Yes he wants to shrink the gov. :
A small government, cut cut and cut budget wherever he can without hurting the American people nor the economy.
He wants that the fruits of your labor stay with you: so every one can afford a health care coverage and take care of themselves, the government is not your NANY! Grow up and take responsibility for yourself and your family.
He doesn't want to put anybody who is dependant on the Medicare or Social security on the street, but give the ones who want to get out of it the possibility to do so.
He wants to let you choose, make your own choices, that's called liberty: Are you now afraid? Because since you were born you were used to the gov. taking your hand and showing you the 'RIGHT' way!? The way they think it is good for you!?
If we stop printing money out of the thin air and sending it overseas for useless wars, and an empire that is so costly (To the 'fact checker': the us has more than 170 army bases overseas) we are going to save more than what we are getting out of the income taxes MR. Pinocchio!
Dr. Paul is a man with integrity, a honest man, his folk in the different texas districts he is being elected since 10 terms, are not a single issue voters like the most of you! All they care about is that they have the chance to have a representative that is honest and close to them, is there when they need him and is not a puppet of the lobbies.
Sure, you got used to liars and dishonest people, who will never serve your interests but the interests of those who pays for their campaigns. You got in love with the hypocrites that you don't care any more about the person and their plans!!
Fortunately, people are waking up, they can't believe there luck, that there is a man out there, a honest man with integrity and principles, who is ready to sacrifice the next years of his life to restore the constitution, restore the republic and give you America back. WE THE PEOPLE.
Vote Congressman Dr. RON PAUL and be part of it.
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And lastly,
Once again : Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! ! :o :o :o
Vote for Ron Paul
Nice try Ozark. But Paul still comes up over a trillion dollars short with all his cuts to foreign aid.
Again, I will ask you where are your economic numbers for making your fantastic claims about the Fair Tax?
This is like the 4th or 5th time I asked and all I get from you are more cut and paste statements about the greatness of the system:
Where are your numbers? Where are the assumptions on which these miraculous payouts and claims are made?
I support Paul's position on Iraq.
These conclusory statements you cutnpaste are not good enough.
Show me the numbers and assumptions of WHICH Fair Tax PLAN you are supporting so we can see what your plan is really made of.
I have a pretty good idea b/c we've been through this scam already. It did not get better with age.
-
...
I see that you conveniently left off the rest of the discusion :o
so here is the rest, where it shows he would drastically cut spending, to match doing away with the IRS,
MR. RUSSERT: Let's talk about some of the ways you recommend.
"I'd start bringing our troops home, not only from the Middle East but from Korea, Japan and Europe and save enough money to slash the deficit."
It's called editing. See I don't bury my points in mass cutnpastes like you do. Narrow the topic and discuss it. We are here to learn.
Re the revenue windfall by repealing all foreign investments, Paul's numbers are wrong:
"...even if he pulled all U.S. troops back home from Iraq and Afghanistan ($152 billion), abolished the entire foreign aid budget, ($22 billion), got rid of the State Department, ($6 billion), and withdrew from the United Nations, ($2 billion), he would only save around $180 billion. If he stopped all federal spending on education and ended agricultural price subsidies, as he has also proposed, he might save another $100 billion.
That's still a long way from $1.2 trillion
" http://blog.washingtonpost.com/fact-checker/2007/11/four_pinocchios_for_ron_paul.html
"That's why he got 4 pinocchios as a rating.
That's still a long way from $1.2 trillion.
That's still a long way from $1.2 trillion.
That's still a long way from $1.2 trillion.
That's still a long way from $1.2 trillion."
We know that Paul's numbers don't add up for vacating all foreign expenditures and scrapping the income tax.
Until you provide the credible economic assumptions that support the Fair Tax fantastic claims you make, you are just blowing smoke.
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exactly !
Decker does not want you to watch these :
http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
and
http://www.youtube.com/watch?v=IWfIhFhelm8 (http://www.youtube.com/watch?v=IWfIhFhelm8)
Vote for Ron Paul
Right. Keep avoiding the issues at hand and talk about possible motivations. You sound like a media pundit.
-
Decker, what is it like losing a debate to an average Joe ?
Again, I will ask you where are your economic numbers for making your fantastic claims about the Fair Tax?
This is like the 4th or 5th time I asked and all I get from you are more cut and paste statements about the greatness of the system:
Where are your numbers? Where are the assumptions on which these miraculous payouts and claims are made?
I have posted numerous links on here to the details and research about the Fair Tax, but since you are too lazy to go to them , here you go :
http://www.fairtax.org/PDF/MacroeconomicAnalysisofFairTax.pdf (http://www.fairtax.org/PDF/MacroeconomicAnalysisofFairTax.pdf)
A Macroeconomic Analysis of the FairTax Proposal Arduin, Laffer & Moore Econometrics
A MACROECONOMIC ANALYSIS OF THE FAIRTAX PROPOSAL
Incentives drive all economic behavior. Taxes are a negative incentive. People do not work, invest, or engage in entrepreneurial activities in order to pay taxes. They engage in such economic activities in order to earn after-tax income. When the government increases its share of the income earned by its citizens, the incentive to engage in growth-enhancing economic activities falls; alternatively, the disincentive to these activities rises. The higher the tax on the next dollar earned (the marginal tax rate) the larger the disincentive. However, without taxes the government cannot operate. From an economic efficiency perspective, the appropriate goal for tax policy is to establish a tax system that minimizes the tax disincentives on economic activities, given the revenue needs of the government.1
Costs of the Current Tax System
Based on this criterion, the current tax code is an abysmal failure. First, the compliance costs are too large. Studies estimate the costs of compliance with the current tax system to be around $200 billion annually.2 And, compliance costs are only one of the current system’s difficulties. More importantly, decisions to invest, save, and consume are all distorted due to the complexity, numerous loopholes, exemptions, and social engineering prevalent throughout our current tax code. The $200 billion figure does not even begin to address these costs. In a recent GAO study, the literature examining these efficiency costs were reviewed, finding that, “Although none of these studies, either individually or in the aggregate, provide a basis for estimating the total efficiency cost of the tax system, they do indicate that those total costs are likely to be large. The two most comprehensive studies we found show costs on the order of magnitude of 2 to 5 percent of GDP each year (as of the mid-1990s).”3 Furthermore, as a direct result of these inefficiencies, our current tax code imposes a marginal tax rate that is far higher than necessary, providing larger than necessary economic disincentives. High and invasive taxes also induce people to employ greater attempts to minimize their tax burdens, wasting valuable productive resources in the process.
In response to these ills, Americans For Fair Taxation (FairTax.org) has created the FairTax proposal, which has been introduced in the 109th Congress by Representative John Linder
1 There are other goals people associate with the tax system including income redistribution or using the tax system to restrain the growth of government. For this paper, we will not evaluate either the current or FairTax systems on any other criteria except for the FairTax’s impact on removing tax distortions and subsequently its impact on economic growth. This evaluation of the economic impacts of the FairTax will include a distributional analysis of the impacts as part of the growth impacts of the FairTax reform.
2 Edwards, Chris, “Options for Tax Reform,” Cato Policy Analysis, No. 536, February 24, 2005. In another recent study, the GAO found the lowest compliance costs to total “…$107 billion (roughly 1 percent of GDP) per year; however, other studies estimate costs 1.5 times as large.” United States Government Accountability Office, (August 2005) Tax Policy: Summary of Estimates of the Costs of the Federal Tax System.
3 United States Government Accountability Office, (August 2005) Tax Policy: Summary of Estimates of the Costs of the Federal Tax System. Emphasis added.
2
A Macroeconomic Analysis of the FairTax Proposal Arduin, Laffer & Moore Econometrics
(GA-7).4 The FairTax addresses the ills of the current tax code by simplifying the tax structure, removing the tax on savings and investment, and lowering the effective marginal tax rates throughout the economy. Removing the current code’s prevalent distortions allows the FairTax proposal to offer a revenue-neutral replacement tax system that contains a much lower effective marginal tax rate. Lower marginal tax rates create significant and positive incentives for individuals to both increase their work effort and report work efforts that are currently performed but not reported. Another primary benefit from the FairTax proposal is its impact on savings and capital development. The current tax code penalizes savings by taxing it excessively. As a result, the incentives for residents of the U.S. to save are diminished. As a consumption-based tax, the FairTax removes these disincentives, eliciting significant dynamic impacts that will raise the level of savings in the U.S. The FairTax is consequently a marked improvement over the current tax system because it eliminates many of the adverse incentives enshrined in our current tax system, producing beneficial incentives in their stead.
In this paper, we evaluate the macroeconomic implications of abandoning our current tax system and replacing it with the FairTax proposal. We begin this investigation with an overview of the proposal being examined: the FairTax. Following this brief overview, we then examine the current income-based tax system with specific attention on its adverse impacts on economic activity. As of late, the topic of tax reform has received a great deal of attention, with much of this research devoted to analyzing the impacts from switching the current tax system to a consumption-based system. Consequently, following the review of the adverse impacts from our current tax system, we provide a brief review of the tax reform research, with specific attention on areas of agreement and disagreement.
It is clear from this review that the majority of analysts that have examined a consumption-based tax conclude it will increase economic growth in the long term (generally within a 5 - 10 year period). There are, however, some disagreements over the impact of a consumption-based tax over the short term (generally within a 1 - 5 year period). Although many analyses show a positive impact, others find the benefits to be muted in the short term due to a marked decrease in consumption spending in the U.S. We consequently examine the assumptions that lead to the different results in the short term and find that the assumptions that lead to a negative short-term effect do not adequately represent all current economic drivers – especially international capital flows and a comprehensive accounting of savings. Based on this review, we employ a standard economic growth model utilizing the assumptions we believe most accurately reflect our current macroeconomy.
This analysis shows that in both the short and long term, a policy shift from our current tax system toward the FairTax would greatly benefit the U.S. economy by increasing economic growth, savings, foreign investment, and personal income.
4 In the 109th Congress, this proposal is H.R. 25. Rep. Linder is the primary sponsor, while over 50 members have co-sponsored this legislation. The Senate bill, S. 25, has been sponsored by Senator Saxby Chambliss (GA).
The FairTax Proposal
Under The Fair Tax Act of 2005 (H.R. 25 and S. 25),5 all federal income taxes and payroll taxes would be repealed. The specific taxes repealed include:
• Personal income taxes
• Estate taxes
• Gift taxes
• Capital gains taxes
• The alternative minimum tax
• Social Security and Medicare taxes
• Self-employment taxes
• Corporate taxes
To ensure that income taxes are not reinstated in the future, the FairTax plan also calls for the repeal of the 16th Amendment to the U.S. Constitution – the amendment granting the federal government the power to tax income.6 The federal government would subsequently raise the vast majority of its revenues through a single-rate sales tax levied at the point of purchase on all goods and services for personal consumption, the FairTax. By design, the sales tax rate established in the FairTax proposal is a revenue-neutral rate of 23 percent inclusive.
Much has been said regarding the appropriate tax rate and how to measure that rate. In order to appropriately compare the FairTax proposal to the current tax system the tax rates must be placed on a comparable basis. This is not the case for direct comparisons of income taxes and sales taxes because the tax rates are calculated differently. The simplified example in Table 1 illustrates the issue of tax basis.
Table 1: The Equality between Tax-Inclusive and Tax-Exclusive Rates
Scenario 1: National Income Tax
Scenario 2:
National Sales Tax
Income
$50,000
$50,000
Tax Rate
20.0%
25.0%
Tax Base
Income
Value of goods purchased
Income Tax Payment
$10,000
$ -
Goods Purchased
$40,000
$40,000
Sales Tax Payment
$ -
$10,000
Table 1 shows a family that earns $50,000 annually under two different scenarios: (1) a national income tax; and (2) a national sales tax. Under scenario (1), a national income tax, this family pays a 20 percent marginal income tax on every dollar they earn, or for this family a total tax payment of $10,000. The family’s income can be divided into two parts: $40,000 of after-tax income, which they subsequently spend on goods and $10,000 in tax payments. The basis for
5 In the 109th Congress, this proposal is H.R. 25. Rep. Linder is the primary sponsor, while over 50 members have co-sponsored this legislation.
6 See H.J. Res. 16, sponsored by Representative Steve King (IA-5). 4
A Macroeconomic Analysis of the FairTax Proposal Arduin, Laffer & Moore Econometrics
calculating the income tax does not take this distinction into account. The income tax payment is determined by multiplying the gross income earned by 20 percent, which includes the portion of the gross income that is owed in taxes. In public finance jargon, the 20 percent tax rate is considered to be on a “tax-inclusive” basis because the tax payments are included as part of the total base that is used to determine total taxes paid.
Sales taxes do not typically work this way. Typically, sales taxes are levied on the pre-tax retail price or what is termed a “tax-exclusive” basis. Consequently, raising a $10,000 tax payment based on the aforementioned $40,000 in spending requires a 25 percent sales tax rate or mark-up from the pre-tax price – scenario (2) of Table 1. This calculation is based on a tax-exclusive basis because the $10,000 tax payment is not included as part of the tax base.
Under either the 25 percent sales tax rate or the 20 percent income tax rate, this family still makes the same $10,000 tax payment. The percentages differ because they are calculated as a percentage of different bases. This equivalency can be seen by converting the 25 percent sales tax into a tax-inclusive basis. Including the sales tax payment of $10,000 into the calculation, the total tax payment is the $40,000 in consumption expenditures plus the $10,000 in tax payments or $50,000. The $10,000 payment is 20 percent of this figure – the exact same rate as a 20 percent marginal income tax. Consequently, it is useful to calculate either the income tax on a tax-exclusive basis or the sales tax on a tax-inclusive basis for comparative purposes. For this paper, the FairTax rate is discussed on an equivalent tax-inclusive basis – this has the benefit of maintaining rate consistency with the current tax system. Consequently, the 23 percent FairTax has the impact of marking up pre-tax retail prices by 30 percent.
The 23 percent national sales tax is applied to the final consumption of all new goods and services. Business-to-business purchases are not taxed, because the tax will be collected once the ultimate user purchases the good or service. Similarly, used goods are not taxed as the tax has been already collected when the good was originally sold. The FairTax also removes all exemptions in the current tax code and replaces them with a family consumption allowance which is equal to the Health and Human Services poverty guideline plus an additional amount in the case of a married couple to prevent a marriage penalty. A monthly sales tax rebate is provided to each qualified household which is equal to the family consumption allowance divided by twelve times the FairTax rate.7
Testing the Rate
The next question with respect to the FairTax is whether the 23 percent consumption tax rate is high enough in order to provide a revenue-neutral proposal. A simple test illustrates this point. Table 2 presents the 2004 revenues for the federal government from the income tax sources the FairTax intends to eliminate, including all social insurance taxes.
-
Table 2: Revenues Raised in 2004 from Taxes Replaced by the FairTax Proposal
Tax Source
$Billions
Individual Income*
$809.0
Social Insurance Taxes
$733.4
Corporate taxes
$189.4
Estate and Gift Taxes
$24.8
Total Revenues Replaced
$1,756.6
Total Receipts
$1,880.1
Percentage of Total Receipts
93.4%
*Individual Income tax receipts include: Personal income taxes, Capital gains taxes, taxes on dividend income, and the Alternative minimum tax.
Source: Congressional Budget Office, Historical Budget Data, http://www.cbo.gov.
Table 2 illustrates that the FairTax is fairly described as tax replacement – not tax reform – replacing over 93 percent of the federal government’s current revenues. In lieu of these taxes, the FairTax would impose a 23 percent sales tax on all final consumption expenditures on new purchases. Total revenues would be the sum of all of these collections net of the prebate. Table 3 presents the estimated FairTax tax base as of 2004, the estimated value of the FairTax prebate based on poverty guidelines and demographics, and the resulting estimated tax revenues from the FairTax based on 2004 data.
Table 3: Estimated 2004 Revenues if the FairTax Proposal were in Effect
Description of Taxable Item
Tax Base (2004)
Personal consumption expenditures
$8,214.30
+ Purchases of new homes
$572.20
+ Improvements to Residential Structures
$147.00
- Imputed rent on housing
($904.70)
- Foreign travel by U.S. residents (one-half)
($91.60)
- Food produced and consumed on farms
($0.20)
+ Total Government Consumption
$1,843.40
+ Total Government Gross Investment
$372.50
- Education expenditures
($211.30)
+ Expenditures in U.S. by nonresidents
$96.60
Gross FairTax Tax Base
$10,038.20
Total Gross FairTax Revenues
$2,308.79
Estimated Prebate Value
$446.14
Total FairTax Revenues
1,862.65
Sources: Bureau of Economic Analysis, National Income Product Accounts. U.S. Census Current Population Reports 2004.
Based on static calculations, a 23 percent FairTax raises a similar amount of revenues ($106 billion more based on our calculations) as the current income taxes it is designed to replace. As 6
A Macroeconomic Analysis of the FairTax Proposal Arduin, Laffer & Moore Econometrics
such, it is appropriate to deem this proposal a revenue-neutral proposition based on the static methodology. Given the dynamic growth effects from implementing this proposal, the static estimate is, of course, a lower bound of the potential revenues the proposal will generate and the upper bound of the revenue-neutral rate.
The Current U.S. Tax System
Although we call our current tax system an income-based tax system, the federal government currently imposes a complex hybrid tax system. This is due to the tax reductions for pre-approved savings vehicles (e.g., Investment Retirement Accounts (IRAs), College Education Savings Accounts (529s), Health Savings Accounts (HSAs), 401Ks, pensions, etc.) that skew the tax base away from total income earned toward total consumption expenditures spent. The current federal tax system can subsequently be more appropriately described as an income/consumption tax. However, the complexity inherent in our current hybrid system distorts capital allocation by imposing incentives that may or may not be efficient. Compounding these issues, there are numerous other exemptions, deductions, carry-forwards, carry-backwards, depreciation allowances (which likely bear little resemblance to actual economic depreciation of the assets), and marginal tax rates that differ depending upon pre-approved circumstances, such as whether you are married or single or whether you own a home. However, other circumstances, such as living in a place with a higher cost of living, are not taken into account.
Removing these complex and arbitrary rules provides macroeconomic benefits that cannot be fully accounted for in a macroeconomic model. The inability to quantify a benefit makes the benefit no less real or no less important. From this perspective, the macroeconomic benefits developed below can be accurately viewed as a lower-end estimate of the benefits from switching to the consumption-based tax as laid out in the FairTax proposal.
The Current Tax System and its Disincentives
Converting our current complex tax system into the simple national retail sales tax system represented by the FairTax creates two primary economic effects. Economists deem these the income effect and the substitution effect. The income effect examines the changed behavior that directly arises from changes in income or wealth. For example, people will tend to increase the amount of consumption in response to an increase in income. The substitution effect examines the changed behavior that arises from changes in the relative costs of different goods or activities. For example, a switch in tax policy that reduces the costs of one good compared to another will provide incentives for people to consume more of the former at the expense of the latter. The primary benefits to the economy from replacing our current tax code with the FairTax proposal that are accounted for in our model arise in the following areas:
• Work effort
• Work demand (and subsequently wages)
• Savings
• Investment and subsequently, greater capital accumulation
Other benefits will arise. These include lower compliance costs under the FairTax proposal that will presumably be less than the current compliance costs in excess of $200 billion, the increased
efforts toward productive activities as opposed to tax compliance and tax minimization, as well as the reduction in informal activities as more economic activity that is not reported becomes recognized. Although these impacts are real, they are difficult to quantify and we do not attempt to account for them in our analysis – another instance reinforcing the view that our analysis provides a lower-end projection of the macroeconomic benefits from the FairTax proposal.
Our analysis also understates the macroeconomic benefits of the FairTax due to the fact that our model does not take into account several of the taxes the FairTax would eliminate: the estate tax, the gift tax, and the alternative minimum tax (AMT). The estate and gift taxes impact families’ financial planning activities as well as their incentives. These costs steer valuable resources away from productive activities toward tax minimization activities. Consequently, removing these taxes will elicit significant and beneficial economic impacts.8 Several types of models can be designed to account for the inefficiencies associated with these taxes.9 As our model does not consider these impacts, the assumption serves to lessen the estimated benefits of the FairTax compared to the actual economic benefits created.
The impact of the AMT is twofold.10 First, by running what is in effect a dual income tax system, it raises compliance costs and complexity (not to mention taxpayer resentment). Second, the AMT raises the marginal income tax rate faced by many middle-class families.11 Consequently, the expected impact from including the AMT in our model would be to raise the current marginal income tax rate on families subjected to the tax, which is increasing every passing year due to the lack of inflation indexing associated with the AMT earnings limits. Again, the impact from not including this complexity is to lessen the benefits from implementing the FairTax system as a replacement to our current tax system. Table 4 summarizes all of the aforementioned assumptions supporting the notion that the macroeconomic benefits estimated are a lower-end estimate.
8 For instance, a 1996 Heritage Foundation study found that the repeal of the estate tax could generate $11 billion in increased output annually. See Beach, William W., (1996) "The Case for Repealing the Estate Tax," Heritage Backgrounder No. 1091, August 21, 1996.
9 Specifically, in evaluating alternative tax proposals, some models take into account the incentive for people to leave money and assets to their children through creating models termed Computable General Equilibrium (CGE) models that incorporate overlapping generations. Such models use a construct termed a lifetime utility (happiness) function and a lifetime budget constraint that incorporates the desired level of money that the person would like to bequeath to their children. Under such a construct, the estate tax effectively creates a tax wedge distorting decisions regarding investment, consumption, and bequeaths, and such distortions can be explicitly taken into account.
10 For a more complete analysis of the adverse impacts from the Alternative Minimum Tax see Plotkin, Joseph and Coors, Andrew C., “The AMT: Another Reason To Hate April 15th,” Laffer Associates, February 7, 2005.
11 Ibid.
8
A Macroeconomic Analysis of the FairTax Proposal Arduin, Laffer & Moore Econometrics
Table 4: Conservative Assumptions Used to Model Economic Impact from the FairTax
(1)
No accounting for economic benefit from removing complex and arbitrary tax laws
(2)
No accounting for lower compliance costs from implementing the FairTax
(3)
No accounting for more efficient use of resources – away from tax minimization toward economic maximization
(4)
Model does not incorporate impact from the repeal of the estate, gift or AMT taxes
This leaves the taxes that our model is designed to evaluate. Economic models divide productive inputs into two general categories: labor and capital. The income taxes the FairTax is designed to replace fall into these categories as well. Starting with the personal income tax (PIT), this tax “approximates the sum of labor and capital income and thus, bears a resemblance to national income as measured by economists.”12 The PIT is applied to all wages and salaries earned by employees (a tax on labor), the earnings of the self-employed, as well as earnings received as part of income earned by owners and partners of firms (a tax on capital). These revenues were approximately 43.0 percent of total federal receipts during 2004.13 Based on data from the Tax Foundation, the relevant marginal income tax rates and income brackets adjusted for the 2004 tax year are described in Table 5.14
Table 5: 2004 Statutory Tax Rates and Brackets
Married Filing Jointly
Married Filing Separately
Single
Head of Household
Marginal Tax Rate
Income Bracket
Marginal Tax Rate
Income Bracket
Marginal Tax Rate
Income Bracket
Marginal Tax Rate
Income Bracket
10.0%
> $0
10.0%
> $0
10.0%
> $0
10.0%
> $0
15.0%
> $14,300
15.0%
> $7,150
15.0%
> $7,150
15.0%
> $10,200
25.0%
> $58,100
25.0%
> $29,050
25.0%
> $29,050
25.0%
> $38,900
28.0%
> $117,250
28.0%
> $58,625
28.0%
> $70,350
28.0%
> $100,500
33.0%
> $178,650
33.0%
> $89,325
33.0%
> $146,750
33.0%
> $162,700
35.0%
> $319,100
35.0%
> $159,550
35.0%
> $319,900
35.0%
> $319,100
For any economic decision (i.e., work effort, saving, or investing) there are two primary considerations: (1) the marginal tax rate on the next dollar earned; and (2) total after-tax income
To see why the marginal tax rate matters, imagine the work or investing incentives a person would face if the marginal tax rate on the next dollar earned was 100.0 percent. Under this scenario, every extra dollar a person earns would go straight to the government. Regardless if the tax rate on the previous dollar earned was zero, there is very little incentive for anyone to work, save or invest under such a punitive tax rate. Now imagine the work or investing incentives a person would face if the marginal tax rate on the next dollar earned was zero. Under this scenario, the investor or worker would get to keep the full value of the income or return that they earn. Obviously, the second scenario is more favorable to the worker or investor than the first.
A tax cut that increases the after-tax income for the next dollar earned raises the reward to work, thereby increasing the cost of leisure. The cost of leisure can be measured by the amount of other consumption goods that people could purchase (e.g., sending the kids to a better school or purchasing a high-definition TV) with the extra work effort. This opportunity cost to leisure increases following a decrease in the marginal income tax rate. Whenever a good’s cost increases, rational people will economize on its use. These incentives are encapsulated by the aforementioned substitution effect that induces people to work more. Because the substitution effect captures the trade-off between work and leisure, it is the marginal tax rate (the amount of extra consumption that a person must give up by not working) that is the appropriate incentive driver.
However, the ultimate impact on hours worked is not solely determined by the substitution effect. The second primary economic effect from a policy change, the income effect, also plays an important role. The income effect works against the incentives summarized by the substitution effect. When a tax reduction increases the after-tax income for workers, the “income effect” induces workers to consume more of all normal consumption goods. Economists consider leisure a type of “consumption” good. Consequently, due to the income effect, people can be expected to work less. The desire to work less inhibits the economic growth impact of the tax policy change. Interestingly, economic growth over time is associated with people working less, although this phenomenon appears to have stabilized significantly since the second half of the 20th century.15 Whether workers work more or less, it is difficult to argue that they are not better off following an increase in their take-home pay even if work effort and output do not increase. After all, higher after-tax wages have widened the number of options available to them. As a consequence, from a theoretical point of view, increasing the after-tax wage is a positive development for workers in the U.S. whether or not actual hours worked increases or decreases.
The extent to which an increase in after-tax wages raises overall economic growth is an empirical question. To account for both the substitution and income effects separately, our model incorporates both of these impacts into the labor supply function. Economists typically incorporate dynamic behavioral changes into an economic model using measured statistical relationships between the percentage change in the price and the percentage change in the
15 Horowitz, Carl, (2004) “The Wrong Way to Shorten the Work Week,” Ludwig von Mises Institute, August 30, http://www.mises.org, states that “During 1900-70 the average workweek declined from about 60 to 40 hours.” For a more recent discussion addressing the changing work week landscape and the measurement issues associated with this phenomenon see Kirkland, Katie, (2000) “On the Decline in Average Weekly Hours Worked,” Monthly Labor Review, July.
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activity. This relationship is termed elasticity. Although elasticities are crucial in accurately determining a policy’s impact, estimates are typically fraught with uncertainty and disagreements. Nevertheless, in order to proceed, an estimate is necessary. A recent Congressional Budget Office study summarized the empirical literature on labor supply elasticities, which examines the percentage change in labor effort due to a percentage change in the worker’s wage.16 The range of estimates for the income elasticity for the entire workforce is -0.2 to -0.1; the range of estimates for the substitution elasticity for the entire workforce is 0.2 to 0.4. For our analysis, we use the upper-end estimates from both the income (-0.2) and substitution (+0.4) elasticities.
A further consideration comes into play. The income effect captures the change in people’s take-home pay. The average tax rate more accurately reflects this trade-off than the marginal tax rate: it is indicative of the amount of after-tax income a worker can actually consume, save, or give away. Consequently, estimates of both the marginal and average tax rates are necessary in order to understand the incentive impacts on workers, savers, and investors from the current tax system.
Government revenues are not immune from the incentive drivers discussed above, either.17 Tax collections are a game of cat and mouse: the individual wants to maximize his return on labor (after-tax income) and the government wants to maximize revenues it receives from the working individual. It is clear that the government will raise no revenue by levying a zero percent tax on income; the government takes none of the income earned so government revenues are zero. Similarly, the government can expect to raise no revenue by levying a 100.0 percent tax on income; there is no incentive for anyone to work so taking 100 percent of nothing is still nothing. This effect (i.e., the Laffer Curve Effect) incorporates the economy’s dynamic realities and importantly illustrates that government revenues are not always raised when the marginal tax rate is increased; see Figure 1 (on the following page). Similarly, government revenues can be significantly enhanced when tax reforms lead to positive growth-enhancing incentives that grow the tax base. The FairTax cuts the marginal tax on income to zero providing strong growth-enhancing incentives throughout the economy. The government will, consequently, share in the beneficial growth impacts. The resulting growth in the economy and consequently the consumption base will lead to a larger tax base and lead to even larger revenues over the aforementioned static estimates.
Figure 1: The Laffer Curve
100%
0%
Tax Rates
Tax Revenues ($)
Prohibitive
Range
Labor Supply and Demand
Measuring the economically relevant effective marginal tax rates and average tax rates on salaries and wages is not a straightforward exercise. This difficulty is illustrated by the fact that the Internal Revenue Service Statistics of Income (SOI)18 calculates the average tax rate as a percentage of several different measures of income.19 The actual rates vary depending upon which measure of income is used. For instance, is the relevant measure for the average tax rate the rate imposed on total wages and salaries? Perhaps it is Adjusted Gross Income (AGI) or even taxable income (which is AGI adjusted for relevant deductions)? For instance, in 2003 the average tax rate is estimated to be 13.1 percent of Adjusted Gross Income (AGI) as measured by the IRS, down from 15.2 percent in 2001. However, the average tax rate in 2003 is also estimated to be 8.2 percent of personal income, down from 10.2 percent in 2001; and 17.9 percent of taxable income, down from 20.8 percent in 2001.
Much of the confusion across the different income concepts arises due to the myriad of deductions and exemptions inherent in the current tax code. For example, given five tax accountants preparing an individual’s tax return, you would likely get five different tax rates, further complicating the analysis. For our purposes, we are interested in the representative tax rate only for the purpose of understanding the income effect induced through replacing the current tax system with the FairTax. In other words, how will people change their economic choices because of the change in their after-tax income? For this purpose, tax receipts as a percent of total earnings seems most relevant. Due to the progressive tax structure outlined in Table 5, these averages will vary depending upon each taxpayer’s differing income and availability to tax deductions. Using the detailed tables from the SOI,20 we calculate the weighted average tax rate (effective rate) on total earnings to be 13.0 percent, which is right in line with the most recent Tax Foundation analysis examining average income tax rates.21 We use this figure as the average income tax rate imposed on salaries and wages. Modifying the SOI tables in 2002 for the 2004 rates,22 we calculate that the average marginal tax rate is approximately 24.4 percent.
Then there are the Social Security and Medicare taxes (OASDHI) that accounted for another 39.0 percent of total federal receipts during 2004.23 The percentage levies from these taxes are 7.65 percent imposed on employers and employees for a total burden of 15.3 percent (12.4 percent for Social Security and 2.90 percent for Medicare). However, the current wage and salary cap for the Social Security tax is $90,000 (for the 2005 tax year, and was $87,500 for the 2004 tax year), while there is no wage cap for Medicare taxes. Due to the Social Security income limits, the weighted average tax rate and weighted average marginal tax rate are not exactly 15.3 percent.
Data from the National Income and Product Accounts (NIPA) are instrumental in accounting for these limits, however.24 Total employee compensation in 2004 was $6.7 trillion (see Table 6). Of this, $1.3 trillion was in “Supplementals to Wages and Salaries”. At 19.4 percent of total compensation, supplements to wages and salaries is comprised of the employer contribution to social insurance plus employer contributions to private pension and profit-sharing plans. Employer contributions to private pension and profit-sharing plans were $895.5 billion in 2004, leaving $402.6 billion in payments for employer contributions to social insurance – payroll taxes. The $402.6 billion in payments represents the half of the payroll tax employers pay, and equals 7.47 percent of the total $5.4 trillion in salaries and wages earned in 2004. Adding in the employee-paid half, it is clear that the vast majority of total salary and wage income was subject to the full 15.3 percent payroll tax during 2004. For this reason, we use 15.3 percent as the average and marginal payroll tax in the model.25
The Labor Market Tax Wedge
Labor earnings are designed to represent the market value of people’s work effort. As with any market, there are two sides to this transaction – those who supply the labor (workers) and those
who demand the labor (firms). Our current tax system impacts decisions for both the suppliers and demanders of labor.
Workers, the suppliers of labor, actually receive the lion’s share of our country’s national income. Relying on modified accounting principles that more accurately reflect economic value added, the Bureau of Economic Analysis measures the total income and output of the U.S. economy. Our country’s National Income captures the total amount of money that was earned by residents net of depreciation and is subdivided by how this income was earned. The values for 2004 are reproduced in Table 6 below. According to Table 6, employee compensation comprised 65.1 percent of total national income in 2004. Since 1960, this share of national income has been relatively stable – the average labor share being 64.9 percent, with a standard deviation of 1.6 percent.
Table 6: Total U.S. National Income: 2004
$Billions
National income
$10,275.9
Compensation of employees
$ 6,687.6
Wage and salary accruals
$ 5,389.4
Supplements to wages and salaries
$ 1,298.1
Proprietors' income with IVA and CCAdj
$ 889.6
Rental income of persons with CCAdj
$ 134.2
Corporate profits with IVA and CCAdj
$ 1,161.5
Profits after tax with IVA and CCAdj
$ 890.3
Other*
$ 1,402.9
* Other includes Net interest and miscellaneous payments, Taxes on production and imports, Subsidies, Net business current transfer payments, and the Current surplus of government enterprises. IVA stands for inventory valuation adjustment and CCAdj stands for capital consumption adjustment.
Source: Bureau of Economic Analysis, National Income and Product Accounts, Table 1.12.
It would be incorrect to assume that workers receive all of this income, of course. Before addressing state income taxes (which can be quite significant), the aforementioned federal income and Social Security taxes create many distortions in the labor market. First, the aforementioned “employer contribution to social insurance” is government speak for a tax. On top of this tax burden, the $5.4 billion in salary and wages paid by employers is not fully received by workers – federal income and social insurance taxes also take a bite out of this income. However, workers do not work to pay taxes. Neither do firms produce to pay taxes. Consequently, workers determine their amount of labor effort based on their after-tax incomes. Similarly, firms determine the amount of workers they want to hire based on their costs – before-tax incomes. This difference represents the inefficiencies and distortions the current income tax system levies on the current labor market, what economists deem a “tax wedge”. Because firms determine the amount of workers they want to hire based on before-tax incomes while workers make this decision based on after-tax incomes, it stands to reason that firms and workers are not valuing this transaction at the same rate. Moreover, removing the tax wedge provides for the opportunity for additional gains from exchange as the cost to hiring another worker would fall for a firm while simultaneously the after-tax wage would rise for the worker. Employment opportunities and take-home pay subsequently rise to the benefit of all.
Putting together the values we have previously discussed, although workers receive $5.4 trillion in wage and salary income, the federal government collects 13.8 percent in income taxes (or $743.8 billion) plus 7.65 percent in Social Security taxes (or $402.6 billion). Consequently, taking only federal income and Social Security/Medicare taxes into account, workers’ after-tax income is already down to 78.55 percent of the income they earned. The wedge separating workers and employers is further still. Employers must pay one-half of the Social Security taxes as well.26 This is another $402.6 billion in costs to the firm or 31.0 percent of the 2004 Supplementals estimated by the BEA.
Figure 2 (on the following page) simplifies these numbers. Figure 2 shows that for every $100 in salary and wages earned, workers receive $78.55 (with more tax burdens to pay). Add in the further state income tax burdens of 4.47 percent on average,27 and workers are only receiving $74.08 for every $100 they earn. On the other hand, it costs firms $107.65 to pay each $100 of salary and wages. Because of this difference, the cost of a new worker to the firm is much higher than the benefit the worker receives. This gap is an inefficiency that is manifested through less employment throughout our economy.
The dynamic macroeconomic benefit of the FairTax for the labor market is created by removing the tax wedge. Removing the tax wedge creates beneficial impacts on wages and employment levels and enhances overall work incentives throughout the economy by removing inefficiencies in economic allocation.
Starting with the employer-paid payroll tax, there are several possible scenarios. As workers’ effective cost to employers falls, there is an incentive for firms to hire more workers. Alternatively, employers can pass the savings from the former tax costs on to consumers through a proportionate decrease in prices (before the impact of the national sales tax is taken into account). Firms could alternatively pass the savings along to shareholders through higher profits or increased investment. Finally, a firm could employ a combination of all of these strategies.
As of late, firms have not had the ability to pass along rising costs, especially labor costs. This phenomenon is cited by many as a reason why measured increases in the price level remained subdued throughout 2004 and 2005 (through October as of this writing) despite rising energy
26 It is widely believed among economists that workers actually bear the full incidence of the Social Security taxes as the wages of workers are effectively lowered by an amount large enough to cover the “employer” part of the Social Security tax. Whether this is the case or not, the important point for our purposes here is to trace the wedge between the labor costs to the firm compared to the income received by workers. The wedge could alternatively be developed through a “reduced” wage example, but this complication does not impact the ultimate size and adverse impacts created by the tax wedge.
27 See National Bureau of Economic Research, “Average Marginal State Income Tax Rates 1977 – 2003,” Table 3, http://www.nber.org/~taxsim/state-marginal/. This figure includes an adjustment for the federal deductibility of income taxes. The 2003 figure is used as an estimate for 2004. costs. The difficulty firms have experienced passing costs along to the consumer speaks to the intense pricing pressures firms face. Given these pressures, it is likely that the boon to corporate costs will be passed along to consumers in the form of lower prices. For this reason, we assume that all corporations pass the payroll tax savings to consumers, putting downward pressure on before sales-tax prices.28
Figure 2: Tax-induced Gap Between Salaries Paid and Salaries Received for Every $100 of Before-Tax Salary
Before Tax wage Paid by firms: $107.65After-tax wage Received by Workers: $74.08Firm’s Demand for LaborWorker’s Supply of Labor(without tax)EmploymentWageLost Employment OpportunitiesWorker’s Supply of Labor (with tax)Losses to the economyBefore economy
The tax costs imposed on employees will directly raise workers’ after-tax income dollar for dollar with the repeal of federal income and payroll taxes. This equates to an increase in average earnings of 20.5 percent (the estimated combined impact of the federal income tax and employee portion of the payroll tax). To the extent that state income taxes are lowered in tandem, after-tax earnings will rise further – by 24.7 percent on average. As developed above, increases in work effort depend on the marginal tax rate as well. Due to the progressive nature of the current income tax system, this rate is currently higher than the average at 24.4 percent in income taxes plus the 7.65 percent in payroll taxes for a total impact of 32.1 percent. The impacts on labor supply are estimated to occur in line with the empirical income and substitution elasticities. An important element of this impact is the effect from the lowered taxes on the incentives for increased entrepreneurial ventures. As much of the income from these ventures is taxed via the personal income tax, the large decrease in the marginal tax on this income will provide an important boost to entrepreneurial ventures and the innovation and employment growth with which they are associated.
28 To the extent prices are not reduced, the benefits will accrue to either the workers or owners of the firm showing a rise in income proportionate to the foregone price decline.
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The Capital Market Tax Wedge
Of course, salaries and wages comprise only a portion of the current income tax. Current tax law also imposes a 15.0 percent tax on all capital gains and dividend income people earn (or for taxpayers in the 10 and 15 percent income tax bracket the dividend income tax rate is 5 percent).29 These rates are currently set to sunset December 31, 2008, although whether or not the sunsetting will occur is anyone’s guess. Further complicating the analysis, not all investment income is taxable as well as the nature of the investment and the length of its ownership factor in to the tax rate calculation. For the analysis here, we use the 15.0 percent figure as the appropriate marginal and average tax rate for both capital gains and dividend income. We also allocate 50 percent of total investment income to tax-exempt investors or on tax-deferred investments (i.e., held in pensions and endowments), investors that would consequently not benefit from the elimination of these taxes.30
Corporations are also responsible for paying taxes on their income. According to the Congressional Research Service, “Corporate taxable income is subject to a set of graduated rates: 15%, 25%, 34%, and 35%, with the lower rates applying to firms with lower taxable incomes. Since smaller firms tend to have smaller profits, small firms benefit more often from the 15% and 25% rates. And since the bulk of corporate income is earned by large firms, most corporate income is subject to either the 34% or 35% rate.”31 However, due to exclusions and other activities, corporate taxes at the federal and state level have been 25.1 percent of taxable income.32 In order to account for these activities, we use the 25.1 percent rate as the combined average corporate tax rate, adjusted for corporations with no tax payments. Dividends and capital gains are also paid out of corporate earnings, of course. In other words, the current system taxes the exact same corporate earnings twice, once when the company earns the revenues and once when the shareholder receives the revenue – the well documented problem of double taxing corporate income.
Consequently, it is the combined impact from these taxes on capital allocation and capital formation that is relevant from a macroeconomic impact perspective. Removing the corporate income tax impacts the relative costs and returns of capital and labor. Removing the dividend tax and the capital gains tax will increase investors’ after-tax retention rate. Focusing on this rate, we can illustrate the change in the average tax rate, and consequently market returns, before and after the FairTax is implemented.
29 The 15 percent rate on dividends is also conditioned on meeting certain criteria. If not met, the tax rate on dividends reverts back to the taxpayer’s tax rate on personal income that can be as high as 35 percent.
30 See Coors, Andrew C., Laffer, Arthur B., and Miles, Marc A., (2002) “Dividends: Stop the Discrimination,” Laffer Associates, December 16.
31 Brumbaugh, David L., Esenwien, Gregg A., and Gravelle, Jane G., (2005) “Overview of the Federal Tax System,” March 10 (RL32808).
32 Table 1-12: “National Income by Type of Income” provides numbers on Profits before Tax and Taxes on Corporate Income. According to the BEA, “Profits before tax (1–12) is the income of organizations treated as corporations in the NIPA’s except that it reflects the inventory-accounting and depreciation accounting practices used for Federal income tax returns. It consists of profits tax liability, dividends, and undistributed corporate profits.” (See A Guide to the NIPA’s, www.bea.gov). “Taxes on Corporate Income” is defined as: “the sum of Federal, State, and local government income taxes on all income subject to taxes; this income includes capital gains and other income excluded from profits before tax. The taxes are measured on an accrual basis, net of applicable tax credits In order to proceed we make the following assumptions:33
i.) Asset holders receive cash flows either as dividend payments or proceeds from the sale of the asset.
ii.) Some 68 percent of companies pay dividends.
iii.) Dividend paying companies have a 52 percent payout ratio (i.e., dividends divided by after-tax reported earnings).
iv.) Every dollar of retained earnings will increase a company’s net worth (capital gains) by exactly one dollar.
v.) 50 percent of the entities do not pay taxes on dividends when they are received, such as pension funds, endowments, and charities.34
Figure 3 follows corporate earnings through the income stream. Before any dividends or retained earnings (in this case capital gains) can be allocated, the corporation must pay corporate income taxes – currently estimated to be 25.1 percent that is paid by 90 percent of the companies. This implies the company must earn $129.18 in order to provide investors with $100.00 for distribution to shareholders. Currently, 35.36 percent (68% x 52%) of after-tax profits is paid out in dividends, or $35.36 of every $100.00 of after-tax corporate profits. Therefore, of every $100.00 of after-tax corporate profits, $64.64 is in the form of retained earnings, implying a capital gain. The current maximum capital gains rate is 20.71 percent, which is the 15.0 percent federal rate plus a 5.71 percent effective state tax rate. Half of all investors are tax exempt and half must pay this 20.71 percent tax, thus the total taxes on those capital gains will be $6.69 ($64.64 x 50% x 20.71% = $6.69). The after-tax return in the form of capital gains for $100 of after-tax corporate profits will be $57.95, which is the difference between the initial $64.64 and the $6.69 tax.
Out of $100 of after-tax corporate profits, $35.36 is paid as dividends and is subject to the 20.71 percent dividend tax rate: 15.0 percent federal dividends tax rate and 5.71 percent effective state tax rate. Since half of all dividends are paid to taxable entities and half to tax-exempt entities, the current tax burden is $3.66 ($35.36 x 50% x 20.71% = $3.66). In the end, investors reap only $89.65 of every $129.18 in before-tax corporate profits. Not only is this a large tax bite in and of itself, the bite would be larger if not for the complex loopholes and other exemptions that misdirect resources and create inefficiencies in the capital markets.
Figure 3: The Flow of $129.18 of Corporate Earnings – Current Tax System Before Tax Income:$129.18Effective Corporate Tax Rate:22.6%After Tax Corporate Profits:$100.00Taxes PaidAfter-tax IncomeTaxes PaidAfter-tax IncomeTaxes PaidAfter-tax IncomeTaxes PaidAfter-tax Income$0.00$32.32$6.69$25.63$0.00$17.68$3.66$14.02Total Taxes Paid$39.54Total Income$89.6535.36%Dividends64.64%Capital Gains:$64.6450.0%50.0%$35.36Paid to Tax Exempt:Paid to IndividualsPaid to Tax Exempt:50.0%50.0%Paid to Individuals
Note: Numbers may not add due to rounding.
Under the FairTax proposal, all federal corporate income, dividend income, and capital gains taxes would be eliminated. Before we can assess the impact of the FairTax on the equity markets and returns to capital holders, the “tax savings” from the elimination of the corporate income tax must be allocated. We assume that the states follow the federal lead and also remove their taxes on capital income.35 Starting with this assumption, the impact from the FairTax proposal can be divided into two stages. First, the $29.18 in corporate taxes would be eliminated.36 This reduction in corporate taxes raises the after-tax return. The higher after-tax return induces more investment (to take advantage of the now higher returns), limited by the available pool of savings. Over time, the excess return is slowly competed back down to its previous rate. The general economy benefits through the incentives to invest and the resulting beneficial impacts on capital accumulation, economic growth, and output.
Investors benefit from the elimination of taxes on dividends and capital gains. Prior to the implementation of the FairTax, dividend and capital gains taxes reduced the value of the $100.00 in after-tax corporate profits by a further $10.36, netting investors $89.65. In terms of incentives, the net return goes from $89.65 per $100.00 to $100.00 per $100.00, an 11.55 percent increase in the after-tax return on the market as a whole. Thus, the minimum gain we would see
35 We make this assumption because most states rely upon the federal income tax calculations as a basis for calculating the state income tax. Consequently, we believe the most likely scenario is that states will follow the federal lead and eliminate their taxes on corporate income, capital gains, and dividends in tandem – especially given the intense competitive pressures states face to attract business and residents.
36 Economists generally agree that although corporations pay taxes, they do not bear the brunt of these taxes. Instead, all taxes are passed through either to consumers, workers, or the owners of the firm (e.g., shareholders).
in the market with this proposal is 11.55 percent, and this number ignores all of the dynamic effects. In a dynamic world, of course, this 11.55 percent number will do nothing but increase.
Effects on Interest Rates, Investment, and Saving
The impact of the FairTax on the return to capital is intimately linked to the proposal’s impact on the amount of saving, investment, and overall interest rates. Currently interest income is taxed at normal income tax rates, while interest expenses are tax deductible. For an income-based tax system, this is as it should be. Otherwise the government would double tax interest in the same manner that corporate income is currently double taxed. The tax on interest income creates another tax wedge, however. Borrowers pay a certain percentage interest rate (call it x%). Meanwhile, lenders receive an after-tax rate (call it x% – t%; where t > 0). Because lenders receive a lower rate than borrowers pay, fewer loans are made and inefficiencies arise. Compounding these problems, lenders do not face this tax wedge at the state and federal level when lending to municipalities – such income is tax free. Using the current rate gaps between tax-free and taxable interest along with estimated tax rates provides some insight into the impact on interest rates following the implementation of the FairTax.
Defining interest rates is by definition an imprecise endeavor. Interest rates vary due to differing risk profiles, views about risk, length of time the loans are extended, as well as numerous other criteria. Figure 4 examines the interest rates on two types of investments to adjust for this issue – Moody’s AAA rated corporate bonds and Moody’s A1 rated State and Local General Obligation bonds.37 Although not perfectly similar, both the risk profile and time frames on these bonds are similar. Although varying over time, the differences in these rates tend to fluctuate around 20 - 30 percent. Not coincidentally, this gap is also representative of the effective marginal income tax owed on taxable interest earnings. Consequently, it should be expected that once the tax wedge is removed from this market, interest rates on corporate bonds, government bonds, mortgages, etc. should fall. The extent of the decline will vary as risk profiles and other issues that differentiate these markets will still exist. The decline will create significant positive impacts throughout the economy as the return to lending will remain the same but the cost to investing will decrease by the amount of this tax wedge. Investment will increase in tandem raising the amount of entrepreneurial ventures, new capital equipment, and new research and development activities throughout the country. Lower interest rates will also raise the value of stocks, further impacting the impact on the equity markets. Higher economic growth will subsequently follow.
37
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Decker, what is it like losing a debate to an average Joe ?
I'll let you know when it happens.
You cutnpaste a response and you think you've won something? You would be laughed out of any formal debate with what you've done so far.
No wonder you're a sucker for the Fair Tax. Everything's coming up roses in Ozark's world.
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Figure 4: Interest Rates on State and Local Bonds versus Corporate Bonds 0.02.04.06.08.010.012.01 4.016.018.0Jan-82Jan-84Jan-86Jan-88Jan-90Jan-92Jan-94Jan-96Jan-98Jan-00Jan-02Jan-04State & Local BondsAAA rated Corporate Bonds
Two important trends are discernible from Figure 4. First, the chart illustrates the significant reduction in interest rates that has occurred since the early 1980s. This is noteworthy because the declining interest rates have played an important role in the tremendous economic expansion (with only two minor recessions) that has occurred over this period. The second trend is how the interest rates between these similarly rated bonds move in parallel. The major difference between these alternative investments is their aforementioned tax treatment. Consequently, it can be expected that if the FairTax were implemented, taxable interest rates would fall by the implicit tax costs and would approximate rates on similarly rated municipal bonds. This interest rate reduction has a particularly significant impact, especially for the housing market.
Previous Consumption-based Tax Research
Having reviewed the content and revenue-raising potential of the FairTax proposal, as well as the destructive incentives in the current tax code that the FairTax would replace, we now turn our attention to measuring the economic impact of the FairTax. As the issue of tax reform has been waxing and waning over the past decade, the research examining this issue has followed a similar pattern. The Joint Committee on Taxation (JCT) 1997 Tax Modeling Project and 1997 Tax Symposium has played a pivotal role for many of these analyses.38 In response to Congressional requests to incorporate dynamic analyses into JCT revenue forecasts, the JCT held a series of meetings to examine the methodologies and feasibility of incorporating a dynamic macroeconomic model into the revenue estimating procedures for alternative tax reforms – including consumption-based taxes. These meetings culminated in a symposium where the participating academics each presented the results of their individual models. All of the models projected that a switch to a consumption tax will ultimately lead to higher economic growth. Higher economic growth:
“…arises because all of the models are based on a set of commonly held assumptions about economic behavior…These properties include the following basic assumptions:
• reducing the cost of capital through less taxation of capital provides an incentive for additional investment;
• reducing the marginal tax rate on labor provides an incentive for increased labor effort;
• increasing the returns to labor through capital deepening can provide an incentive for more labor; and,
• reducing distortions in investment decisions by eliminating differential taxation of different types of capital promot[ing] a more efficient allocation of resources.”39
Koenig and Huffman (1998) echo these findings as do Engen, Gravelle, and Smetters (1997).40 Although the Koenig and Huffman model is designed to illustrate direction of change, not magnitude, they find that output, consumption, wages, stock prices, and the total capital stock will rise in the long run due to the adoption of a consumption-based tax. Engen, Gravelle, and Smetters use two different types of models (reduced form growth models and inter-temporal general equilibrium models) to examine the impact of transition to a consumption-based tax system. Again, in all of the models the tax reform has a positive impact on output, savings, consumption, and the growth in the capital stock in the long run. Further studies by Dale Jorgenson (1995), Alan Auerbach (1996), Michael Boskin (1995), and Laurence Kotlikoff (1993) have all shown positive impacts on economic growth if the current tax code is replaced by a single-rate tax on consumption ranging from a total increase in economic output of 5.7 to 17 percent.41 In a 1984 study, Arthur Laffer found that replacing the current income tax system with a flat tax would likely increase economic growth by between 8 and 15 percent in the long run.42
This agreement in the long run does not hold in the short run, however. Both Koenig and Huffman, and the symposium papers by Joel L. Prakken, Roger E. Brinner, and John G. Wilkins, all found that transforming our current tax system into a consumption-based tax system involves a short-run cost in terms of consumption and output. Engen, Gravelle, and Smetters found that under certain models this result could hold. On the other side, symposium papers by Diane Lim Rogers; Alan J. Auerbach, Laurence J. Kotlikoff, Kent Smetters, and Jan Walliser; Eric Engen and William Gale; Dale W. Jorgenson and Peter J. Wilcoxen; Joel L. Prakken, Gary and Aldona Robbins; and Jane G. Gravelle found a positive impact and in some instances a significantly positive impact from a transformation to a consumption-based tax in the short run.
Part of the reason several of the studies find a negative impact is due to the assumptions inherent in those models that preordain a negative impact to occur. One common theme among many of these models is an incomplete accounting (or no accounting) for international capital flows and their impacts on overall national investment. However, as we illustrate below, international capital flows are an important source of savings that more closely track the investment opportunities available in the U.S. than domestic savings alone.
Figures 5 and 6 (on the following page) illustrate that both gross and net domestic savings (national savings as commonly measured) have been declining significantly as of late, although much of this decline is due to the recent increases in government deficits at the federal level and significant reductions in government surpluses at the state level. Although individual savings has declined as of late as well, savings through businesses has increased, offsetting part of the decline. More importantly, the total funds available for private investment (Gross Domestic Saving + net lending/borrowing from abroad) has stayed constant around 18 percent of Income throughout the 1990s and has increased to nearly 19 percent in 2004 due to inflows of capital from abroad.
Adjusting for depreciation, savings (including net inflows from abroad) as a percentage of Gross Domestic Income has been rising in step with net domestic investment, both averaging 8.1 percent and 8.7 percent, respectively. The discrepancy between domestic savings and the funds available for investment in the domestic economy becomes apparent beginning in the 1980s. Since this time period, international funds have been an important and consistent part of the total available savings pool and have more closely responded to changes in domestic investment opportunities than domestic savings alone.
This illustrates that investment opportunities are not constrained solely by the supply of domestic funds. Capital inflows and outflows adjust to the changing relative investment returns across countries and regions. To the extent that opportunities for returns in the U.S. will change due to the implementation of the FairTax, the incentive for people to invest resources in the U.S. economy will change as well. For this reason, models that ignore international capital flows assume away an important source of revenues that will increase investment in the United States following the implementation of the FairTax. 2
Figure 5: Gross National Saving, International Saving, and Gross Domestic Investment as a Percentage of Gross Domestic Income 13%16%18%21%23%196019641968197219761980198419881992199620002004Gross saving + net lending/borrowing % GDIGross Domestic Investment as a % GDI Gross saving as a % GDI
Figure 6: Net National Saving, International Saving, and Net Domestic Investment as a Percentage of Gross Domestic Income 0%2%4%6%8%10%12%14%196019641968197219761980198419881992199620002004Net Domestic Saving + net lending/borrowing % GDINet Domestic Investment % GDINet Domestic Saving % GDI
Since many of the models that find a negative short-run impact assume away the international sector, the results do not fully reflect the important macroeconomic drivers for the U.S. As a consequence, below we build a neoclassical model scaled to the U.S. economy including allocations for international capital flows. This model illustrates that the FairTax will have a significant and positive impact on U.S. economic growth both in the short and long term.
There is a more important flaw with respect to savings that we also account for in our model below. The measure of savings typically used is not the relevant measure. Savings looms so important in policy debates because savings is society’s only way of accumulating capital. Capital is not only the sine qua non of current output but new capital embodies all the fancy technology of the latest inventions, discoveries, and developments. Sooner or later an economy will have to come to a grinding halt if it is deprived of new capital and the capital stock cannot increase. Productivity will stagnate as well without the technology found only in new capital. Therefore, the faster capital increases and the more capital there is the faster the economy will grow and the more able society will be to solve its economic problems without creating austerity.
But, as so often is the case, what is measured isn’t what we think it is. The “savings” that the government measures has almost nothing to do with the type of national savings we need for economic growth. What government measures as savings is that portion of income that people don’t consume, literally income minus consumption. What we wish to measure is the increase in wealth. The two concepts of savings are like apples and oranges in the old saw. They just can’t be added together.
To see the difference between the two types of savings imagine a person who earns $100,000 in a year and consumes exactly $100,000 as well. But also imagine this person started the year with a portfolio worth $500,000 and through astute asset management (or just plain luck if you prefer) ends the year with a portfolio worth $2,500,000. How much did this person save?
Using the government’s concept of savings the person in this example saved nothing—his income exactly equaled his consumption. If the person’s wealth went up by $2,000,000 he in fact saved $2,000,000 for all practical purposes. With the added $2,000,000 the person could buy buildings, machines, technology or what-have-you just as easily as if he had not consumed $2,000,000 worth of income and still had it left to invest. Savings is the increase in wealth, pure and simple.
Likewise, a person who earns $100,000, consumes $50,000 and then loses $50,000 by buying a dog of an investment has no more capacity to acquire capital than if he had consumed $100,000 and had had no savings at all. For the purpose of analyzing growth the relevant concept of savings has to be the increase in wealth, not the absence of consumption. And yet, virtually every discussion of the current U.S. economy uses the wrong concept of savings and comes to the wrong conclusion. The numbers in Figures 5 and 6 don’t make any sense and should never be used to evaluate potential economic performance. Bad models yield worse results the harder they’re worked.
In the late 1960s and 1970s, individuals and companies invested in tax shelters, inflation hedges, and regulatory skirts, and squandered our nation’s capital stock. And yet, according to the government’s numbers, savings was high. By contrast, in the 1980s under President Reagan, we finally put our nation’s capital stock to productive use as a direct consequence of tax rate reductions, deregulation, and inflation control. As a consequence, the market’s valuation of the country’s capital stock after adjusting for inflation increased as never before. For example, the stock market, as measured by the Dow Jones Industrial Average, rose by 184 percent from 1982 to 1989 and the Standard and Poor’s index of 500 stocks rose by 170 percent over the same
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There is a more important flaw with respect to savings that we also account for in our model below. The measure of savings typically used is not the relevant measure. Savings looms so important in policy debates because savings is society’s only way of accumulating capital. Capital is not only the sine qua non of current output but new capital embodies all the fancy technology of the latest inventions, discoveries, and developments. Sooner or later an economy will have to come to a grinding halt if it is deprived of new capital and the capital stock cannot increase. Productivity will stagnate as well without the technology found only in new capital. Therefore, the faster capital increases and the more capital there is the faster the economy will grow and the more able society will be to solve its economic problems without creating austerity.
But, as so often is the case, what is measured isn’t what we think it is. The “savings” that the government measures has almost nothing to do with the type of national savings we need for economic growth. What government measures as savings is that portion of income that people don’t consume, literally income minus consumption. What we wish to measure is the increase in wealth. The two concepts of savings are like apples and oranges in the old saw. They just can’t be added together.
To see the difference between the two types of savings imagine a person who earns $100,000 in a year and consumes exactly $100,000 as well. But also imagine this person started the year with a portfolio worth $500,000 and through astute asset management (or just plain luck if you prefer) ends the year with a portfolio worth $2,500,000. How much did this person save?
Using the government’s concept of savings the person in this example saved nothing—his income exactly equaled his consumption. If the person’s wealth went up by $2,000,000 he in fact saved $2,000,000 for all practical purposes. With the added $2,000,000 the person could buy buildings, machines, technology or what-have-you just as easily as if he had not consumed $2,000,000 worth of income and still had it left to invest. Savings is the increase in wealth, pure and simple.
Likewise, a person who earns $100,000, consumes $50,000 and then loses $50,000 by buying a dog of an investment has no more capacity to acquire capital than if he had consumed $100,000 and had had no savings at all. For the purpose of analyzing growth the relevant concept of savings has to be the increase in wealth, not the absence of consumption. And yet, virtually every discussion of the current U.S. economy uses the wrong concept of savings and comes to the wrong conclusion. The numbers in Figures 5 and 6 don’t make any sense and should never be used to evaluate potential economic performance. Bad models yield worse results the harder they’re worked.
In the late 1960s and 1970s, individuals and companies invested in tax shelters, inflation hedges, and regulatory skirts, and squandered our nation’s capital stock. And yet, according to the government’s numbers, savings was high. By contrast, in the 1980s under President Reagan, we finally put our nation’s capital stock to productive use as a direct consequence of tax rate reductions, deregulation, and inflation control. As a consequence, the market’s valuation of the country’s capital stock after adjusting for inflation increased as never before. For example, the stock market, as measured by the Dow Jones Industrial Average, rose by 184 percent from 1982 to 1989 and the Standard and Poor’s index of 500 stocks rose by 170 percent over the same period. Housing prices and real estate values soared as well. And yet, none of these increases in the country’s wealth shows up in the above chart on the government’s measure of savings.
In the words of a recent article in The Wall Street Journal, “When the government calculates the personal savings rate, it doesn’t count the wealth accrued in homes or in the stock market, a point that economists often raise as a flaw that overstates the profligacy of American consumers.”43
But once we view savings properly, the picture changes dramatically. In Figure 7, changes in the total market value of household net wealth for the U.S. relative to personal disposable income are charted over the period of 1965 through first quarter 2005. The picture is quite different than the picture portrayed using the government’s measure of savings.
Figure 7: Wealth Savings as a Percentage of Disposable Income -5%0%5%10%15%20%25%30%35%40%45%50%196519701975198019851990199520002005-5%0%5%10%15%20%25%30%35%40%45%50%
After President Kennedy’s tax cuts in the mid 1960s, savings as measured by increases in wealth was very high. But in the years following Kennedy’s “go-go ’60s” the savings rate as measured by the increase in America’s wealth fell. President Johnson’s 1967 tax surcharge and his counterproductive Great Society spending programs wrought havoc on U.S. savings and our country’s future capacity to produce. President Nixon with his doubling of the capital gains tax rate, devaluation of the U.S. dollar, 10 percent import surcharge, and wage and price controls drove the average true savings rate below zero.
The Ford Administration with its Whip Inflation Now (WIN) 5 percent tax surcharge didn’t improve matters much. Savings stayed very low. In 1978, however, with California’s Proposition 13 and the Steiger-Hansen capital gains tax rate reduction, savings started to rise, and rise sharply. But it really wasn’t until the Reagan-Volcker policies of the 1980s took full effect that savings rose to its earlier highs. The Reagan era had the longest sustained increase in savings of the prior seven administrations. Reagan’s era was an era of truly great wealth accumulation and output growth. Net job growth was 18,000,000 and the poor, the disadvantaged, and minorities all improved their respective lots in life.
Once President Bush raised taxes in 1990 and President Clinton raised taxes further in 1993 savings fell again. Fortunately, monetary policy during the 1990s has been excellent and has kept savings from falling to the lows of the mid-1970s. The latter part of the Clinton 1990s saw huge increases in savings. Clinton had become more Reagan than Reagan.
Clinton signed into law NAFTA (North American Free Trade Agreement), much to the consternation of some of his fellow Democrats and Union supporters. Clinton also signed welfare reform, reappointed Alan Greenspan twice, cut government spending as a share of GDP by over three percentage points, left the country with surpluses, and signed the biggest capital gains tax cut in our nation’s history. It’s no wonder that savings as measured as the increase in wealth rose.
For our purposes here, the conclusion is straightforward. Basing the growth model on a more relevant definition of savings will provide a better understanding of the FairTax proposal’s ultimate economic impact. As a result, we leverage this more appropriate definition of savings in the model developed below.
Evaluating the FairTax Proposal: A Macroeconomic Simulation
All macroeconomic models involve trade-offs. A caveat for any model, including our own, is an understanding of the model’s assumptions, many of which we have laid out above. These assumptions, and the theoretical foundations that precede the assumptions, play a critical role in determining the validity of any economic analysis. For instance, many macroeconomic models employed to evaluate the impact of tax reform fail to account for international trade and capital flows when addressing the impact from tax reform.44 Due to the rising importance of international trade and capital flows, we believe this to be an important consideration to include, and believe that models that do not account for these impacts are discounting an important consideration. As such, we present an overview of the theoretical and empirical foundations that underlie our model in Appendix A, for those readers who are interested in such details. The results of the model show that the FairTax will have a significant and positive impact on the economy. These are presented by variable of interest for an estimated 10-year period.
GDP growth: The baseline scenario normalizes the 2004 GDP to 1.00 and assumes that the economy will grow at its long-run potential growth rate set to 3.0 percent. This rate approximates the current economic growth potential for the U.S. economy.
The FairTax induces an immediate increase in labor supply, followed by significant growth in the capital stock. These impacts raise current economic growth, but do not change the long-run potential growth rate of the economy. Consistent with the neoclassical growth models, economic output increases in response to the higher labor and capital which, after spiking growth to 5.5 and 5.8 percent in the initial years following implementation, begin to approach the steady-state growth rate of 3.0 percent by year ten. By year ten, total economic output is 11.3 percent above what it would have been without implementation of the FairTax proposal.
To the extent that higher productivity growth is linked to higher capital accumulation (a likely scenario), the growth effects will be even greater. For instance, if the larger accumulation of capital induces a one-quarter percent increase in productivity growth, total economic output in year ten would be 19.4 percent greater than the baseline scenario as opposed to 11.3 percent.
In addition, the GAO has cited estimates that efficiency costs associated with our current tax system are 2 percent to 5 percent of GDP. To the extent the FairTax reduces these efficiency costs, a likely supposition, economic growth can be further enhanced by up to 16.3 percent above the baseline scenario. Combining these two impacts, the FairTax increases economic growth by up to 24.4 percent greater than the baseline scenario by year ten.
Source of Growth
GDP improvement over baseline in 10th year
Economic growth due to neutral tax base and lower rates
11.3%
Lower compliance costs
2-5%
Productivity Gains from Improved Efficiency
8.1%
Total (up to)
24.4%
Figure 8: GDP Growth, FairTax Compared to Baseline 1.01.11.21.31.41.51.6Bas et+1t+2t+3t+4t+5t+6t+7t+8t+9t+100%2%4%6%8%10%12%Cumulative Economic Growth Over BaselineBaselineFairTax
Domestic Investment: Initial domestic investment is scaled to the 2004 GDP level based on the proportion of GDP devoted to domestic investment in 2004. The FairTax has an immediate and significant impact on investment, raising it 33.0 percent above the baseline level in the first year following implementation. By the tenth year following implementation, total investment is estimated to be over 41 percent higher than the baseline scenario. Investment net of depreciation
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in the tenth year following implementation of the FairTax is 12.4 percent of GDP, which is still above the baseline level of 9.0 percent of GDP.
Figure 9: Gross Investment Percentage of Output, FairTax Compared to Baseline 15%20%25%30%35%Baset+1t+2t+3t+4t+5t+6t+7t+8t+9t+10BaselineFairTax
Employment, Labor Income, and Disposable Personal Income: The higher take-home wage provides an immediate incentive for people to work more following the implementation of the FairTax proposal. During the first year after implementation, this will lead to total employment growth of 3.5 percent in excess of the baseline scenario, which continues to grow through year ten such that total employment is 9.0 percent above what it would have been under the baseline scenario.
The impact on total labor income is even more pronounced, increasing due to both an increase in after-tax wages and the increase in the number of people working. Total labor income will rise 27.4 percent in the first year following the implementation of the FairTax. By year ten, labor income will be over 41 percent higher than what it would have been under the baseline scenario.
Figure 10: Cumulative Growth in Employment, Take-home Wages, and Aggregate Take-home Labor Income Due to FairTax Proposal Compared to Baseline 0%10%20%30%40%50%Baset+1t+2t+3t+4t+5t+6t+7t+8t+9t+10EmploymentTake-home WagesAggregate Take-home Labor Income Rising incomes from capital and labor raise total disposable personal income (DPI), even after adjusting for the one-time increase in the price level that would accompany the implementation of the FairTax. Compared to the baseline scenario, DPI is 1.7 percent higher in the first year following implementation of the FairTax. The difference in DPI continues to grow compared to the baseline such that by year ten, DPI is 11.8 percent above the baseline scenario.
Figure 11: DPI, FairTax Adjusted for Price Level Impacts Compared to Baseline 0.60.70.80.91.01.11.2Bas et+1t+2t+3t+4t+5t+6t+7t+8t+9t+100%2%4%6%8%10%12%14%Cumulative DPI Growth over BaselineBaselineFairTax (adj. for price increase)
Consumption: We estimate that following the implementation of the FairTax, consumption will grow in excess of the baseline growth path by 2.4 percent in the first year alone. The increase in consumption arises even though total savings (and investment) in the U.S. economy increases due to the growth in wealth and international capital flows. Wealth increases due to: (1) accelerated economic growth; (2) the direct impact the FairTax will have on equity values; and, (3) the direct impact the FairTax will have on home values.46 Over time, the stronger economy continues to support growing consumption such that by year 10, total consumption exceeds the baseline scenario by 11.7 percent.
Figure 12: Consumption, FairTax Compared to Baseline 0.60.70.80.91.01.1Baset+1t+2t+3t+4t+5t+6t+7t+8t+9t+100%2%4%6%8%10%12%14%Cumulative Growth in ConsumptionBaselineFairT ax
Government Revenues: Government revenues, after accounting for Social Security expenditures, also benefit from the growing economy. In the first year following implementation of the FairTax, total government revenues are estimated to be 0.5 percent above baseline revenues. Revenue growth under the FairTax exceeds the baseline scenario during the first six years following implementation. However, beginning in year seven revenue growth under the baseline scenario begins to grow faster due to the more progressive nature of our current tax system, which increases tax revenues at a faster rate than economic growth. This leads to total revenues under the FairTax to be only 6.2 percent above the baseline scenario by year ten, compared to 6.9 percent above the baseline scenario in year six.
Figure 13: Government Revenues, FairTax Compared to Baseline 0.150.200.250.300.35Base t+1t+2t+3t+4t+5t+6t+7t+8t+9t+100%1%2%3%4%5%6%7%8%Cumulative Growth in Government Revenues (%)BaselineFairTax
Impacts on the price level, equities markets, and housing: The FairTax proposal is not inflationary, because it does not have a sustained impact on the price level – the definition of inflation. It will have a significant one-time impact on the price level, however; rising 24.8 percent following implementation of the FairTax, based on the assumption that the employer portion of the payroll tax benefits consumers through lower prices.
As demonstrated above, the repeal of the capital gains and dividends taxes will increase the values of the equities markets by a bare minimum 11.35 percent. This impact is a direct result of the increased capital retention rate of 11.35 percent for investors following implementation of the FairTax. The value of the housing market will also increase, rising a one-time 2.2 percent compared to the current median price of $208,500. The increased value in the housing market is due to the lower interest rates increasing overall housing affordability after accounting for the loss of the mortgage interest deduction. Based on the current spreads between the similarly risked tax-free versus taxable bonds, interest rates should decline by approximately 90 basis points.
Summing up the impacts, the FairTax would likely have a real and significant impact on the economic welfare of the country. The proposal would have significant and positive impacts on economic growth, income, wages, and capital formation, bettering our standard of living in the process.
A Budget Perspective
There is one last benefit the FairTax could provide that is often overlooked. Steeply progressive tax systems create bad budget incentives while single-rate taxes, such as the FairTax, can provide significant budgetary benefits. These benefits arise from creating a more stable revenue stream that is more predictable and less costly to collect. Additionally, since the FairTax is based on consumption, and consumption expenditures are more stable than income earned, the stability from the FairTax revenue stream is further enhanced. The adverse incentives created from California’s progressive tax system stand as an important case study that illustrates this phenomenon.
Because the California tax structure is progressive, the state has long periods of feast followed by periods of crushing famine. When the overall economy is good, California has seemingly endless surpluses. Beginning in January 1999, California’s state budget was in surplus by some $12 billion out of a total revenue base of $59 billion. Revenues from realized capital gains and exercised stock options, following along with the rise in the stock market, soared in the late 1990s/early 2000s, and at their peak in FY2001 (ending June 30, 2001) these two sources alone accounted for 24 percent of California’s total general fund revenues.
In contrast, when times turn sour, progressive tax codes combine with an economic slowdown for a surefire recipe for fiscal crisis. Even without mirrors and handkerchiefs, revenues vanish. Over the two-year period from FY2001 through FY2003, adjusted state tax revenues per capita fell by 19.4 percent following seven straight years of increases. This drop represented more than $13 billion in tax revenues, demonstrating just how volatile and unpredictable California’s revenue stream can be from year to year.
In addition to California’s huge revenue swings, another byproduct of difficult economic times is that claims on government soar. California’s unemployment rate rose from 4.9 percent to 6.8 percent between FY2001 and the end of FY2003. In step, California’s surplus went from $12 billion to a $38 billion projected deficit practically overnight. This magnitude of fiscal reversal happened on an expenditure level of $76 billion. If the California legislature were to reduce spending to match revenues, it would have to cut expenditures by 55 percent across the board!
It is this famine/feast syndrome that is characteristic of economies with progressive income taxes. Progressive income taxes also lead to a higher overall share of output going to
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government than the electorate would prefer. Tax cuts are never as popular with politicians in good times as are tax increases in bad times. Volatile revenues – the alter ego of progressive taxes – inextricably lead to big government by increasing spending during prosperity and ratcheting up tax rates during slow times. Big government is a byproduct of a progressive tax code. For instance, total government spending increased from $75.3 billion to $104.9 billion from the FY1999 budget through the FY2003 budget, an increase of 39.3 percent (29.8 percent on a per capita basis). Although a possibility, typically the funds necessary to smooth over spending cycles that tend to last 10 or 12 years is rarely made – politically it is very difficult to put a year and a half’s worth of revenues into a special rainy day fund for when you have the four or five year period of bad times.
Because California has such a highly progressive tax structure, the most successful and productive of the state’s residents and businesses are the ones who are taxed the most on the margin. And they are the ones who make the decision whether to locate in California or, if they are already there, whether or not to stay.
With this in mind, juxtapose California’s high tax rates with the fact that there are nine states in the U.S. without a state personal income tax at all – including the biggies of Florida and Texas, in addition to California’s neighbors, Nevada and Washington – and you can see why California once again is facing the very serious prospect of a brain drain. Primarily due to huge tax increases in California during 1990 and 1991 and more tax-friendly climates in neighboring states, Census Bureau data show that California went from importing a net of 207,000 people from other states in 1990 to losing 435,000 people in 1994 alone. The consequences of these population inflows and outflows and their potential effects on state revenues should not be ignored. Considering that the wealthiest 3.1 percent of California’s population pays 61.7 percent of the state’s personal income taxes – by far the state’s most important source of revenue – California can ill afford to tax the wealthy to the point where they choose to leave the state. These wealthy residents, many of whom are baby boomers approaching retirement age, are mobile and could decide to become ex-Californians in a heartbeat.
This same logic applies to the state’s businesses as well. One of the major costs of a business is the tax bill it has to pay. If you raise taxes on businesses, especially during bad economic times, the cost of doing business rises pari passu. These businesses then raise their heads and look around, and it won’t take long for them to realize that most states have a more business-friendly environment than does California. In fact, there is nary a state with as high a corporate income tax rate within 2,500 miles of California.
Better budgeting and taxes have also lead to better economic performance. We examined the economic performance between 1994 and 2004 of the nine states that do not impose a personal income tax on their residents versus the nine states that impose the highest marginal personal income tax rates in the nation. Relative to the nine states with the highest taxes on personal income, the nine states without personal income taxes experienced:
• Faster growth of gross state output (79.7 percent versus 62.5 percent);
• Greater personal income growth (77.2 percent versus 60.2 percent);
• Higher personal income per capita growth (50.9 percent versus 48.7 percent);
• A much greater increase in total population (17.8 percent versus 6.4 percent), including a net inflow of residents from other states (4.1 percent of total population) versus a net outflow of residents (2.2 percent of total population);
• Much more rapid job creation (22.9 percent vs. 12.8 percent); and
• A lower unemployment rate (5.1 percent vs. 5.2 percent), despite the huge inflow of migrants.
Although larger than any individual state, the U.S. is not immune from any of the ills from a progressive income tax, nor its resulting impact on economic performance. The U.S.’s progressive tax structure creates the same adverse impacts on government revenues, spending, and the overall economy as the California tax structure. The FairTax is a solution to this problem. As such, the FairTax will benefit the economy through better budget management and more efficient government expenditures. Although not typically part of macroeconomic models, such benefits are real and should not be overlooked.
Conclusion
Our current tax system is most aptly described as an inefficient hybrid income/consumption-based tax system. It is also rife with problems: the current tax system is overly complex, costly to administer, creates adverse incentives, and it is plagued with loopholes and random exemptions. Additionally, many of the taxes currently imposed are hidden, obfuscating the system’s true tax burden from taxpayers. As a consequence, the current tax system sacrifices potential U.S. economic growth. The FairTax offers a simple, revenue-neutral alternative to the current tax system. As currently proposed, the FairTax is a pure consumption tax that is not hidden in the price of the product, but visible for all to see.
This proposal also addresses many of the problems inherent in the current tax system. Foremost among these, the FairTax eliminates the current disincentives to save and invest (including the double taxation of corporate income), increases the reward to work, removes many of the tax-induced distortions in the labor and capital markets, and creates a less complex tax system that is easier for taxpayers to comprehend.
By imposing a visible tax that eliminates many of the adverse incentives enshrined in our current tax system, the FairTax creates many economic benefits including:
• Higher total economic output
• More savings
• Higher take-home pay for workers
• Faster employment growth
• Greater rewards to investing that directly lead to more capital formation
• Lower mortgage rates and, consequently, beneficial impacts for the housing market, and
• A more efficient and stable tax revenue system.
For all of these reasons, the FairTax has a great deal to offer as a proposed tax replacement system and is a marked improvement over our current tax regime.
Appendix A
In order to evaluate the impact of the FairTax, we begin with the creation of a baseline short-term and long-term economic outlook for ten years based on the current tax structure. Once the baseline framework is established, the tax policy aspects of the economic model are modified to reflect the FairTax proposal. We employ a neoclassical general equilibrium model of the economy to evaluate these impacts. The model evaluates the production of output with particular attention to the impact that the marginal and average tax rates have on returns and investment decisions. In addition, the household sector is evaluated giving specific attention to the varying marginal and average income tax rates people currently face. Both the household and business sectors establish the amount of domestic savings and domestic consumption in the economy. The domestic savings is augmented by savings from abroad, both of which respond to changes in the after-tax return to capital. Furthermore, households provide labor services to the production process, which varies depending upon the purchasing power of the after-tax wage received. We assume standard responses to changes in after-tax wages and savings behavior (what economists term elasticities) and discuss this issue more fully below.
GDP is modeled by a Cobb-Douglas production function as represented in equation (1):
(1) Y = Ka A L(1-a),
In equation (1) K represents the amount of capital devoted to the production; L is the total number of hours employed in production and A is the technology function; as per standard practice A is estimated as a residual. The parameters (a) and (1-a) represent the factor shares for capital and labor, which take on the standard values of a = 0.3 and (1-a) = 0.7.47
Taking the natural log of (1) and then differentiating the equation with respect to time provides a representation of growth in total output as a function of the growth in technology, capital, and labor:
(2) %ΔY = %ΔA + %ΔK + %ΔL
Where, %Δ represents the percentage change in the variable of interest. For the baseline scenario, %ΔL is set to its long-run average growth rate between 1960 and 2004. Measuring the labor input is relatively straightforward – the sum of all hours worked by the labor force, which the BLS measures on a regular basis. Since 1960, hours worked has risen an average 1.0 percent per year. Consequently, for our baseline assessment, we model the labor supply to grow at this rate for the next ten years.
Assuming that the economy is at its steady state equilibrium level, we set the %ΔK at a level to maintain a constant relationship between capital per worker and output per worker. Subsequently, growth in the economy arises from growth in %ΔA or the technology/productivity factor, which we set at 2 percent per year. This simplified representation has been shown to accurately portray the essential workings of the current U.S. economy.48
Firms are assumed to maximize their profits, which requires the firm to pay capital and labor the value of their marginal products: w = MPL and c = MPK; where w is the market wage rate, MPL is the marginal product of labor, c is the cost of capital, and MPK is the marginal product of capital. The current income tax system complicates these basic relationships by creating a wedge between the costs to the firm and the income received by the factors of production. The primary economic benefits to switching to the FairTax arise through the removal of these complications.
For wages, this complication is represented by the gap between w versus w’ detailed in equation (3):
(3) w’ = w * [1 – τi – (0.5 * (τOASDI + τHI))]
Where, w’ is the wages actually received by the worker, τi is the marginal income tax rate, τOASDI is the marginal tax rate from Social Security taxes, and τHI is the marginal tax rate from Medicare taxes. Note that the incidence of these taxes is imposed directly on worker’s incomes. As a consequence, although the firm is paying the workers their MPL, the workers receive less than their marginal product in income. There is a further complication, however. Under the current payroll tax system, the firm pays one-half of the payroll tax.49 Consequently, the cost to the firm is not w but w * (0.5 * (τOASDI + τHI)). Consequently, in deciding how much labor to utilize, it is this greater value that is of relevance to the firm.
Taxes on capital are a bit more complex as the current tax system taxes capital income several times. The firm will equate the MPK to the cost of capital minus depreciation as detailed in equation (4):
(4) r’ = r – δ
Where, δ is the rate of capital depreciation. In a similar manner to labor, profits face a tax wedge, but the tax is imposed on after-tax profits. The tax on profits does not directly alter the cost of capital relative to labor, and subsequently does not impact the relative levels of capital and labor. We denote the corporate profits tax as τp. In addition, the corporation must pay production taxes and one-half of the Social Security and Medicare taxes τOASDI + τHI as mentioned earlier. Since this tax is proportional to the amount of labor that the firm hires, this tax does alter the relative costs of capital and labor. The after-tax profits of the firm are subsequently detailed in equation (5):
(5) π = [(1 – τp) * (Y – (w * ((1 + (0.5 * (τOASDI + τHI)))) * A L) – (r’ * K))].
Substituting equation (1) into (5) yields:
(6) π = [(1 – τp) * (A Ka L(1-a) – (w * ((1 + (0.5 * (τOASDI + τHI)))) * A L) – (r’ * K))].
If we denote (0.5 * (τOASDI – τHI)) as τs, then the first-order conditions of a profit-maximizing firm imply:
(7) [K /A L] = [(w + τs) / r’] * [a / (1-a)].
Consequently, firms set the ratio of capital to labor in proportion to the after-tax costs in wages to the firm to the cost of capital (including depreciation costs), taking into account the relative factor shares of capital to labor.
Corporate profits can either be retained by the firm for future investment or paid out to the shareholders as dividends. Under either scenario, if the asset is not held in a tax-exempt savings vehicle, then a future tax liability on the part of the owner is created – either immediately in the case of a dividend or in the future in the case of a productive investment that leads to a capital gain liability once the owner realizes that gain. The tax system is not neutral in this case as the immediate tax liability at rates that could be higher than the liability in the future discourages the payments of dividends in favor of activities that lead to capital gains.50 In either case, the income earned is currently taxed at current income tax rates τi. Equation (8) accounts for the individual income taxes paid on this income, which have already been taxed in Equation (7):
(8) DI’ = [(1 – τd) * DI]
Where, DI’ is the after-tax dividend income, DI is the before-tax dividend income, and τd is the weighted average individual income tax rate on dividends. Equation (7) also illustrates that the FairTax will lower the cost of labor compared to capital for firms, encouraging firms to employ more labor.
Workers’ labor supply function is described by equation (9);
(9) Ls = (1+n)t * b1 * (W *(1– τi)) Es * (W *(1– τai))Ei
Where, b1 is a constant, Es is the substitution elasticity, Ei is the income elasticity, and τai is the average tax rate on income. Equation (10) states that the labor supply is dependent upon a constant, which grows at a constant rate over time, which we have assumed to be 1.0 percent per year. Labor supply is also dependent on the after-tax wage responding to both the income and substitution effects. As stated earlier, the substitution effect is expected to have a positive effect on labor supply where the income effect is expected to have a negative effect. Because the substitution effect is examining the cost of leisure, it is the marginal tax rate that matters – the cost to taking the next hour of leisure. The income effect, on the other hand, quantifies the incentive to work less due to a higher income. A higher income reflects not the marginal tax paid but the average taxes paid. Consequently, it is the average tax rate that matters, which is reflected by τai.
Empirical studies of the labor supply elasticity have a wide range of estimates, which we discussed above.51 Based on a review of this literature, we utilize a substitution elasticity of 0.4 and an income elasticity of -0.2.52
Three areas of our economy remain to be specified: the investment function, savings function, and international economy. As shown in Figures 1 and 2, Gross and Net Domestic Investment in the U.S. economy can diverge from Gross and Net Savings, with the difference between these amounts being savings supplied from foreign sources. Our rationale for dividing out the savings and investment functions is that they represent two different (but intimately related) activities. Savings refers to the act of foregoing consumption today for consumption opportunities (presumably greater consumption opportunities) tomorrow. Investment, in the economic sense, refers to the opportunities (or perceived opportunities) to utilize savings today in order to create something of greater value in the future.
Both investment opportunities and the desire to save are interrelated. However, the ability to engage in an investment opportunity is not solely constrained by domestic savings. Should the opportunities to invest resources and expand future production exceed the net funds availability from domestic savings, there is an incentive for savings from overseas to fund these investment opportunities. As a consequence, our model examines the uses (investment) and sources (domestic and foreign savings) separately.
The amount of investment is limited by the supply of investment funds – savings. We model the domestic savings opportunity around the empirical literature on savings elasticities. The literature on savings elasticities varies wildly. To be conservative, we use a value of 0.40 in our analysis.53 The specific savings function is detailed in equation (10):
(10) s = b2 * [r*(1 – τr)]Er
Where, τr is the tax rate applied to savings, and Er is the elasticity of savings. To finish off the model we incorporate an investment/capital accumulation function. Equation (11) details this relationship:
(11) Kt+1 = Kt – (δ * Kt) + I t
As we mentioned earlier, the baseline scenario assumes that the capital accumulation process grows at the level necessary to keep output per person constant. Consequently, for the baseline scenario It grows at the rate of population growth, depreciation, and growth in technology, thereby keeping capital per effective labor and output per effective labor constant. This coincides with the presumption that total savings available for domestic investment remains relatively stable. This increased supply of savings allows for a greater amount of sustained capital per worker at the new growth equilibrium and provides a bigger output impact from the tax reform.
This basic framework was calibrated to approximate the current economy as follows. First, output and wages were set equal to 1. The labor supply is consequently equal to 0.7. The capital supply was set in order to obtain a savings rate that was consistent with current values. Based on these values, the values for the constants and service price for capital were obtained. Interest rates were based on current values and spreads between top rated municipal and corporate bonds as well as the difference between the 10-year Treasury and 30-year mortgage.
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and here is more :
http://www.fairtax.org/PDF/FairTax_on_American_manufacturing.pdf (http://www.fairtax.org/PDF/FairTax_on_American_manufacturing.pdf)
The impact of the FairTax on American manufacturing, agriculture, trade, and international competitiveness
What is the FairTax Plan? The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll taxes with an integrated approach including a progressive national retail sales tax, a rebate to ensure no American pays federal taxes up to the poverty level, dollar-for-dollar revenue neutrality, and the repeal of the 16th Amendment.
The FairTax plan reduces the cost of American manufacturing and agriculture considerably.
Under the FairTax, American manufactured or grown goods and services no longer enter the marketplace burdened with hidden corporate taxes, the cost of compliance with such taxes, and Social Security employee matching. This amounts to an average cost reduction from 12 percent to in some cases more than 25 percent. Said another way, American goods become 12 to 25 percent more competitive.
This nonpartisan legislation (HR 25) abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them all with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities. The FairTax taxes us only on what we choose to spend, not on what we earn. It is a tax on wealth, not wages. It does not raise any more or less revenue; it is designed to be revenue neutral.
How do U.S. goods incur federal taxes today, while imported goods do not?
Let’s buy a bottle of California wine. Or a Boeing 737. Or some Kansas wheat. Or a Caterpillar D10R dozer. Or some consulting services from PricewaterhouseCoopers. While your invoice will not show it, included in the cost you’ll pay is your share of each provider’s corporate income taxes. And you’ll pay for the tax department, accounting firms, and law firms that figure those taxes and defend the audits or lobby tax-law loopholes. While the taxes themselves can go below zero in a bad year, those compliance costs just keep on toting up. And then there is the matching of each employee’s Social Security contribution.
In the price you pay are all three costs (taxes/compliance/matching) for the company that provides the glass bottles containing the wine. And the cork provider. And the label printer. And the label ink supplier. And the label glue manufacturer. And the tires on the 737. And the fertilizer for the wheat. And the paint on the dozer. And the Blackberrys carried by your PwC consultant.
Whether these products and services are provided here in the U.S. or exported, the purchaser is going to pay all of these costs, along with the actual cost of the product, its marketing, and delivery.
Why do American companies move offshore? Antipatriotism or to meet shareholder demand for competitive returns in an ever-less-forgiving world?
Further exacerbating this crippling tax burden on American producers is the fact that U.S. corporate taxes are the highest in the industrialized world, with a top corporate rate about nine percentage points higher than the OECD1 average.2 These taxes also rank among the most complex and least stable or predictable, thanks to the incessant work of an army of lobbyists. This drives huge and ever-increasing compliance costs. To the extent that these corporate and payroll taxes and compliance costs imposed on producers and workers have forward incidence (econospeak for “the consumer pays”) and remain embedded in producer prices, relative prices of goods and services go up in the global marketplace. The only alternative left to producers is to make dispassionate decisions about where to produce or invest. That all too often means moving offshore.
Now let’s buy some French champagne.
Or an Airbus A300. Or some Argentinean wheat. Or a Komatsu D21A-7 dozer. Or some consulting from France’s SOFRECO. While your invoice as a U.S. purchaser will not show it, these providers incurred value-added taxation (VAT) all along the way, which was rebated upon export. Local users pay these hidden taxes; as a U.S. recipient, you do not. When such products arrive here in the U.S., their prices do not include any country-of-origin taxes. There are compliance costs. Sitting side by side, the hidden hand of Uncle Sam raises the price of American goods worldwide, while goods imported into our country bear no such burden from their governments.
It is estimated that border-adjustable tax regimes – virtually the entire world outside of the U.S. – effectively grant their producers an 18-percent price advantage over U.S. produced goods, whether competing here or abroad.3 Since effectively all of our trading partners have such border-adjusting systems, our failure to follow suit results in the equivalent of a self-imposed handicap, stimulating international outsourcing, encouraging plant relocations offshore, and lowering the wages of remaining American workers. A recent report by MIT Professor of Economics Jerry Hausman states that the U.S.’s failure to recognize and confront this problem costs us more than $100 billion in exports annually.4
Border-adjustable taxes are consumption taxes that are removed/rebated upon the export of goods from producing nations. Such nations reciprocate when importing, assessing incoming goods with ad valorem5 taxes. Today, 29 of 30 OECD nations have border-adjustable tax regimes; only the U.S does not. By failing to respond, the net effect is the export of both jobs and entire industries.
The FairTax levels the playing field.
Under the FairTax, imported goods and domestically produced goods incur the same U.S. tax. This stands in stark contrast to the present system, where U.S. companies and workers must pay income tax and payroll taxes, but foreign goods enter the U.S. entirely free of any tax, other than whatever modest customs duties are levied.
The FairTax is inherently border adjusted.6 U.S. exports are not taxed since they are not sold at retail in the U.S., but imports are taxed when sold at retail in the U.S. or when brought into the U.S. by a consumer.7
The FairTax is GATT compliant.
Under the General Agreement for Tariffs and Trade (GATT), indirect taxes, such as VATs or the FairTax, may be border adjusted, while a direct tax, such as the U.S. income tax, may not. Since the FairTax is indisputably an indirect tax, this border-adjustment feature poses no difficulty in implementation or legal compliance.
Many observers – and unemployed or underemployed American manufacturing workers – take the position that this border adjustment gives foreign firms a large advantage. Since their goods do not include the full burden of their domestic governments in their prices, while U.S. goods and services do, some consider this unfair, or at least uncompetitive. Most business leaders would agree. Professional economists are divided. Some agree. Some argue that foreign exchange rates change in response to border tax adjustment, and little competitive advantage is provided to imports.8 The flight of U.S. jobs would appear to provide all-too-real disagreement with this theoretical viewpoint. Others argue that in the short term, imports (i.e., the traded goods sector) gain an advantage that evaporates over time.9 None argue that failure to reciprocate with a border tax adjustment has an adverse impact on the U.S. manufacturers, farmers, or service providers.
Interest rates and currency trading are the significant factors in exchange rates; increased demand for American goods and services is not.
There are many things that affect foreign exchange rates. Expectations about interest rates and inflation rates in the two countries are the most important. The magnitude of currency traded by banks, other financial institutions, governments, and private currency traders dwarfs the amount of currency bought and sold because of international trade. The magnitude of currency trading is vast compared to the small amount of excess demand caused by the U.S. trade deficit and changes in that deficit. It is, therefore, far from clear that the changes in exchange rates generated by an increased demand for U.S. goods would cancel out the improvement in the competitiveness of U.S. produced goods caused by the “border-adjustment” feature built into the FairTax.
A recent study by Professor Hausman found that:
• Existing disparities in treatment of corporate income taxes and VATs for purposes of border adjustment lead to extremely large economic distortions.
• U.S. exporters suffer both domestic income taxes and foreign VATs when selling abroad.
• Foreign exporters in countries relying largely on VATs typically receive a full rebate of such taxes upon export to the U.S., and are not subject to U.S. corporate taxes when sold here.
• This situation creates a very significant tax and cost disadvantage for U.S. producers in international trade with significant impact on investment decisions – leading to the location of major manufacturing and other production facilities in countries that benefit from current rules on the border adjustment of taxes.
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• The adverse economic implications for the U.S. are very large. Ask someone from Michigan.
• Elimination of the current disparity in WTO rules (by eliminating border adjustment for either direct or indirect taxes) would increase U.S. exports by 14 to 15 percent, or approximately $100 billion based upon 2004 import levels.
• Eliminating such economic distortions should be a high priority.
In sum, Professor Hausman agrees exchange rates are not likely to counteract the relative price advantage of foreign produced goods.
To be fair, there are three ways to pay the extortion of our corporate income tax and Social Security systems.
Increasing prices is only the first and most obvious way to pay the piper. But sometimes competition limits the raising of prices. This causes providers to seek lower labor costs. Efficiency takes some jobs, and it should. But then jobs move overseas. Finally, with prices as high as possible and labor costs as low as possible, reducing profits to owners/shareholders is the final means to remain competitive.
Domestically, higher prices are a huge burden to the least affluent Americans, including retirees on fixed incomes. Lower labor costs hit our least affluent sector hardest as well. But when it comes to export/import tax imbalances perpetrated by current federal tax policy, the job losses have a corrosive effect throughout every sector of our labor market. Then, when it comes to reducing profits to shareholders, the losers are extended to union, public employee, and corporate pension funds as well as the cliché wealthy widows. Clearly, being directly competitive benefits all levels of our society. These are real problems, not esoteric discussions by economists.
The FairTax brings more and better jobs to the U.S.
Perhaps a more fundamental issue is the overall impact that the FairTax has on the competitiveness of U.S. industry. U.S. businesses are much less likely to locate their plants or corporate headquarters overseas, and foreign companies come to the United States in droves. Americans are employed building these new plants; Americans are employed in the new plants.
Compliance costs evaporate under the FairTax.
American firms no longer face crushing income tax compliance costs, costs that exacerbate years with no profits. Costs that have no exchange value in the international economy, or any economy for that matter. Costs that amount to make-work to the tune of at least $265 billion each year, as much as three percent of the American gross domestic product annually. Costs that disproportionately burden small business, the biggest job producer. Under the FairTax, this much sand is removed from the gearbox of the American economy. This much friction evaporates.
Under the FairTax, the U.S. becomes a manufacturing haven improving on the Irish model11 and a tax haven improving on the Cayman Islands model.
The cost of capital is much lower. Banks’ costs are reduced by about 25 percent. And the huge pool of U.S. firms’ profits currently trapped offshore comes home, putting substantial downward pressure on interest rates simply due to the availability of capital. Firms producing here do not pay taxes on their profits, unless an American owner’s profits are used to fund consumption, or a foreign income tax imposes taxes on a foreigner’s income earned here. The United States is the most attractive place to build plants in the world. Our sound political and economic system, educated workforce, unparalleled infrastructure, large domestic market, and − once the FairTax tax is passed − extremely attractive tax system draws capital to, and keeps capital in, the United States. The giant sucking sound is job-producing and productivity-enhancing capital flowing to the United States from throughout the world.
The FairTax has broad impact.
In conclusion, the income and Social Security tax systems have a broad and universally negative affect on the American society as a whole. The power to tax is the power to destroy. The FairTax has an equally broad impact, though positive. This is a tax through which the individual has the ultimate power to be taxed – or not. To control the amount of taxation with each purchase. And to avoid taxation altogether, should they chose to live very modestly – at or near the federally mandated poverty level. Besides the multitudinous jobs this returns to American workers, it also reestablishes civil liberties with equal, if not greater, quantity. And this freedom, if perhaps esoteric, may be more important than the tangible result of a good job.
What is the FairTax Plan?
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion legislation, the repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 1025) abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax – administered primarily by existing state sales tax authorities. The IRS is disbanded and defunded. The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
What is Americans For Fair Taxation (FairTax.org)?
FairTax.org is a nonprofit, nonpartisan, grassroots organization solely dedicated to replacing the current tax system. The organization has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts. For more information visit the Web page: www.FairTax.org or call 1-800-FAIRTAX
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and even more :
http://www.fairtax.org/PDF/HowTheFairTaxAffectsWages.pdf (http://www.fairtax.org/PDF/HowTheFairTaxAffectsWages.pdf)
How the FairTax affects wages
Under the FairTax, what you make is what you keep. Income and payroll taxes are no longer withheld from employees’ paychecks. The self-employed are no longer subject to income and self-employment taxes.
The FairTax has a pronounced positive impact on the after-tax real wages of the American people. Real wages increase because:
• Higher investment levels increase the productivity of employees.
• The economy grows more rapidly, increasing the demand for workers and improving job opportunities.
• The economy becomes more productive because we waste fewer resources on needless paperwork related to complying with an overly complex tax system.
• American-based businesses are more competitive in the international marketplace because of the improved tax climate and lower compliance costs.
• Foreign and domestically produced goods are taxed equally, instead of foreign-produced goods enjoying a tax advantage as under current law.
The income of some people increases because they find working more attractive in the absence of income and payroll taxes, and they may choose to work more or at a second job. Others may choose to work less because they are making more money per hour worked, and it is easier for them to meet their personal financial goals. In either case, people are better off.
The most important cause of higher real wages is a higher level of capital investment per worker. A worker or farmer is more productive if he or she has more machinery and equipment to work with, particularly new equipment that incorporates the latest technological innovations. Higher productivity leads to higher real wages. It is impossible, on a sustained basis, for an employer to pay workers higher wages than their productivity justifies because employers that do so would go out of business. Higher investment levels per hour worked explain as much as 97 percent of the increase in inflation-adjusted wages since 1948,
Virtually all economic models project a much healthier economy with the FairTax replacing the current tax system. These models typically project that the economy will be 10 to 14 percent larger in 10 years.2 A dynamic, growing economy provides more and better paying jobs. Laurence Kotlikoff’s study of the FairTax predicted significant macroeconomic and welfare improvements from implementing a national retail sales tax to replace the federal income/payroll tax system.3 These improvements include increasing the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and real wages by 8 percent.4 Furthermore, with such economic growth employers will need more and better trained workers.
Today we spend $265 billion per year – nearly $900 for every American – complying with the present tax system.5 The Government Accountability Office (GAO) recently conducted a review of the research on the compliance costs of the existing federal tax system. The study found that compliance costs are about one percent of GDP.6 We spend much more money complying with the tax system than we do building every automobile and airplane built in the country.7 Under the FairTax, well over three-quarters of these resources can be redirected toward more useful pursuits,8 and the productivity and competitiveness of our industries increases.
Compliance costs, though large, are dwarfed by the efficiency costs of the federal tax system. Efficiency costs occur when tax rules distort the decisions of individuals and businesses regarding work, savings, and consumption and investment. By changing the relative attractiveness of highly taxed and lightly taxed activities, taxes alter decisions such as what to consume and how to invest. When taxpayers alter their behavior in response to tax rules, they often end up with a combination of consumption and leisure that they value less than the combination they could have achieved if they made decisions free of any tax influences. This reduction in value is a welfare loss or efficiency cost. The same GAO study estimated that efficiency costs run in the range of two to five percent of GDP.9
Under the FairTax, businesses are able to compete much more effectively in the international marketplace than under our present tax system. If U.S. firms are more competitive, they will need to employ more workers. As the demand for U.S. workers rises, employment and wages will increase. Because compliance costs and the overall tax burden are lower, firms manufacturing in the United States are better able to compete than today. Firms can sell their products at lower prices and still achieve the same rate of return for their investors.
Under the FairTax, manufacturers of foreign-produced goods pay the same tax as manufacturers of U.S.-produced goods. Under the current tax system, imported goods bear no income or payroll tax on the value added abroad. Similarly, U.S. goods exported abroad contain embedded income and payroll taxes that must be included in the price of the goods, reducing the competitiveness of U.S. firms.
What is the FairTax Plan?
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion legislation, the repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 1025) abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax – administered primarily by existing state sales tax authorities. The IRS is disbanded and defunded. The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
What is Americans For Fair Taxation (FairTax.org)?
FairTax.org is a nonprofit, nonpartisan, grassroots organization solely dedicated to replacing the current tax system. The organization has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts. For more information visit the Web page: www.FairTax.org or call 1-800-FAIRTAX.
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still not enough ?
okay, here you go Decker Dummy :
http://www.fairtax.org/PDF/TheFairTaxAndTheGlobalEconomy.pdf (http://www.fairtax.org/PDF/TheFairTaxAndTheGlobalEconomy.pdf)
The FairTax and the global economy
by Philip L. Hinson, CPA
While waiting to meet someone recently at Barnes & Noble, I picked up a book that caught my eye entitled China, Inc. It was written by Ted C. Fishman.1 It has some eye-popping statistics in it. For example:
• China is home to 1.5 billion people, probably, which would make the official census count of 1.3 billion too low by roughly the population of Germany, France, and the United Kingdom combined. Put another way, China’s uncounted multitude, were it a country on its own, would be the fifth largest in the world.
• The United States has nine cities with populations in excess of 1 million. Eastern and Western Europe combined have 36. China has between 100 and 160.
• There are 220 million “surplus workers” in China’s central and western regions. The number of people working in the United States is about 140 million.
• 300 million rural Chinese will move to cities in the next 15 years. China must build urban infrastructures equivalent to that of Houston every month in order to absorb them. This is the largest human migration in world history by a wide margin.
• General Motors expects the Chinese automobile market to be bigger than the U.S. market by 2025. Some 74 million Chinese families can now afford cars.
There is more, but I think you get the gist. The author poses the question: What could happen when China can manufacture nearly everything – computers, cars, jumbo jets, and pharmaceuticals – that the United States and Europe can, at perhaps half the cost?
If all of that were not enough, in addition to China, India is another potentially enormous economic power on the move. In fact, for at least one recent quarter, India’s economy grew at a rate of 10.4 percent, which was faster than China’s 9.9 percent.2 According to author Gurcharan Das in his book India Unbound, India’s middle class constituted less than 10 percent of the population in 1984 - 1985.3 Since then it has been growing rapidly, but still constitutes less than 20 percent of the population. It will pass the 50-percent mark sometime between 2020 and 2040. Das indicates that India’s individual purchasing power will climb from $2,149 in 1999 to $5,653 per person in 2020 – and to $16,500 in 2040. India’s population crossed the 1 billion mark in the spring of 2000 and it sends six students to a university for every one that China sends.
In a recent column, columnist David Brooks of The New York Times offered the following data points:
1990 472 million
2001 271 million
2015 19 million4
Those figures represent the number of people living in extreme poverty (less than $1/day) in the East Asia and Pacific region countries. This is an astounding 96-percent reduction in that part of the world during a 25-year period in which world population is increasing by more than 33 percent. We are right in the middle of that period.
I saw Newt Gingrich on one of the evening news talk shows promoting his book, Winning the Future. He made the point that we are faced with something in the 21st century that we have never before been challenged by and that is economic competitors which will have economies on the scale of ours. He was speaking, of course, of India and China. He identified three areas where reform is critical in order to meet this new challenge, which is unlike any that we have ever seen before: Litigation, education, and taxation.
His idea of tax reform is, “…a dramatically simplified tax code that favors savings, entrepreneurship, investment, and constant modernization of equipment and technology.”5 Although Mr. Gingrich had not been a strong supporter of the FairTax previously, while he was doing a guest spot on Sean Hannity’s radio show I heard him say that he supported a sales tax which replaced the income tax along the lines of the proposal of John Linder and Neal Boortz.
It should be apparent that we are at a pivotal juncture in our national history. I do not think that it is any exaggeration to say that what is at stake is the standard of living we have become accustomed to as a people and the economic strength that has enabled us to become a beacon of freedom respected by the rest of the world. Since this country was founded, every generation has left a higher standard of living to their children than the one they inherited. It is not inevitable that this track record continue, however.
The FairTax is not the entire solution to this challenge and we should not represent it as such. However, it should be obvious to all that continuing into this new environment with a tax system which puts U.S. producers at such a decided disadvantage as our current one does is a luxury which we can no longer afford. Every institution that we have should be reexamined from a new perspective. This country has risen to every challenge that we have been faced with in our history up until now and I am confident that we can prevail against this new one also. However, for that to happen, the American people need to awaken from their slumber and realize the seriousness of the threat.
What is the FairTax Plan?
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion legislation, the repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 1025) abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax – administered primarily by existing state sales tax authorities. The IRS is disbanded and defunded. The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
What is Americans For Fair Taxation (FairTax.org)?
FairTax.org is a nonprofit, nonpartisan, grassroots organization solely dedicated to replacing the current tax system. The organization has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts. For more information visit the Web page: www.FairTax.org or call 1-800-FAIRTAX.
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more ?
http://www.fairtax.org/PDF/Open_Letter.pdf (http://www.fairtax.org/PDF/Open_Letter.pdf)
An Open Letter to the President, the Congress, and the American people
Concerning Reform of the Federal Tax Code
Dear Mr. President, Members of Congress, and Fellow Americans,
We, the undersigned business and university economists, welcome and applaud the ongoing
initiative to reform the federal tax code. We urge the President and the Congress to work
together in good faith to pass and sign into federal law H.R. 25 and S. 25, which together call
for:
• Eliminating all federal income taxes for individuals and corporations,
• Eliminating all federal payroll withholding taxes,
• Abolishing estate and capital gains taxes, and
• Repealing the 16th Amendment
We are not calling for elimination of federal taxation, which would be irresponsible and
undesirable. Nor does our endorsement call for reduced federal spending. The tax reform plan
we endorse is revenue neutral, collecting as much federal tax revenue as the current income tax
code, including payroll withholding taxes.
We are calling for elimination of federal income taxes and federal payroll withholding taxes.
We endorse replacing these costly, oppressively complex, and economically inefficient taxes
with a progressive national retail sales tax, such as the tax plan offered by H.R. 25 and S. 25 –
which is also known as the FairTax Plan. The FairTax Plan has been introduced in the 109th
Congress and had 54 co-sponsors in the 108th Congress.
If passed and signed into law, the FairTax Plan would:
• Enable workers and retirees to receive 100% of their paychecks and pension benefits,
• Replace all federal income and payroll taxes with a simple, progressive, visible,
efficiently collected national retail sales tax, which would be levied on the final sale of
newly produced goods and services,
• Rebate to all households each month the federal sales tax they pay on basic necessities,
up to an independently determined level of spending (a.k.a., the poverty level, as
determined by the Department of Health and Human Services), which removes the
burden of federal taxation on the poor and makes the FairTax Plan as progressive as the
current tax code,
• Collect the national sales tax at the retail cash register, just as 45 states already do,
• Set a federal sales tax rate that is revenue neutral, thereby raising the same amount of tax
revenue as now raised by federal income taxes plus payroll withholding taxes,
• Continue Social Security and Medicare benefits as provided by law; only the means of
tax collection changes,
• Eliminate all filing of individual federal tax returns,
• Eliminate the IRS and all audits of individual taxpayers; only audits of retailers would be
needed, greatly reducing the cost of enforcing the federal tax code,
• Allow states the option of collecting the national retail sales tax, in return for a fee, along
with their state and local sales taxes,
• Collect federal sales tax from every retail consumer in the country, whether citizen or
undocumented alien, which will enlarge the federal tax base,
• Collect federal sales tax on all consumption spending on new final goods and services,
whether the dollars used to finance the spending are generated legally, illegally, or in the
huge “underground economy,”
• Dramatically reduce federal tax compliance costs paid by businesses, which are now
embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world
markets,
• Bring greater accountability and visibility to federal tax collection,
• Attract foreign equity investment to the United States, as well as encourage U.S. firms to
locate new capital projects in the United States that might otherwise go abroad, and
• Not tax spending for education, since H.R. 25 and S. 25 define expenditure on education
to be investment, not consumption, which will make education about half as expensive
for American families as it is now.
The current U.S. income tax code is widely regarded by just about everyone as unfair,
complex, wasteful, confusing, and costly. Businesses and other organizations spend more than
six billion hours each year complying with the federal tax code. Estimated compliance costs
conservatively top $225 billion annually – costs that are ultimately embedded in retail prices paid
by consumers.
The Internal Revenue Code cannot simply be “fixed,” which is amply demonstrated by more
than 35 years of attempted tax code reform, each round resulting in yet more complexity and
unrelenting, page-after-page, mind-numbing verbiage (now exceeding 54,000 pages containing
more than 2.8 million words).
Our nation’s current income tax alters business decisions in ways that limit growth in
productivity. The federal income tax also alters saving and investment decisions of households,
which dramatically reduces the economy’s potential for growth and job creation.
Payroll withholding taxes are regressive, hitting hardest those least able to pay. Simply
stated, the complexity and frequently changing rules of the federal income tax code make our
country less competitive in the global economy and rob the nation of its full potential for growth
and job creation.
In summary, the economic benefits of the FairTax Plan are compelling. The FairTax Plan
eliminates the tax bias against work, saving, and investment, which would lead to higher rates of
economic growth, faster growth in productivity, more jobs, lower interest rates, and a higher
standard of living for the American people.
The America proposed by the FairTax Plan would feature:
• no federal income taxes,
• no payroll taxes,
• no self-employment taxes,
• no capital gains taxes,
• no gift or estate taxes,
• no alternative minimum taxes,
• no corporate taxes,
• no payroll withholding,
• no taxes on Social Security benefits or pension benefits,
• no personal tax forms,
• no personal or business income tax record keeping, and
• no personal income tax filing whatsoever.
No Internal Revenue Service; no April 15th; all gone, forever.
We believe that many Americans will favor the FairTax Plan proposed by H.R. 25 and S. 25,
although some may say, “it simply can’t be done.” Many said the same thing to the grassroots
progressives who won women the right to vote, to those who made collective bargaining a reality
for union members, and to the Freedom Riders who made civil rights a reality in America.
We urge Congress not to abandon the FairTax Plan simply because it will be difficult to face
the objections of entrenched special interest groups – groups who now benefit from the
complexity and tax preferences of the status quo. The comparative advantage and benefits
offered by the FairTax Plan to the vast majority of Americans is simply too high a cost to pay.
Therefore, we the undersigned professional and university economists, endorse a progressive
national retail sales tax plan, as provided by the FairTax Plan. We urge Congress to make H.R.
25 and S. 25 federal law, and then to work swiftly to repeal the 16th Amendment
Respectfully,
Donald L. Alexander
Professor of Economics
Western Michigan University
Wayne Angell
Angell Economics
Jim Araji
Professor of Agricultural
Economics
University of Idaho
Ray Ball
Graduate School of Business
University of Chicago
Roger J. Beck
Professor Emeritus
Southern Illinois University,
Carbondale
John J. Bethune
Kennedy Chair of Free
Enterprise
Barton College
David M. Brasington
Louisiana State University
Jack A. Chambless
Professor of Economics
Valencia College
Christopher K. Coombs
Louisiana State University
William J. Corcoran, Ph.D.
University of Nebraska at
Omaha
Eleanor D. Craig
Economics Department
University of Delaware
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Henry Demmert
Santa Clara University
Arthur De Vany
Professor Emeritus
Economics and Mathematical
Behavioral Sciences
University of California, Irvine
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Demissew Diro Ejara
William Paterson University of
New Jersey
Patricia J. Euzent
Department of Economics
University of Central Florida
John A. Flanders
Professor of Business and
Economics
Central Methodist University
Richard H. Fosberg, Ph.D.
William Paterson University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Professor James Frew
Economics Department
Willamette University
K. K. Fung
University of Memphis
Satya J. Gabriel, Ph.D.
Professor of Economics and
Finance
Mount Holyoke College
Dave Garthoff
Summit College
The University of Akron
Ronald D. Gilbert
Associate Professor of
Economics
Texas Tech University
Philip E. Graves
Department of Economics
University of Colorado
Bettina Bien Greaves, Retired
Foundation for Economic
Education
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management
and Leadership
Arizona State University
Darrin V. Gulla
Dept. of Economics
University of Georgia
Jon Halvorson
Assistant Professor of
Economics
Indiana University of
Pennsylvania
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
James M. Hvidding
Professor of Economics
Kutztown University
F. Jerry Ingram, Ph.D.
Professor of Economics and
Finance
The University of Louisiana-
Monroe
Drew Johnson
Fellow
Davenport Institute for Public
Policy
Pepperdine University
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Richard E. Just
University of Maryland
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
David L. Kendall
Professor of Economics and
Finance
University of Virginia's College
at Wise
Peter M. Kerr
Professor of Economics
Southeast Missouri State
University
Miles Spencer Kimball
Professor of Economics
University of Michigan
James V. Koch
Department of Economics
Old Dominion University
Laurence J. Kotlikoff
Professor of Economics
Boston University
Edward J. López
Assistant Professor
University of North Texas
Franklin Lopez
Tulane University
Salvador Lopez
University of West Georgia
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
Glenn MacDonald
John M. Olin Distinguished
Professor of Economics and
Strategy
Washington University in St.
Louis
Dr. John Merrifield,
Professor of Economics
University of Texas-San
Antonio
Dr. Matt Metzgar
Mount Union College
Carlisle Moody
Department of Economics
College of William and Mary
Andrew P. Morriss
Galen J. Roush Professor of
Business Law & Regulation
Case Western Reserve
University School of Law
Timothy Perri
Department of Economics
Appalachian State University
Mark J. Perry
School of Management and
Department of Economics
University of Michigan-Flint
Timothy Peterson
Assistant Professor
Economics and Management
Department
Gustavus Adolphus College
Ben Pierce
Central Missouri State
University
Michael K. Pippenger, Ph.D.
Associate Professor of
Economics
University of Alaska
Robert Piron
Professor of Economics
Oberlin College
Mattias Polborn
Department of Economics
University of Illinois
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
Barry Popkin
University of North Carolina-
Chapel Hill
Steven W. Rick
Lecturer, University of
Wisconsin
Senior Economist, Credit Union
National Association
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory Univeristy
John Ruggiero
University of Dayton
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina at
Chapel Hill
Dr. Carole E. Scott
Richards College of Business
State University of West
Georgia
Carlos Seiglie
Dept. of Economics
Rutgers University
John Semmens
Economist
Phoenix College
Arizona
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and
Finance
Marshall School of Business
University of Southern
California
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
James F. Smith
University of North Carolina-
Chapel Hill
Vernon L. Smith
Economist
W. James Smith
Dean of Liberal Arts and
Sciences and Professor of
Economics
University of Colorado at
Denver
John C. Soper
Boler School of Business
John Carroll University
Roger Spencer
Professor of Economics
Trinity University
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and
Resource Economics,
University of California, Davis
Curtis R. Taylor
Professor of Economics and
Business
Duke University
Robert Vigil
Analysis Group, Inc.
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
F. Scott Wilson, Ph.D.
Canisius College
Mokhlis Y. Zaki
Professor of Economics
Emeritus
Northern Michigan University
Once again : Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! ! :o :o :o
Decker the Tax Lawyer does not want you to watch these :
http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
and
http://www.youtube.com/watch?v=IWfIhFhelm8 (http://www.youtube.com/watch?v=IWfIhFhelm8)
Vote for Ron Paul
-
Here is the first deception of the report.
Table 3: Estimated 2004 Revenues if the FairTax Proposal were in Effect on page 6 shows Personal Consumption Expenditures of $8,214.30 for the year and a net Fair Tax Revenue of $1,862.65.
Divide $1,862.65 by $8,214.30 and you get a 23% tax rate.
Boy am I in trouble. I guess it is a....
Wait a moment, what's that?
The scammers are including sales tax revenues the government is paying itself? But isn't this a revenue-neutral tax meaning that for every dollar that goes out as an expenditure, a dollar of revenue comes in?
So the government is paying itself and these scammers are counting that. What a Ponzi Scheme.
Let's do a little math.
$8,214.30 - $1,843.40 (total government consumption) = $6,370.90 (Personal Consumption Expenditures without the shady Gov. pays itself tactic).
What tax rate is that? $1,862.65 divided by $6,370.90 = 29%
23% is not the same as 29% is it?
There's our first deception.
Now let's add in Total Government Gross Investment from that same chart. $372.50 + $1,843.40 = $2,215.90
$8,214.30 - 2,215.90 = $5,998.40
Divide $1,862.65 (Total Fair Tax Revenue) by $5,998.40 and you get: 31% as a REAL TAX RATE.
That is the hidden gift of the Fair Tax.
This is the first in many installments showing the scam of the so-called "Fair Tax".
Here's a freebie: I can't wait to see Congress Amend the Constitution to eliminate the 16th Amendment.
Stay tuned, there's more to come.
-
Hell, we'll split the difference of the above rates of tax and ask anyone here whether they want to pay 30% extra for all their purchases?
Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
What is your problem? For the most part, I make a living out of ensuring nondiscrimination compliance so that the average joe won't get scammed out of his retirement monies.
Scammed by people, in principle, such as yourself who advocate a huge tax hike on joe average while slashing the tax burden of those equipped to handle that burden: the monied elites that have suckered you into supporting a tax that will cut your own throat.
I suppose you also believe that the Laffer Curve can indicate that Tax Cuts Pay for themselves--careful, read your own report.
You smug child.
Do you really believe there is a free lunch in America?
You must. You support a flat tax.
Do you even know why we have the progressive tax policy that we do?
I doubt it. Ron Paul doesn't either.
You'll have to wait for my next chapter debunking your elitest bullshit.
Happy New Year Ozark.
-
(repost in case you missed it Ozark)
Here is the first deception of the report.
Table 3: Estimated 2004 Revenues if the FairTax Proposal were in Effect on page 6 shows Personal Consumption Expenditures of $8,214.30 for the year and a net Fair Tax Revenue of $1,862.65.
Divide $1,862.65 by $8,214.30 and you get a 23% tax rate.
Boy am I in trouble. I guess it is a....
Wait a moment, what's that?
The scammers are including sales tax revenues the government is paying itself? But isn't this a revenue-neutral tax meaning that for every dollar that goes out as an expenditure, a dollar of revenue comes in?
So the government is paying itself and these scammers are counting that. What a Ponzi Scheme.
Let's do a little math.
$8,214.30 - $1,843.40 (total government consumption) = $6,370.90 (Personal Consumption Expenditures without the shady Gov. pays itself tactic).
What tax rate is that? $1,862.65 divided by $6,370.90 = 29%
23% is not the same as 29% is it?
There's our first deception.
Now let's add in Total Government Gross Investment from that same chart. $372.50 + $1,843.40 = $2,215.90
$8,214.30 - 2,215.90 = $5,998.40
Divide $1,862.65 (Total Fair Tax Revenue) by $5,998.40 and you get: 31% as a REAL TAX RATE.
That is the hidden gift of the Fair Tax.
This is the first in many installments showing the scam of the so-called "Fair Tax".
Here's a freebie: I can't wait to see Congress Amend the Constitution to eliminate the 16th Amendment.
Stay tuned, there's more to come.
-
Here's a reference for Ron Paul's misguided idea that there will be no need for an IRS.
National Sales Tax (NST) Hoax: "IRS will be eliminated". The truth is the IRS will become more invasive because it will be needed to:
[1] register and keep a record of every person for the pre-bate
[2] monitor the whereabouts of every citizen: are they in prison?, are they out of the country?, are they members of more than one family?
[3] mail millions of pre-bate checks each month.
[4] collect NST for the 5 states without a sales tax
[5] audit the income-tax-returns of all individuals to ensure that they did not get money from the sales of products or services for which taxes were not collected, or were collected but not sent to the IRS,
[6] audit the income-tax-returns of all firms to ensure that they are collecting the tax on their sales,
[7] audit 45 States for accuracy in collecting NST
[8] audit the purchases of all state, county, and city governments
[9] audit state education lotteries,
[10] issue regulations about what is an investment
[11] etc.
http://www.fair-tax.org/NST.html#IRS
Not only will there be a need for an IRS, the level of governmental meddling will INCREASE under your transparent and simple Fair Tax. What if merchants just decided to keep that extra 30% tax? How would you know they do that unless some branch of enforcement exists?
Guys like you never think these things through.
I like this. I can't wait for the next installment.
Why?
B/c you asked for it.
-
INSTALLMENT #2 ON THE FAIR TAX SCAM
Here are some things we know:
1. The Fair Tax assumptions INCLUDE sales tax the government pays to itself. That's double dipping aka a Ponzi Scheme. For the moment, the true rate of taxation is 31% and not 23%
2. It is extremely likely that the IRS will still exist with more work than ever before b/c of this "transparent and simple tax" (See Reply #122 in this thread)
3. Ozark did not know that payroll taxes are NOT income taxes and that it was Reagan and NOT Clinton that signed the largest tax increase in history.And why do I list that? B/c I can and b/c Ozark's uninformed cheerleading days for the Flat Tax Scam are numbered.
TODAY'S ENTRY
The Laffer report (how poetic) on the Fair Tax Proposal introduced to Congress as H.R. 25 and Senate Bill 25 shows that "The tax rate is not 23%. The Tax Bill, Sec. 2 (a) (5): ". . . `gross payments´ means payments for taxable property or services, including Federal taxes imposed by this title." and Sec. 101 (b) (1): ". . . the rate of tax is 23 percent of the gross payments . . ." In Mathematical modeling "including" means add, "is" means equal, and "of" means multiply. Let X be the "rate of tax", then X is 23% of gross payments. X = .23 multiplied by price plus tax. Let price be 1, then "rate of tax" and "tax" will be the same number. Therefore: X = (.23) (1 + X). Answer: X = .30. The tax rate is 30%.
http://www.fair-tax.org
The Laffer Report admits this on page 5 and then engages in a meaningless comparison with the current income tax system.
The 23% that is used to hoodwink people who do not bother to read the Bill is just a mathematical relationship. It is not money paid. Item sells for $1, National Sales Tax will be 30 cents, and the Total the consumer pays will be $1.30. When you divide $0.30 by $1.30 the answer is 23 percent. This is not the cents the consumer pays. http://www.fair-tax.org
The tax is 30% on purchases of all services and all new products - Sec 1 (b) (2). The Bill requires that the NST be printed on the cash register receipt - Sec 510. You buy an Item. The receipt states: "$1.00 Item", "$0.30 NST", "$1.30 Total". Citizens will be outraged. You pay 30 cents because the rate is 30 percent. The Mathematically-challenged say: "Item costs 77 cents, tax is 23 cents, the total is 1 dollar. That´s a 23 percent tax."
The proponents of the National Sales Tax Bill say the 23 percent is inclusive. That does not have any meaning for the manager of the store who has to program the cash registers to apply the National Sales Tax. The state sales tax is 4%, the local sales tax is 3%, and National Sales Tax is 30%. The store sells an Item for $1.00. The register is programed to multiply $1.00 by 0.04, multiply $1.00 by 0.03, multiply $1.00 by 0.30, and then print the results of the calculations on the receipts and then add all entries and print the total on the receipt:
Item $1.00
.04 State tax .04
.03 Local tax .03
.30 Federal tax .30
Total $1.37
http://www.fair-tax.org
The proponents of the National Sales Tax say the receipt will show the inclusive tax percentage, i.e. the percentage the tax is of the total of the price and the tax:
Item $1.00
.04 State tax .04
.03 Local tax .03
.23 Federal tax .30
Total $1.37
The $0.04 State Sales Tax divided by $1.04 (the total of the price of the item and the sales tax, inclusive) equals 0.038 (the percentage the tax is of the total of the price and the tax, round to 0.04). The $0.03 Local Tax divided by $1.03 (the total of the price of the item and the local tax, inclusive) equals 0.029 (the percentage the tax is of the total of the price and the tax, round to 0.03). The $0.30 National Sales Tax divided by $1.30 (the total of the price of the item and the National Sales Tax, inclusive) equals 0.231 (the percentage the tax is of the total of the price and the tax, round to 0.23).
How many consumers have such low IQ's that they will not understand what is the tax rate?" (I can think of one, can you Ozark?) "Just how many low IQ people are promoting a National Sales Tax and do not understand what is the tax rate? There are thousands of people who cannot preform this analysis. There are thousands who cannot understand it even after this analysis is presented.
http://www.fair-tax.org
Maybe I was wrong about this cutnpaste stuff? Hmmm.
So the real tax rate is 30%. 30% - 23% = 7%
So we add another 7% to the existing rate of 31% for a true Fair Sales Tax of 38%
There's our lesson for the moment, the deceptive assumptions and tax methodology yields not a 23% rate but a 38% national sales tax rate.
Stay tuned. There is much more to come.
-
So Eldon supports the Fair Tax.
Two kinds of people support the Fair Tax.
Those that don't understand it or
Those who understand it but have an ulterior motive:
Ron Paul wants no taxes. And if there will be a tax, then it must be consistent with original intent of the Constitution....along with slavery.
Arthur Laffer is a supplysider and the Fair Tax is a supplyside consumption tax.
The Elites want a big tax cut and the poor and middle class to pay more taxes.
Which type of person are you Eldon....or Ozark or whoever the hell you are?
Are you stupid or do you do you have an ulterior motive?
The Fair Tax doesn't add up.
-
Nice try Decker Dummy, we now both know the true reason for your hatred of the Fair Tax, people wont need crooked Bloodsucking Tax Lawyers much anymore. Then Decker will be saying in his new career......... " would you like to super-size your Fries ? " :o :o
Not only will there be a need for an IRS, the level of governmental meddling will INCREASE under your transparent and simple Fair Tax. What if merchants just decided to keep that extra 30% tax? How would you know they do that unless some branch of enforcement exists?
How is the tax collected?
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
It makes the administrative costs of businesses in that state much lower. The state is paid a one-quarter of one percent fee by the federal government to collect the tax. For states that already collect a sales tax, this fee proves generous. A state can choose not to collect the federal sales tax, and either outsource the collection to another state, or opt to have the federal government collect it directly. If a state chooses to conform to the federal tax base, they will raise the same amount of state sales tax with a lower tax rate -- in some cases more than 50 percent lower -- since the FairTax base is broader than their current tax base. States may also consider the reduction or elimination of property taxes by keeping their sales tax rate at or near where it is currently. Finally, conforming states that are part of the FairTax system will find collection of sales tax on Internet and mail-order retail sales greatly simplified.
The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system
The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
# Does the FairTax improve compliance and reduce evasion when compared to the current income tax?
The old aphorism that nothing is certain except death and taxes should be modified to include tax evasion. Tax evasion is chronic under any system so complex as to be incomprehensible. As a percentage of gross domestic product (GDP), tax evasion in 2001 is beyond 2.6 percent, compared to 1.6 percent in 1991. This represents over 16 percent of taxes due. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. These IRS figures do not include taxes lost on illegal sources of income with a criminal economy estimated at a trillion dollars. All this, despite a major enforcement effort and assessment of tens of millions of civil penalties on American taxpayers in an effort to force compliance with the tax system. Disrespect for the tax system and the law has reached dangerous levels and makes a system based on taxpayer self-assessment less and less viable.
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
Item $1.00
.04 State tax .04
.03 Local tax .03
.30 Federal tax .30
Total $1.37
http://www.fair-tax.org
The proponents of the National Sales Tax say the receipt will show the inclusive tax percentage, i.e. the percentage the tax is of the total of the price and the tax:
Item $1.00
.04 State tax .04
.03 Local tax .03
.23 Federal tax .30
Total $1.37
The $0.04 State Sales Tax divided by $1.04 (the total of the price of the item and the sales tax, inclusive) equals 0.038 (the percentage the tax is of the total of the price and the tax, round to 0.04). The $0.03 Local Tax divided by $1.03 (the total of the price of the item and the local tax, inclusive) equals 0.029 (the percentage the tax is of the total of the price and the tax, round to 0.03). The $0.30 National Sales Tax divided by $1.30 (the total of the price of the item and the National Sales Tax, inclusive) equals 0.231 (the percentage the tax is of the total of the price and the tax, round to 0.23).
How many consumers have such low IQ's that they will not understand what is the tax rate?" (I can think of one, can you Ozark?) "Just how many low IQ people are promoting a National Sales Tax and do not understand what is the tax rate? There are thousands of people who cannot preform this analysis. There are thousands who cannot understand it even after this analysis is presented.
http://www.fair-tax.org
Maybe I was wrong about this cutnpaste stuff? Hmmm.
So the real tax rate is 30%. 30% - 23% = 7%
So we add another 7% to the existing rate of 31% for a true Fair Sales Tax of 38%
There's our lesson for the moment, the deceptive assumptions and tax methodology yields not a 23% rate but a 38% national sales tax rate.
Stay tuned. There is much more to com
First of all used items, including houses, will not be taxed. Secondly the 30% exclusive tax rate (tax applied external to the actual price of the item) under The Fair Tax you refer to is the 23% inclusive tax rate included in the price of every item bought today. Consequently the dollar amount collected from the inclusive tax rate will become the 30% exclusive rate on an item with the Fair tax. Example: $100 item today includes 23% or $23 in hidden taxes. The actual cost is $77. That will be the price listed on the bill with The Fair Tax. The $23 in tax will be collected on that $77 for a rate of 30%(23/77). The bottom line is the dollar amount collected will be the same as it is with the inclusive tax rate collected on items today.
As the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.
Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.
Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.
If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.
If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.
Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.
(http://www.fairtax.org/images/content/pagebuilder/12920.jpg)
We may report the tax rate as $25/$125 = 20 percent, which is the tax-inclusive rate (meaning that the tax is included in the base). Alternately, we may think of the tax rate as $25/$100 = 25 percent, which is the tax-exclusive rate (meaning the tax is excluded from the base). The 23 percent FairTax rate set out in HR 25/S 1025 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, FairTax.org gives the tax rate both ways. Both rates are relevant, since the FairTax is replacing an income tax system, and 23 percent correctly represents the tax burden compared to the current system.
More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
The FairTax rate of 23% (when calculated inclusively like income tax rates) has been thoroughly researched to provide all the revenues now collected under both the income tax system and through FICA payroll taxes. Reports otherwise are largely based on the President's Advisory Panel on Tax Reform which declared the rate would have to be much higher. What the Panel failed to make clear in an amazingly shameless sleight-of-hand is that they never studied the FairTax legislation as it exists in pending legislation. They ignored $22 million of FairTax research and, instead, quietly devised their own national consumption tax which they loaded with the exemptions and deductions they felt were "politically realistic". They also failed to calculate the effects of elimination of the FICA tax on annual taxpayer burdens or on the distributional effects of the FairTax across the income spectrum. Upon completion--and after declaring a national consumption tax flawed--they then refused to publish their underlying assumptions and the top two former Senators who led the exercise found employment in K Street income tax lobbying firms.
Great public policy changes do not happen easily. We believe, however, in the promise of the Founding Fathers that this is a nation, "of, by and for the people". In the last year we have seen more Congressional co-sponsors come on board faster than ever before. We have seen five of eight GOP candidates and one Democratic candidate embrace the FairTax. With increased media coverage, as at least one candidate has made this a central plank of his campaign, more and more Americans have come to understand the powerful benefits the FairTax offers the nation. They are, in turn, joining our growing citizen army and are beginning to communicate their wishes to their elected officials. All of this progress is a consequence of the body politic first learning about and then accepting the FairTax. As our ranks grow such pressure will increase on Members of Congress and at some point, the voice of the people will eclipse the voices of the relatively small number of Washingtonians who profit working the income tax system at great cost to the nation. Enactment of the FairTax will require advanced citizenry and a resurgence of what has been too often forgotten--public policy can and should be driven by the public. All that is required is that we all dare to be fair and remind our elected official that they work for their constituents--not for the narrow self-interests of the tax writing committee, the lucrative tax lobby business or the academicians who have built careers around the complexity of the tax code.
Consumption is a more stable source of revenue than income, as shown in Figure 3. The chart compares the yearly changes in the tax bases for the income tax (adjusted gross income -- AGI) and the FairTax (personal consumption expenditures -- PCE) for years 1974 to 2004. PCE has always grown from year to year, whereas AGI dropped from 2000 to 2001 and from 2001 to 2002 -- two years in a row. The higher growth rates of AGI in boom years result in overspending and then when the economy slows down either budget cuts are needed or, what is more often the case, taxes are raised or the budget deficit increases.
(http://www.fairtax.org/images/content/pagebuilder/11763.gif)
And lastly,
Once again : Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! ! :o :o :o :o
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
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Your answers to my evidence are feeble.
The IRS will not only still exist, it will grow under your Fair Tax Scam. Enforcement, audits, and prebate welfare checks assure that. But you show us "How the Tax is Collected"...how feeble of you.
The only way 23% will stay 23% is if the merchants all cut their profits to mask the true 30% cost of the tax (that's not including the Ponzi scheme of counting the tax dollars the gov. pays to itself--what a scam).
Why are you comparing the FAir tax to the Income tax? It doesn't change the fact that the tax rate is really at least 30% and not 23%. Talk about misdirection. Income tax is not a sales tax. The Gov. does not file a 1040 paying itself income tax you dolt. Unlike your deceitful Fair Tax Scam, where the Gov. pays itself tax income. Can anyone say, "Double Dip"?
As for me, like I said before, you have no idea what nondiscrimination policies are built into the tax code for income tax or retirement plan taxes. Keep up your smoke and mirrors. You just look like an uniformed, uneducated dipshit.
I'll ask you Ozark?
Are you so stupid that you cannot do simple math showing the Fair Tax Scam or do you have an ulterior motive like Ron Paul does?
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Are you so stupid that you cannot do simple math showing the Fair Tax Scam or do you have an ulterior motive like Ron Paul does?
Nice try Decker Dummy, we now both know the true reason for your hatred of the Fair Tax, people wont need crooks Tax Lawyers much anymore. Then Decker will be saying in his new career......... " would you like to supersize that order ? "
The only one on here with an ulterior motive, is Decker the tax lawyer :o
Once again :
The FairTax ends all record keeping and income tax filings of any kind for individuals, totally insulating them from the high costs and abusive tactics of tax preparers. Bad for Decker :o
It is estimated that Americans spend at least $265 billion a year to comply with the tax code -- nearly $900 for every man, woman, and child in America. That is greater than the current federal deficit ($205 billion). Billions of dollars in compliance costs are wasted each year, and we have nothing of value to show for this expenditure -- not one single productive service or product is added to our nation’s wealth. It is estimated that the FairTax dramatically cuts such compliance costs, perhaps as much as 95 percent. Bad for Decker :o :o
There are, of course, still some people who are involved in sales tax return preparation and sales tax administration under the FairTax, but many fewer than those involved with the income tax today. Those tax preparers, tax lawyers, and Internal Revenue Service employees, who are typically well educated and well equipped with transferable skills, will have to find other, more productive work. The projected 10.5 percent growth in the economy during the first year of the FairTax will provide plenty of new jobs. Very bad for Decker :o :o :o
The following is a list of professional and university economists, that endorse the FairTax Plan.
(Decker wants you to believe they are either stupid, or have an ulterior motive )
Donald L. Alexander
Professor of Economics
Western Michigan University
Wayne Angell
Angell Economics
Jim Araji
Professor of Agricultural
Economics
University of Idaho
Ray Ball
Graduate School of Business
University of Chicago
Roger J. Beck
Professor Emeritus
Southern Illinois University,
Carbondale
John J. Bethune
Kennedy Chair of Free
Enterprise
Barton College
David M. Brasington
Louisiana State University
Jack A. Chambless
Professor of Economics
Valencia College
Christopher K. Coombs
Louisiana State University
William J. Corcoran, Ph.D.
University of Nebraska at
Omaha
Eleanor D. Craig
Economics Department
University of Delaware
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Henry Demmert
Santa Clara University
Arthur De Vany
Professor Emeritus
Economics and Mathematical
Behavioral Sciences
University of California, Irvine
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Demissew Diro Ejara
William Paterson University of
New Jersey
Patricia J. Euzent
Department of Economics
University of Central Florida
John A. Flanders
Professor of Business and
Economics
Central Methodist University
Richard H. Fosberg, Ph.D.
William Paterson University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Professor James Frew
Economics Department
Willamette University
K. K. Fung
University of Memphis
Satya J. Gabriel, Ph.D.
Professor of Economics and
Finance
Mount Holyoke College
Dave Garthoff
Summit College
The University of Akron
Ronald D. Gilbert
Associate Professor of
Economics
Texas Tech University
Philip E. Graves
Department of Economics
University of Colorado
Bettina Bien Greaves, Retired
Foundation for Economic
Education
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management
and Leadership
Arizona State University
Darrin V. Gulla
Dept. of Economics
University of Georgia
Jon Halvorson
Assistant Professor of
Economics
Indiana University of
Pennsylvania
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
James M. Hvidding
Professor of Economics
Kutztown University
F. Jerry Ingram, Ph.D.
Professor of Economics and
Finance
The University of Louisiana-
Monroe
Drew Johnson
Fellow
Davenport Institute for Public
Policy
Pepperdine University
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Richard E. Just
University of Maryland
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
David L. Kendall
Professor of Economics and
Finance
University of Virginia's College
at Wise
Peter M. Kerr
Professor of Economics
Southeast Missouri State
University
Miles Spencer Kimball
Professor of Economics
University of Michigan
James V. Koch
Department of Economics
Old Dominion University
Laurence J. Kotlikoff
Professor of Economics
Boston University
Edward J. López
Assistant Professor
University of North Texas
Franklin Lopez
Tulane University
Salvador Lopez
University of West Georgia
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
Glenn MacDonald
John M. Olin Distinguished
Professor of Economics and
Strategy
Washington University in St.
Louis
Dr. John Merrifield,
Professor of Economics
University of Texas-San
Antonio
Dr. Matt Metzgar
Mount Union College
Carlisle Moody
Department of Economics
College of William and Mary
Andrew P. Morriss
Galen J. Roush Professor of
Business Law & Regulation
Case Western Reserve
University School of Law
Timothy Perri
Department of Economics
Appalachian State University
Mark J. Perry
School of Management and
Department of Economics
University of Michigan-Flint
Timothy Peterson
Assistant Professor
Economics and Management
Department
Gustavus Adolphus College
Ben Pierce
Central Missouri State
University
Michael K. Pippenger, Ph.D.
Associate Professor of
Economics
University of Alaska
Robert Piron
Professor of Economics
Oberlin College
Mattias Polborn
Department of Economics
University of Illinois
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
Barry Popkin
University of North Carolina-
Chapel Hill
Steven W. Rick
Lecturer, University of
Wisconsin
Senior Economist, Credit Union
National Association
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory Univeristy
John Ruggiero
University of Dayton
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina at
Chapel Hill
Dr. Carole E. Scott
Richards College of Business
State University of West
Georgia
Carlos Seiglie
Dept. of Economics
Rutgers University
John Semmens
Economist
Phoenix College
Arizona
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and
Finance
Marshall School of Business
University of Southern
California
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
James F. Smith
University of North Carolina-
Chapel Hill
Vernon L. Smith
Economist
W. James Smith
Dean of Liberal Arts and
Sciences and Professor of
Economics
University of Colorado at
Denver
John C. Soper
Boler School of Business
John Carroll University
Roger Spencer
Professor of Economics
Trinity University
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and
Resource Economics,
University of California, Davis
Curtis R. Taylor
Professor of Economics and
Business
Duke University
Robert Vigil
Analysis Group, Inc.
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
F. Scott Wilson, Ph.D.
Canisius College
Mokhlis Y. Zaki
Professor of Economics
Emeritus
Northern Michigan University
Nice try Decker Dummy, we now both know the true reason for your hatred of the Fair Tax, people wont need crooks Tax Lawyers much anymore. Then Decker will be saying in his new career......... " would you like to supersize that order ? "
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
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Way to avoid the questions at hand you novice.
Who tracks the prebate welfare checks. Or do we just mail those out to like everybody? Free money!!!
Thanks for addressing the simple math that I provided showing beyond a doubt what a scam your Fair Tax is.
Ozark avoids all questions requiring critical thought.
Ozark cutsnpastes irrelevant "counter arguments".
Ozark does not know what he's talking about.
I don't want the Fair Tax b/c it is a regressive tax that hurts poor people and the middle class while giving a huge tax cut to the wealthy elites while seriously underfunding our government.
Ozark wants a Fair Tax b/c....well, just b/c he does. He has no answer for the real facts. He just wants it to scrap the IRS and the Code b/c they take his money.
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Way to avoid the questions at hand you novice.
Who tracks the prebate welfare checks. Or do we just mail those out to like everybody? Free money!!!
Thanks for addressing the simple math that I provided showing beyond a doubt what a scam your Fair Tax is.
Ozark avoids all questions requiring critical thought.
Ozark cutsnpastes irrelevant "counter arguments".
Ozark does not know what he's talking about.
I don't want the Fair Tax b/c it is a regressive tax that hurts poor people and the middle class while giving a huge tax cut to the wealthy elites while seriously underfunding our government.
Ozark wants a Fair Tax b/c....well, just b/c he does. He has no answer for the real facts. He just wants it to scrap the IRS and the Code b/c they take his money.
Nice try Decker Dummy, we now both know the true reason for your hatred of the Fair Tax, people wont need crooks Tax Lawyers much anymore. Then Decker will be saying in his new career......... " would you like to supersize that order ? "
Here are the facts:
How does the prebate work?
All valid Social Security cardholders who are U.S. residents receive a monthly prebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The prebate is paid in advance, in equal installments each month. The size of the prebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.
(http://www.fairtax.org/images/content/pagebuilder/11751.jpg)
[1] Alaska and Hawaii have different poverty levels and different FairTax rebates. See charts below.
[2] Federal Register: Jan. 24, 2007 (Vol. 72, No. 15, pp. 3147-3148).
(http://www.fairtax.org/images/content/pagebuilder/11757.jpg)
Why not just exempt food and medicine from the tax? Wouldn’t that be fair and simple?
Exempting items by category is neither fair nor simple. Respected economists have shown that the wealthy spend much more on unprepared food, clothing, housing, and medical care than do the poor. Exempting these goods, as many state sales taxes do, actually gives the wealthy a disproportionate benefit. Also, today these purchases are not exempted from federal taxation. The purchase of food, clothing, and medical services is made from after-income-tax and after-payroll-tax dollars, while their purchase price hides the cost of corporate taxes and private sector compliance costs.
Finally, exempting one product or service, but not another, opens the door to the army of lobbyists and special interest groups that plague and distort our taxation system today. Those who have the money will send lobbyists to Washington to obtain special tax breaks in their own self-interest. This process causes unfair and inefficient distortions in our economy and must be stopped.
Is the 23% FairTax revenue-neutral rate higher or lower when compared to income and Social Security taxes people pay today?
Most people are paying that much or more today -- much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That’s 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in the business taxes and associated compliance costs passed on to consumers in higher prices.
Effective tax rates vs. stated tax rates
Because the 23-percent FairTax rate of $0.23 on every dollar spent is not imposed on necessities, an individual spending $30,000 pays an effective tax rate of only 15.5 percent, not 23 percent. That same individual will pay 17.3 percent of his or her income to federal taxes under current law. See effective tax rates for a family of four at various spending levels in Figure 2.
(http://www.fairtax.org/images/content/pagebuilder/14459.jpg)
Does the FairTax rate need to be much higher to be revenue neutral?
The proper tax rate has been carefully worked out; 23 percent does the job of: (1) raising the same amount of federal funds as are raised by the current system, (2) paying the universal rebate, and (3) paying the collection fees to retailers and state governments. Unlike some other proposals, this rate has been independently confirmed by several different, nonpartisan institutions across the country. Detailed calculations are available from FairTax.org.
How is the Social Security system affected?
Like all federal spending programs, Social Security operates exactly as it does today, except that its funds come from a broad, progressive sales tax, rather than a narrow, regressive payroll tax. Employers continue to report wages for each employee, though, to the Social Security Administration for the determination of benefits. The transition to a reformed Social Security system is eased while ensuring there is sufficient funding to continue promised benefits.
Meanwhile, Social Security/Medicare funds are no longer triple-taxed as under the current system: 1) when payroll taxes are initially withheld; 2) when those withheld payroll taxes are counted as part of the taxable base for income tax purposes; and 3) when the promised benefits are finally received.
Is consumption a reliable source of revenue?
Yes, in fact, consumption is a more stable source of revenue than income, as shown in Figure 3. The chart compares the yearly changes in the tax bases for the income tax (adjusted gross income -- AGI) and the FairTax (personal consumption expenditures -- PCE) for years 1974 to 2004. PCE has always grown from year to year, whereas AGI dropped from 2000 to 2001 and from 2001 to 2002 -- two years in a row. The higher growth rates of AGI in boom years result in overspending and then when the economy slows down either budget cuts are needed or, what is more often the case, taxes are raised or the budget deficit increases.
(http://www.fairtax.org/images/content/pagebuilder/11763.gif)
How is the tax collected?
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
Why is the FairTax better than our current system?
Our present tax system is one of the reasons that people are finding it so difficult to get ahead these days. It is one of the reasons the next generation may not have a standard of living as high as this generation. Cars replaced the horse and buggy, the telephone replaced the telegraph, and the FairTax replaces the income tax. The income tax is holding us back and making it more difficult than it needs to be to improve our families’ standard of living. It makes it needlessly difficult for our businesses to compete in international markets. It wastes vast resources on complying with needless paperwork. We can do better and we must.
Is the FairTax fair?
Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.
How does the FairTax protect low-income and lower-middle-income families and individuals?
Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today.
Under the federal income tax, slow economic growth and recessions have a disproportionately adverse impact on lower-income families. Breadwinners in these families are more likely to lose their jobs, are less likely to have the resources to weather bad economic times, and are more in need of the initial employment opportunities that a dynamic, growing economy provides. Retaining the present tax system makes economic progress needlessly slow, thus harming low-income people the most.
In contrast, the FairTax dramatically improves economic growth and wage rates for all, but especially for lower-income families and individuals. In addition to receiving the monthly FairTax prebate, these taxpayers are freed from regressive payroll taxes, the federal income tax, and the compliance burdens associated with each. They pay no more business taxes hidden in the price of goods and services, and used goods are tax free.
Is it fair for rich people to get the exact same FairTax prebate from the federal government as the poorest person in America?
Let’s look at a billionaire under the FairTax -- if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a prebate of $4,697 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.
Now, let’s look at a middle-income married couple with no children under the FairTax -- if they spend $50,000, they pay $6,803 net of their prebate for an effective tax rate of 13.6 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent!
Figure 4: Comparison of effective tax rates: FairTax, income tax
FairTax Current tax
Expenditures = income $50,000 $50,000
Net tax $6,803 $7,918
Effective tax rate 13.6% 15.8%
n contrast, if this same couple earns $50,000 in wages today under the current tax system, they pay $4,093 in income taxes and $3,825 in payroll taxes for a total of $7,918 in taxes (15.8 percent) -- a tax burden 14.1 percent higher than under the FairTax. In addition, their employer pays another $3,825 in payroll taxes. Most economists agree that the employer payroll tax is actually borne by employees in the form of lower wages. Looked at this way, this couple is paying $11,743 (23.5 percent) in taxes today, which doesn’t even include the hidden taxes they pay every time they make a purchase.
Finally, let’s look at a low-income couple that spends at the poverty level under the FairTax -- they pay no net FairTax at all. Today, under the income tax system, they not only pay 15 percent in payroll taxes, but they also pay hidden taxes -- arising from corporate taxes, private sector compliance costs, and payroll taxes passed on to consumers and embedded in the price of everything they buy.
What about senior citizens, retired people, and anyone on a fixed income?
As a group, seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system.
Some erroneously believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax, seniors pay $0.23 out of every dollar they choose to spend on new goods and services.
Plus, seniors, like everyone else, receive a monthly prebate, in advance of purchases, for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits.
The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. Pension funds, IRAs, and 401(k) plans had assets of $12 trillion in 2004. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax.
All owners of existing homes experience large capital gains due to the repeal of the income tax and implementation of the FairTax Plan. Seniors have dramatically higher home ownership rates than other age groups (81 percent for seniors compared to 65 percent on average). Homes are often a family’s largest asset. Gains are likely to be in the range of 20 percent.
The FairTax makes the economy much more dynamic and prosperous. Consequently, federal tax revenues grow. This makes it less likely that federal budget pressures require Medicare or Social Security benefit cuts.
How does the FairTax help seniors who have paid taxes on their retirement savings or invested in Roth IRAs?
Simply put, the FairTax is a revenue-neutral proposal, raising no more money than does the current system. The FairTax only changes where the money is raised, not the amount.
Additionally, some erroneously believe that people who have invested in Roth IRAs will never pay taxes on this money again. They may not know it, but they are paying corporate income taxes, employer payroll taxes, plus the associated compliance costs that are hidden in the price of every retail purchase they make. Under the FairTax, these hidden taxes are driven out of retail prices. And note, they can determine the amount of tax they pay through their own lifestyle choices.
Furthermore, used goods are not taxed because they have already been taxed once -- when they were new. Therefore senior citizens, like all Americans, do not lose purchasing power, but gain it instead. Moreover, the FairTax preserves the purchasing power of Social Security benefits, and seniors receive a monthly prebate so they don’t pay taxes on the purchase of necessities. Tax-deferred investments get a one-time windfall. Savings invested in any long-term, income-generating asset such as a stock, real estate, or a long-term bond that can’t be called, increase substantially in value. Finally, complex estate planning is an artifact of an earlier age.
How does the FairTax affect wages and prices?
Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.
Why not just exempt necessities from the FairTax instead of providing for a prebate?
The prebate is the most equitable and most efficient way to make the FairTax progressive. If the FairTax were to exempt necessities, the tax rate would have to be 20 percent higher then the FairTax rate with a prebate.
Should the government tax services?
Service providers are not exempt from the income tax today, and should not be exempt from the FairTax. Services now account for well over one-half of the gross domestic product (GDP). Neither consumption of services nor consumption of goods should be tax preferred. And it is economically foolish not to tax the fastest growing segment of our economy. Competition, not politics, should determine what goods and services cost.
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How does the FairTax affect income tax preparers, accountants, and many government employees?
There are, of course, still some people who are involved in sales tax return preparation and sales tax administration under the FairTax, but many fewer than those involved with the income tax today. Those tax preparers, tax lawyers, and Internal Revenue Service employees, who are typically well educated and well equipped with transferable skills, will have to find other, more productive work. The projected 10.5 percent growth in the economy during the first year of the FairTax will provide plenty of new jobs.
But the heavy compliance costs of the income tax are like an anchor holding back economic growth. We have nothing to show for the $265 billion (greater than the current federal deficit -- $205 billion) that we spend each year measuring, tracking, sheltering, documenting, and filing our annual income. Surely these valuable labor and capital resources can be employed more productively -- for example, in following the money trails left by terrorist, drug, and other criminal enterprises, rather than in tracking every American wage earner.
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What about the home mortgage deduction?
The FairTax has positive effects on residential real estate far beyond this narrow question. Today’s homeowners, if they itemize (and 70 percent do not), pay their interest with post-Social Security/pre-income tax dollars. They then pay their principal with post-SS/post-income tax dollars. Those who do not itemize get no advantages at all. Under the FairTax, all homeowners make their entire house payment with pre-tax dollars.
With the FairTax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls; this is a huge savings for consumers. For example, on a $150,000, thirty-year home mortgage at an interest rate of 7.00 percent, the monthly mortgage payment is $999.12 for principal and interest. On that same mortgage at a 5.25 percent interest rate, the monthly payment is $830.01. Over 30 years, the 1.75-percent decrease in interest rates in this instance results in a $60,879 cost savings to the consumer. Finally, first-time buyers save for that down payment much faster, as savings are not taxed.
Under the FairTax, home ownership is a possibility for many who have never had that option under the income tax system. Lower interest rates, the repeal of the income tax, the repeal of all payroll taxes, and the prebate mean that people have more money to spend and have an increased opportunity to become homeowners.
What happens to charitable giving?
Charitable contributions depend on one factor more than any other: The health of the economy (not tax benefits). As a wide range of economists agree on the economic expansion the FairTax delivers, charitable contributions benefit also.
For all of the money that pours into churches every Sunday and into a broad range of charities every day, only the 30 percent who itemize get any tax benefit. The other 70 percent have given and keep giving with no tax benefit whatsoever.
The FairTax allows people to make charitable contributions out of pre-tax dollars. Thus, those generally less affluent taxpayers who do not itemize see their cost of charitable giving go down under the FairTax.
Do corporations get a windfall with the abolition of the corporate tax?
Corporations are legal fictions that have not, do not, and never will bear the burden of taxation. Only people pay taxes. Corporations pass on their tax burden in the form of higher prices to consumers, lower wages to workers, and/or lower returns to investors. The idea that taxing a corporation reduces taxes on, say the working poor, is a cruel hoax. A corporate tax only makes what the working poor buy more expensive, costs them jobs, lowers their lifestyle, or delays their retirement. Under the FairTax Plan, money retained in the business and reinvested to create jobs, build factories, or develop new technologies, pays no tax. This is the most honest, fair, productive tax system possible. Free market competition will do the rest.
Does the FairTax burden the retail industry?
All businesses are tax collectors today. They withhold income and payroll taxes from their employees. Moreover, the vast majority of retail businesses operating in states with a sales tax (45 states currently use a sales tax) are already sales tax collectors. Under the FairTax, retailers are paid a fee equal to one-quarter of one percent of federal sales tax they collect and remit. In addition, of course, retailers no longer bear the cost of complying with the income tax, including the uniform capitalization requirements, the various depreciation schemes, and the various employee benefit and pension rules. Finally, the economic growth resulting from the aggregate, beneficial effects of dramatically lower income tax compliance costs and no payroll or income taxes, customers having substantially more money -- the greatest influence on retail sales -- and a reasonable fee for collecting the FairTax, all ensure that retailers do quite well.
How are state tax systems affected, and can states adequately collect a federal sales tax?
No state is required to repeal its income tax or piggyback its sales tax on the federal tax. All states have the opportunity to collect the FairTax; states will find it beneficial to conform their sales tax to the federal tax. Most states will probably choose to conform. It makes the administrative costs of businesses in that state much lower. The state is paid a one-quarter of one percent fee by the federal government to collect the tax. For states that already collect a sales tax, this fee proves generous. A state can choose not to collect the federal sales tax, and either outsource the collection to another state, or opt to have the federal government collect it directly. If a state chooses to conform to the federal tax base, they will raise the same amount of state sales tax with a lower tax rate -- in some cases more than 50 percent lower -- since the FairTax base is broader than their current tax base. States may also consider the reduction or elimination of property taxes by keeping their sales tax rate at or near where it is currently. Finally, conforming states that are part of the FairTax system will find collection of sales tax on Internet and mail-order retail sales greatly simplified.
How does the plan affect economic growth?
With the penalty for working harder and producing more removed, Americans are free to keep every dollar they earn, and a new era of economic growth and job creation is unleashed. Hidden taxes are history, Americans are able to save more, and businesses invest more. Capital formation, the real source of job creation and innovation, is facilitated. Gross domestic product (GDP) increases by an estimated 10.5 percent in the first year alone. The FairTax as proposed raises the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent.
As U.S. companies and individuals repatriate, on a tax-free basis, income generated overseas, huge amounts of new capital flood into the United States. With such a huge capital supply, real interest rates remain low. Additionally, other international investors will seek to invest here to avoid taxes on income in their own countries, thereby further spurring the growth of our own economy
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What economic changes come at the retail level with the FairTax?
Our baby boom generation has been trained to spend money before inflation eats it up or savings is taxed away. This group, for good or evil, will likely spend their initial pay raise. Others will recognize the advantages of savings and investment. There will be a whole new round of home refinancings. There will likely be a lot of interest in the actual cost of the federal government when consumers see their most recent contribution at the bottom of each retail receipt.
Since the FairTax plan is revenue neutral, the same amount of resources is extracted from the economy as is extracted under current law. These funds are, however, extracted in a less economically damaging way. Every known economic projection shows the economy doing better, often much better, under the FairTax.
Because the economy grows, is more efficient and more productive, that means investment, wages, and consumption are higher than they are under the income tax.
What happens to interest rates?
First, interest rates drop quickly by approximately one-quarter. Interest rates include compensation to the lender for the tax that they must pay on interest you pay them. That is why taxable bonds bear a higher interest rate than tax-exempt bonds. When the tax on interest is removed, interest rates will drop toward today’s tax-exempt rate.
Second, under the current system, savings and investments are taxed. Under the FairTax, savings and investments are not taxed at all. As Americans save more money, the pool of funds in lending institutions grows. When you add to this the flood of capital currently trapped offshore, we realize a huge increase in the pool of capital, thereby causing the cost of borrowing funds to drop.
What happens to the stock market, mutual funds, and retirement funds?
Investors prosper greatly under this plan, since corporations face lower operating costs and individuals have more money to save and invest. The reform significantly enhances the retirement savings and/or retirement spending power of most Americans. The purchase of stocks is considered a purchase for investment purposes and not personal consumption so they are purchased tax free. The service fees charged by the broker, however, are personal consumption and therefore subject to tax.
What happens to tax-free bonds?
Tax-free bonds are still tax free, though they are now directly competitive with corporate bonds. Under the FairTax, equities, treasuries, bonds, and other investments are all tax free. There is a one-time windfall in non-callable instruments, such as corporate bonds; this windfall also has a positive effect on callable instruments with some time remaining to the call date, including treasuries.
How does this affect U.S. competitiveness in foreign trade?
Because the FairTax is automatically border adjustable, the 17 percent competitive advantage, on average, of foreign producers is eliminated, immediately boosting U.S. competitiveness overseas. American companies doing business internationally are able to sell their goods at lower prices but at similar margins, and this brings jobs to America.
In addition, U.S. companies with investments or plants abroad bring home overseas profits without the penalty of paying income taxes, thus resulting in more U.S. capital investment.
And at last, imports and domestic production are on a level playing field. Exported goods are not subject to the FairTax, since they are not consumed in the U.S.; but imported goods sold in the U.S. are subject to the FairTax because these products are consumed domestically.
What about border issues?
It is unlikely that “shopping across the border” in Canada or Mexico will result in any cost savings to the consumer. Remember, the FairTax is revenue neutral and therefore price neutral. This means the relative cost of retail goods and services after the FairTax remains very close to the same levels found in the marketplace today. With regard to interstate competition, since all states have the same federal sales tax rate, the federal sales tax is not an incentive to cross state lines to avoid the tax.
Does the FairTax improve compliance and reduce evasion when compared to the current income tax?
The old aphorism that nothing is certain except death and taxes should be modified to include tax evasion. Tax evasion is chronic under any system so complex as to be incomprehensible. As a percentage of gross domestic product (GDP), tax evasion in 2001 is beyond 2.6 percent, compared to 1.6 percent in 1991. This represents over 16 percent of taxes due. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. These IRS figures do not include taxes lost on illegal sources of income with a criminal economy estimated at a trillion dollars. All this, despite a major enforcement effort and assessment of tens of millions of civil penalties on American taxpayers in an effort to force compliance with the tax system. Disrespect for the tax system and the law has reached dangerous levels and makes a system based on taxpayer self-assessment less and less viable.
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
Finally, the wealthy make decisions on charitable giving based on the cause. Once they have determined the cause is worthy, their contribution is structured to maximize the gift and minimize the tax. But the intention to give comes first; taxes simply determine the structure -- rarely the amount -- of the gift.
What other significant economies use such a tax plan?
Two of the largest economies in the world rely almost solely on sales taxes: Florida and Texas. Many civilizations in history have relied solely on transaction-based consumption taxes: A percentage of a grain shipment in exchange for a safe harbor. Even a cursory study of history shows that nation/states that relied on consumption taxes flourished and prospered, supported democracies/republics, had expanding economies, and high levels of civil rights for their citizens. The exact opposite is true for empires that relied on income/poll/head taxes. These taxes were used to support despots, eventually collapsed the economies in which they were applied, and sundered civil rights.
The sales tax is a familiar tax, being a major source of revenue in 45 states and the District of Columbia. It is true, however, that no post-industrial nation, until now, has ever repealed its income tax and replaced it with a federal retail sales tax. However, England did repeal its detested income tax upon the defeat of Napoleon and enjoyed the fastest, longest expansion of its economy in its long history. An expansion that ended only with the -- you guessed it -- re-imposition of an income tax.
Is the FairTax just another conservative tax scheme? Or just another liberal tax scheme?
The FairTax has nonpartisan support from people in all walks of life. From both major parties and several third parties. Its supporters need only have one common belief: That it is a fairer, simpler, more efficient way to raise federal revenue. The FairTax delivers these benefits to all American people and more. More government accountability for taxpayer dollars, a tax system that is less susceptible to being manipulated by special interests, a tax system that will make it easier -- not harder -- for the average person to get ahead, and perhaps most importantly, a tax system that provides real, honest, and transparent tax relief for those who need it most.
How does the income tax affect our economy?
How does dragging an anchor affect the speed of a ship? Our entire economy is not dependent on the income tax. Instead, our economy is held back by the income tax. There was no income tax for the first 124 years of our history -- that’s more than half the time we have existed as a nation. A study by the Government Accountability Office estimated that the federal tax system imposed efficiency costs on the U.S. economy of two to five percent of GDP. Under the FairTax, within ten years average Americans will be at least 10 percent and probably 15 percent better off than they would be under the current system. That translates to an increase of $3,000 to $4,500 per household, per year.
How does this plan affect compliance costs?
It is estimated that Americans spend at least $265 billion a year to comply with the tax code -- nearly $900 for every man, woman, and child in America. That is greater than the current federal deficit ($205 billion). Billions of dollars in compliance costs are wasted each year, and we have nothing of value to show for this expenditure -- not one single productive service or product is added to our nation’s wealth. It is estimated that the FairTax dramatically cuts such compliance costs, perhaps as much as 95 percent.
What do we experience in the transition from the income tax to the FairTax?
Everyone will have to think about taxes in a different way. Income -- what we earn -- no longer has to be documented, measured, and tracked for tax purposes. The only relevant measure of our tax liability is the amount we choose to spend on final, discretionary consumption. Tax-related issues are suddenly a lot simpler and more straightforward than they used to be. The aggravation and anxiety associated with “April 15th ” disappears forever after passage of the FairTax. The FairTax is not new -- most Americans come into contact with sales taxes daily, since 45 states currently use them to collect state revenues. It is easier to switch from an income tax to the FairTax system than it is to switch from gallons to liters, or from feet to meters! Of course, those who depend on the structure and complexity of our current system (e.g., tax lobbyists, tax preparers, and tax shelter promoters) will have to find more productive economic pursuits. However, everyone will have enough advance notice to adjust to the new system.
Job creation booms. Residential real estate booms. Financial services boom. Exports boom. Retail prospers. Farming and ranching prosper. Churches and charities prosper. Civil liberties are enhanced. In short, it is difficult to imagine the far-reaching, positive effects of this change. Though this tax policy is exactly what our Founding Fathers counseled us to do with the Federalist Papers and the Constitution.
Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?
Absolutely, as you can see in Figure 6 below -- where the graph shows annual expenditures for a family of four and the corresponding FairTax effective tax rates. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the rebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.
No other country has a system of government like ours, and no other country has led the world in so many fields as ours. It was France and Germany that forced the imposition of a VAT in addition to income taxes across the European Community. Shall we follow France’s lead?
Figure 6: Annual expenditures vs. FairTax effective tax rates, for a family of four
(http://www.fairtax.org/images/content/pagebuilder/10457.gif)
Ron Paul
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Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
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More irrelevant comparisons to the income tax from Scammer Ozark.
We know this to be true about the Fair Tax Scam:
1. The Fair Tax assumptions INCLUDE sales tax the government pays to itself. That's double dipping aka a Ponzi Scheme. For the moment, the true rate of taxation is 31% and not 23%
2. It is extremely likely that the IRS will still exist with more work than ever before b/c of this "transparent and simple tax" (See Reply #122 in this thread)
3. The true Fair Sales Tax is 38%. As an inclusive sales tax, the tax is 30% on purchases of all services and all new products - Sec 1 (b) (2). The Bill requires that the NST be printed on the cash register receipt - Sec 510. You buy an Item. The receipt states: "$1.00 Item", "$0.30 NST", "$1.30 Total".
Now here's why the Poor will Pay big taxes under the FAir Tax Scam:
National Sales Tax (NST) Hoax: "the poverty level income will not be taxed". The Bill requires a pre-bate of 23% of the poverty level income. The 2006 A.D.¹ Guideline poverty level is $9,800.00. The pre-bate will be $2,254.00 ($9,800.00 * .23 = $2,254.00). The poverty-level income person can buy $7,513.33 worth of products and services using the pre-bate to pay the 30% NST ( .30X = $2,254.00 therefore X =$7,513.33 ). Then the poverty level income person will use only his/her remaining $2,286.67 ( $9,800.00 - 7,513.33 = $2,286.67 ) to buy $1,758.98 worth of products and pay $527.69 for NST ( X + .30X = $2,286.67 therefore X = $1,758.98 for products. $2,286.67 total available minus $1,758.98 for purchases = $527.69 for NST ).
What sort of irrational, cruel people are promoting this system as a fair tax, when a person with a poverty level income pays $527.69 in federal taxes? This will severely punish the people living off of Social Security. To the Mathematically-challenged: calculate the taxes paid when the poverty level income is $20,000. Surprise! The Math of the Bill will always tax poverty-level income.
National Sales Tax (NST) Hoax: "low incomes will pay little taxes". A person earning $6 per hour will gross $12,480.00 per year. The pre-bate will be $2,254.00. This person can buy $7,513.33 worth of products using the pre-bate to pay the NST. S/he will purchase products and pay the sales tax with his/her own money ($4,966.67) after spending $7,513.33 ($12,480 - $7,513.33 = $4,966.67. The sales tax is 30%, therefore X + .30X = $4,966.67. X will equal $3,820.52 for purchases. That will be $4,966.67 total available minus $3,820.52 for purchases equals $1,146.15 for taxes.
The effective federal income tax rate will be $1,146.15 / $12,480 = 9.18% of the poor person's income. This sales tax system will create effective income tax rates that will plot a negatively accelerating curve that is more obscene than the current bracket system plots. A negatively accelerating curve means that the tax rate increases faster on low and middle incomes than it does on high incomes. Construct a graph. Percent tax on the Y axis. Gross income on the X axis. Draw a straight line from 0 thru 9.18% tax and $12,480 income, and you will get a 50% tax at about $64,000 income. This places the 9.18% tax in perspective. The straight line is because the income tax rate should increase the same for all incomes.
http://www.fair-tax.org/NST.html#Poverty
Even with the Tax bill's own numbers, the poor and working poor will be paying more under the Fair Tax Scam.
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The FairTax Rate: a 23% tomato or a 30% tomato?
05/31/2007
tomatoAs the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.
Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.
Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.
If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.
If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.
Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.
(http://www.fairtax.org/images/content/pagebuilder/12920.jpg)
We may report the tax rate as $25/$125 = 20 percent, which is the tax-inclusive rate (meaning that the tax is included in the base). Alternately, we may think of the tax rate as $25/$100 = 25 percent, which is the tax-exclusive rate (meaning the tax is excluded from the base). The 23 percent FairTax rate set out in HR 25/S 1025 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, FairTax.org gives the tax rate both ways. Both rates are relevant, since the FairTax is replacing an income tax system, and 23 percent correctly represents the tax burden compared to the current system.
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FairTax Facts
COMMENTARY from The Wall Street Journal Online, p. A10
Much has been written lately about the FairTax, the proposal to replace the current federal income tax with a national retail sales tax. Unfortunately, much of it is wrong.
This country needs a spirited and wide-ranging debate about fundamental tax reform. But that debate is not advanced by misimpressions and distortions of the FairTax. Let us then clear up a few.
One assertion about the FairTax is that it began as a project of the Church of Scientology at a time when it was seeking tax-exempt status. This is false. The FairTax actually comes to us from market research conducted more than a decade ago by a handful of business leaders. Their goal was to determine what type of tax system would be most acceptable to the American public. The studies they paid for cost millions of dollars, included hard economic research by respected scholars, and were subjected to critical peer review. The result is a proposal, since introduced as legislation in Congress, now known as the FairTax.
What emerged from this research is that a national retail sales tax is a preferred method of taxation among most Americans surveyed. Another is that the tax would have significant benefits for the nation's economy.
Why? Because it eliminates income taxes and payroll taxes (for Social Security and Medicare), which are costly to collect and end up as "embedded" in the price of everything we buy. Along with getting rid of the Internal Revenue Service and the complexities of the income tax code, the FairTax would eliminate the distorting effect that income and payroll taxes have on the economy.
Research on the price of consumer goods reveals that up to 20% of all prices today represent hidden income taxes and payroll taxes. Once these taxes are repealed and replaced with the FairTax, it is likely that market pressure would force retail prices to fall.
Eliminating embedded taxes will also do something else -- it will remove significant price disadvantages suffered by American producers competing with tax-free imports. Eliminating corporate income taxes and capital gains taxes, which the FairTax would do, would likely make the American economy the most desirable place in the world to do business.
Another benefit of the FairTax is that, unlike other sales taxes, it would not hit the poorest Americans the hardest. The FairTax proposal calls for sending every American a "prebate" check to offset the cost of the national sales taxes paid by those living in poverty. This feature would effectively exempt those living below the poverty line from paying taxes to the federal government, and provide all taxpayers with a reimbursement of a portion of taxes paid.
The FairTax rate is 23% on retail sales when calculated "inclusively," as are income tax rates. It will, in a fairer, more transparent and less-expensive way, raise the same amount of money the federal government now collects through the income and payroll taxes. Because it would be levied on consumption at the final point of sale, instead of on earnings, it would dramatically expand the tax base. The FairTax would collect revenue from the underground economy. Even illegal immigrants and the 40 million foreign tourists who visit the U.S. each year would pay it.
The distributional effects of the FairTax have been extensively studied, and although the proposal has distinct advantages for investors and wealth creation across the income spectrum, the greatest benefit of the FairTax is to low- and moderate-income Americans. The effect of eliminating regressive payroll taxes is commonly overlooked when analyzing the FairTax, but it would have a very significant impact, as these taxes represent the single largest tax burden on these income earners.
Significantly, the FairTax eliminates all loopholes, gimmicks, exemptions and deductions from the federal tax system. Under the FairTax, Congress would no longer be able to reward friends, punish enemies or manipulate behavior through the tax code. The FairTax would also eliminate the lucrative tax lobbying practices that represent more than 50% of all lobby dollars spent annually in Washington.
It's no surprise, then, to see that vested interests have argued against the FairTax and in favor of keeping the mortgage interest deduction. But wouldn't it be better for everyone to stop the IRS from withholding from paychecks; to see the price of new homes -- and all other goods -- drop by removing embedded costs; and to have interest rates fall as the savings rate increases? Is it really in everyone's interests to keep the income-tax system so that one-third of taxpayers can go on deducting a portion of their mortgage interest from their federal taxes?
There have been many tax reform proposals over the years, but most of them simply call for reforming around the margins of the existing tax system. The President's Advisory Panel on Tax Reform was assembled by the Bush administration and concluded its work a few years ago. Instead of seriously looking at the FairTax, the panel looked at a very different type of consumption tax, riddled with exemptions, and then declared that it would be too expensive and that the rate would have to be far higher than the FairTax rate.
Politically, the FairTax will only become law once enough citizens demand that it be enacted, overcoming the self-interest that members of Congress and others have in holding onto the current system. It is debatable whether a modern, citizen-led tax revolution is possible. But the growing popularity (even among presidential candidates) of the FairTax suggests that another Boston Tea Party may be at hand.
Ron Paul
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Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
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The FairTax Rate: a 23% tomato or a 30% tomato?
05/31/2007
tomatoAs the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.
Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.
Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.
If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.
If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.
Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.
(http://www.fairtax.org/images/content/pagebuilder/12920.jpg)
We may report the tax rate as $25/$125 = 20 percent, which is the tax-inclusive rate (meaning that the tax is included in the base). Alternately, we may think of the tax rate as $25/$100 = 25 percent, which is the tax-exclusive rate (meaning the tax is excluded from the base). The 23 percent FairTax rate set out in HR 25/S 1025 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, FairTax.org gives the tax rate both ways. Both rates are relevant, since the FairTax is replacing an income tax system, and 23 percent correctly represents the tax burden compared to the current system.
What's the point of comparing the income tax to your scam Fair Tax?
As an inclusive sales tax, the tax is 30% on purchases of all services and all new products - Sec 1 (b) (2). The Bill requires that the NST be printed on the cash register receipt - Sec 510. You buy an Item. The receipt states: "$1.00 Item", "$0.30 NST", "$1.30 Total".
The only way for the 23% to be the applicable rate would be if the Nation's Business Men absorbed the extra 7% total sales tax.
Yeah, and that'll really happen.
And I will repeat, Why are you comparing the Income tax to your Fair Tax Scam? The comparison serves no purpose other than to compare apples with oranges....and to fool people like yourself into thinking the comparison is really saying that 23% percent is 30%.
Basic math shows your Fair Tax as the Elitest Tax Raising Scam it is.
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The FairTax will not be enforceable and evasion will be rampant"
The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
"The FairTax will not be revenue neutral (i.e. bring in the same revenue as the current system) at 23%"
The truth: The FairTax rate of 23% (when calculated inclusively like income tax rates) has been thoroughly researched to provide all the revenues now collected under both the income tax system and through FICA payroll taxes. Reports otherwise are largely based on the President's Advisory Panel on Tax Reform which declared the rate would have to be much higher. What the Panel failed to make clear in an amazingly shameless sleight-of-hand is that they never studied the FairTax legislation as it exists in pending legislation. They ignored $22 million of FairTax research and, instead, quietly devised their own national consumption tax which they loaded with the exemptions and deductions they felt were "politically realistic". They also failed to calculate the effects of elimination of the FICA tax on annual taxpayer burdens or on the distributional effects of the FairTax across the income spectrum. Upon completion--and after declaring a national consumption tax flawed--they then refused to publish their underlying assumptions and the top two former Senators who led the exercise found employment in K Street income tax lobbying firms.
"The FairTax is not politically viable"
The truth: Great public policy changes do not happen easily. We believe, however, in the promise of the Founding Fathers that this is a nation, "of, by and for the people". In the last year we have seen more Congressional co-sponsors come on board faster than ever before. We have seen five of eight GOP candidates and one Democratic candidate embrace the FairTax. With increased media coverage, as at least one candidate has made this a central plank of his campaign, more and more Americans have come to understand the powerful benefits the FairTax offers the nation. They are, in turn, joining our growing citizen army and are beginning to communicate their wishes to their elected officials. All of this progress is a consequence of the body politic first learning about and then accepting the FairTax. As our ranks grow such pressure will increase on Members of Congress and at some point, the voice of the people will eclipse the voices of the relatively small number of Washingtonians who profit working the income tax system at great cost to the nation. Enactment of the FairTax will require advanced citizenry and a resurgence of what has been too often forgotten--public policy can and should be driven by the public. All that is required is that we all dare to be fair and remind our elected official that they work for their constituents--not for the narrow self-interests of the tax writing committee, the lucrative tax lobby business or the academicians who have built careers around the complexity of the tax code.
-
FairTax Facts
COMMENTARY from The Wall Street Journal Online, p. A10
Much has been written lately about the FairTax, the proposal to replace the current federal income tax with a national retail sales tax. Unfortunately, much of it is wrong.
This country needs a spirited and wide-ranging debate about fundamental tax reform. But that debate is not advanced by misimpressions and distortions of the FairTax. Let us then clear up a few.
One assertion about the FairTax is that it began as a project of the Church of Scientology at a time when it was seeking tax-exempt status. This is false. The FairTax actually comes to us from market research conducted more than a decade ago by a handful of business leaders. Their goal was to determine what type of tax system would be most acceptable to the American public. The studies they paid for cost millions of dollars, included hard economic research by respected scholars, and were subjected to critical peer review. The result is a proposal, since introduced as legislation in Congress, now known as the FairTax.
What emerged from this research is that a national retail sales tax is a preferred method of taxation among most Americans surveyed. Another is that the tax would have significant benefits for the nation's economy.
Why? Because it eliminates income taxes and payroll taxes (for Social Security and Medicare), which are costly to collect and end up as "embedded" in the price of everything we buy. Along with getting rid of the Internal Revenue Service and the complexities of the income tax code, the FairTax would eliminate the distorting effect that income and payroll taxes have on the economy.
Research on the price of consumer goods reveals that up to 20% of all prices today represent hidden income taxes and payroll taxes. Once these taxes are repealed and replaced with the FairTax, it is likely that market pressure would force retail prices to fall.
Eliminating embedded taxes will also do something else -- it will remove significant price disadvantages suffered by American producers competing with tax-free imports. Eliminating corporate income taxes and capital gains taxes, which the FairTax would do, would likely make the American economy the most desirable place in the world to do business.
Another benefit of the FairTax is that, unlike other sales taxes, it would not hit the poorest Americans the hardest. The FairTax proposal calls for sending every American a "prebate" check to offset the cost of the national sales taxes paid by those living in poverty. This feature would effectively exempt those living below the poverty line from paying taxes to the federal government, and provide all taxpayers with a reimbursement of a portion of taxes paid.
The FairTax rate is 23% on retail sales when calculated "inclusively," as are income tax rates. It will, in a fairer, more transparent and less-expensive way, raise the same amount of money the federal government now collects through the income and payroll taxes. Because it would be levied on consumption at the final point of sale, instead of on earnings, it would dramatically expand the tax base. The FairTax would collect revenue from the underground economy. Even illegal immigrants and the 40 million foreign tourists who visit the U.S. each year would pay it.
The distributional effects of the FairTax have been extensively studied, and although the proposal has distinct advantages for investors and wealth creation across the income spectrum, the greatest benefit of the FairTax is to low- and moderate-income Americans. The effect of eliminating regressive payroll taxes is commonly overlooked when analyzing the FairTax, but it would have a very significant impact, as these taxes represent the single largest tax burden on these income earners.
Significantly, the FairTax eliminates all loopholes, gimmicks, exemptions and deductions from the federal tax system. Under the FairTax, Congress would no longer be able to reward friends, punish enemies or manipulate behavior through the tax code. The FairTax would also eliminate the lucrative tax lobbying practices that represent more than 50% of all lobby dollars spent annually in Washington.
It's no surprise, then, to see that vested interests have argued against the FairTax and in favor of keeping the mortgage interest deduction. But wouldn't it be better for everyone to stop the IRS from withholding from paychecks; to see the price of new homes -- and all other goods -- drop by removing embedded costs; and to have interest rates fall as the savings rate increases? Is it really in everyone's interests to keep the income-tax system so that one-third of taxpayers can go on deducting a portion of their mortgage interest from their federal taxes?
There have been many tax reform proposals over the years, but most of them simply call for reforming around the margins of the existing tax system. The President's Advisory Panel on Tax Reform was assembled by the Bush administration and concluded its work a few years ago. Instead of seriously looking at the FairTax, the panel looked at a very different type of consumption tax, riddled with exemptions, and then declared that it would be too expensive and that the rate would have to be far higher than the FairTax rate.
Politically, the FairTax will only become law once enough citizens demand that it be enacted, overcoming the self-interest that members of Congress and others have in holding onto the current system. It is debatable whether a modern, citizen-led tax revolution is possible. But the growing popularity (even among presidential candidates) of the FairTax suggests that another Boston Tea Party may be at hand.
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
The Fair Tax Scam was organized by wealthy people in Texas to push the nation's tax burden from themselves to the poor and middle class.
National Sales Tax (NST) Wish: "when the NST is enacted prices will be unchanged". This is because 23% of the price of every service and new product is various taxes (income tax, social security, etc.). These taxes will be eliminated and a 30% sales tax will be added. Example: an item now sells for $1. The 23% included taxes will be eliminated ( $1 * .23 = 23 cents ). The item then sells for 77 cents ( $1 - $ .23 = $ .77 ). A 30% NST will be added ($ .77 * .30 NST = 23 cents ) for a sale price of $1 ( $ .77 + $ .23 = $1.00).
If the proponents of the Bill really expect this to happen, then it is irrational and irresponsible to give every person who is at least 18 years old a pre-bate of $2,254 to pay the NST. This is typical of this poorly reasoned Congressional Bill. If eliminating the included 23 percent taxes and adding the 30 percent NST produces the same amount of revenue, then the pre-bates will be a huge outflow of money from the U.S. Treasury. 230,000,000 people aged 18 and over, multiplied by $2,254 = $518,420,000,000. This new item of over 518 Billion dollars will now be in the federal budget.
http://www.fair-tax.org/NST.html#Unchanged
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Your flat national sales tax is regressive by definition. That hurts the poor and middle class. Ron Paul agreed with that assessment on Russert's show.
Your nonsensical, untraceable, unauditable welfare Prebates do little to change that fact.
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The FairTax is revenue neutral at $0.23 out of every retail dollar spent.
The FairTax is imposed on a base indisputably twice as large as the base of taxable income
today. The truth is that the FairTax rate is the lowest rate possible for any tax plan that does not
tax returns on capital more than once or tax the necessities of life, and is far less than the
marginal rates on labor or capital required by the current system.
The FairTax rate of $0.23 out of every retail dollar spent on new goods or services works.
The Beacon Hill Institute at Suffolk University and Laurence Kotlikoff, Professor of Economics
and noted public finance expert at Boston University, recently teamed up to provide a sound
methodology for estimating the FairTax base and computing the FairTax rate.1 Their report:
• Demonstrates that the 23 percent rate (as compared to current rate terminology for the
taxes the FairTax replaces) specified by the Fair Tax Act (HR 25) is eminently feasible.
• Suggests what led Gale2 and the President’s Advisory Panel on Federal Tax Reform3 to
reach the opposite – and incorrect – conclusion.
Beacon Hill Institute and Dr. Kotlikoff estimate the FairTax base for 2007 to be $11.244
trillion. Implementing the FairTax rate of 23 percent on this base would generate federal tax
revenues equal to $2.586 trillion – $358 billion more than the $2.228 trillion in tax revenues
generated by the taxes it repeals. According to the Congressional Budget Office, 2007 spending
(assuming current levels) is projected to be $3.285 trillion. Revenues from the FairTax at a 23
percent tax rate ($2.586 trillion) plus other federal revenues not repealed by the FairTax are
estimated to yield $3.209 trillion – an amount $76 billion less than the CBO projection. The $76
billion figure is remarkably small when set against the more than 30 percent increase in the real
value of discretionary spending since 2004.4 At 23 percent, non-Social Security spending in
2007 would be $2.102 trillion compared to $2.113 trillion in 2006, a difference of only $12
billion or less than one percent.
The report goes on to prove that implementation of the FairTax, including the
requirement that state and local governments pay the tax on their purchases, entails no reduction
in state and local real spending, provided that these governments adjust their tax structure to
maintain the same state/local tax burden on taxpayers under the current system.
The FairTax lowers the lifetime tax burden for most Americans.
In other research, Dr. Kotlikoff finds that the FairTax lowers marginal tax rates on work and
saving, cuts remaining average lifetime tax rates,5 and enhances overall progressivity. This
occurs because the reduction in these rates is proportionately much greater at the low end of the
earnings distribution than at the high end. Consider a middle-aged couple with two children
earning $20,000 per year compared to that same couple earning $500,000 per year. In switching
to the FairTax, the low-income couple’s FairTax rate is only 1.5 percent versus 11.0 percent
under the current system. The high-income couple’s FairTax rate is 20.5 percent versus 35.6
percent under the current system. The low-income couple gets an 86 percent cut in their average
remaining lifetime tax rate, whereas the high-income couple gets a 42 percent cut.
Kotlikoff’s analysis compares the total effective marginal6 and remaining lifetime
average7 tax rates under the current system with those under the FairTax for 42 typical
income/age/marital status categories: Two marital status groups (single individuals or married
couples), three age groups (ages 30, 45, and 60) whose spouses are the same age, and seven
income groups. Both the single-headed households and the married households have two
children to whom they gave birth at ages 27 and 29. Their earnings between now and retirement
are assumed to remain fixed in real terms and each household is assumed to have a home, a
mortgage, and non-mortgage housing expenses.
Average remaining lifetime tax rates measure what percentage of remaining lifetime
resources the taxpayer pays to the government, netting all future federal tax payments against
Social Security benefits received and the FairTax prebate. These rates provide a more realistic
estimate of the true effective tax burden than comparisons of taxes versus income for a single
year (as done by the tax panel). These findings indicate that the FairTax entails either a
significant or a substantial reduction in the remaining lifetime tax rates of all of our stylized
households. For example, the stylized single age 45 household with $35,000 in annual income
pays, on average, 20.7 percent of its remaining lifetime resources to the government under our
current tax system, but only 5.4 percent under the FairTax. The same aged married couple (see
table below) in which both spouses earn $35,000 faces a 21.3 percent current average tax rate,
but only an 11.6 percent average tax rate under the FairTax.
The FairTax benefits retirees who depend mostly on Social Security.
For older, low-income households, the FairTax generates a major reduction in remaining lifetime
taxes. Again, the reason is that the elderly not only continue, under the FairTax, to receive the
same real Social Security benefits, they also receive the FairTax prebate. The average Social
Security benefits for a retired couple living solely on Social Security are $18,776. The FairTax
prebate for this couple is $4,697 which is $381 more than the FairTaxes the couple would have
to pay if they spent the entire $18,776 on taxable consumption.
Let’s look at a single 60-year-old earning $15,000 a year. His or her average remaining
lifetime tax rate falls from 9.8 percent to -28.0 percent! Middle-income and upper-income
seniors also experience lower average lifetime tax rates under the FairTax compared to the
current tax system. High-income seniors experience average remaining lifetime tax rates under
the FairTax of 18.2 percent for singles and 19.3 percent for couples. However, these rates are
significantly lower than what they would experience under the current system: 40.8 percent for
singles and 41.5 percent for couples.
In general, the FairTax offers several other benefits to seniors. The FairTax repeals the
taxation of Social Security benefits and adjusts Social Security indexing to preserve the
purchasing power of seniors. The FairTax ends all record keeping and income tax filings of any
kind for seniors, totally insulating them from the high costs and abusive tactics of tax preparers.
The FairTax repeals the income tax imposed on investment income and pension benefits or IRA
withdrawals. No form of savings or investment is taxed. The beneficiaries and owners of
pension funds, IRAs, and 401(k) plans (with assets of over $11 trillion in 2003) will not have to
pay taxes on these plans upon withdrawal, despite taking an income tax deduction for the
contributions to most of these plans. (For a complete discussion of these benefits, please see
“The FairTax Benefits Seniors,” available at
http://www.fairtax.org/PDF/The_FairTax_benefits_seniors_11-7-06.pdf).
The FairTax preserves the overall progressivity of the federal tax burden.
The FairTax not only lowers remaining average lifetime net tax rates, it also maintains and,
indeed, enhances overall progressivity in the tax system. Consider middle-aged married
households. The FairTax average lifetime tax rate is very low – only 1.5 percent – for the couple
with $20,000 in annual earnings, and much higher – 20.5 percent – for the couple with $500,000
in annual earnings. The reduction in the tax rate is proportionately much greater at the lower end
of the earnings distribution than at the high end. In switching to the FairTax, the $20,000-
earning couple experiences an 86 percent cut in their average tax rate, whereas the $500,000-
earning couple experiences a 42 percent cut.
The FairTax: A very progressive long-run outcome
To get another meaningful picture of how persons in various income groups fare under the
FairTax in the aggregate, Dr. Kotlikoff models the dynamic macroeconomic and microeconomic
effects of replacing the income tax system with the FairTax.9
His model considers three income classes within each generation. It compares what the
economy is like under the FairTax versus what it would be like if the current system were to
remain in place. This approach gives a realistic view of the impact of America’s aging
population, coupled with high and growing health and pension benefits that necessitate much
higher payroll taxes, with potentially damaging effects on the U.S. economy. The FairTax offers
a solution to this dismal economic future.
The shift to the FairTax raises marginal labor productivity and real wages over the course
of the century by 18.9 percent and long-run output by 10.6 percent. Moreover, the FairTax
reduces by half the long-run increase in the effective rate of wage taxation needed to pay the
Social Security and health care benefits of an aging population. These macroeconomic gains
have important microeconomic welfare implications. In the long run:
• Low-income households experience a 26.7 percent welfare gain under the FairTax
• Middle-income households experience a 10.9 percent welfare gain
• High-income households experience a 4.7 percent welfare gain
This is a very progressive long-run outcome.
Progressivity also marks the entire transition. Low-income households, which are
initially alive at the time of the reform, whether they are young, middle age, or old, all
experience welfare gains ranging from 8.3 to over 20 percent. Who pays for these gains? The
answer is hardly anyone. The initial rich elderly and rich middle aged, as well as some middle
age/middle-income households are somewhat affected, but their welfare losses are quite small
compared to the welfare gains experienced by the current poor and future generations.
In switching from taxing income to taxing consumption and adding high progressivity via
a rebate, the FairTax introduces many progressive elements into our fiscal system, removes one
very regressive element (the payroll tax), and provides much better incentives to work and save.
Switching to the FairTax raises long-run capital intensity, thus raising long-run real wages by 19
percent compared to the base-case alternative. The reform also generates major welfare gains for
the poorest members of society, including those now retired and those yet to be born.
In short, according to Dr. Kotlkoff’s analysis, the FairTax offers a real opportunity to
improve the U.S. economy’s performance and the well-being of the vast majority of Americans,
regardless of income and when they were born.
The FairTax dramatically improves the U.S. economy.
New economic research shows that the economy fares much better under the FairTax. The
economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by
the tenth year than it would otherwise be. Consumption increases by 2.4 percent more in the
first year than it would be if the current system were to remain in place. The increase in
consumption is fueled by the 1.7 percent increase in disposable (after tax) personal income that
accompanies the rise in incomes from capital and labor once the FairTax is enacted. By the tenth
year consumption increases by 11.7 percent over what it would be if the current tax system
remained in place, and disposable income will be up by 11.8 percent.
Following the implementation of the FairTax plan, the higher take-home wage provides
an immediate incentive for people to work more. During the first year, this will lead to total
employment growth of 3.5 percent in excess of the baseline scenario, which continues to grow
through year ten such that total employment is 9.0 percent above what it would have been under
the baseline scenario.
The impact on total labor income is even more pronounced, increasing due to both an
increase in after-tax wages and an increase in the number of people working. Total labor income
will rise 27.4 percent in the first year. By year ten, labor income will be over 41 percent higher
than what it would have been under the baseline scenario
The FairTax improves the international competitiveness of American producers.
Today, we have a tax system that remarkably subsidizes foreign-content vehicles, assisting
Korea, Japan, Germany, and others in competing against the American worker. How do we do
so? The U.S. government’s failure to remove the tax on exports (as do the other 29 OECD
nations) creates a large and artificial relative price advantage (estimated to be over 18 percent)
for foreign goods, in both the U.S. market and abroad.11 A recent MIT report states that the U.S.
failure to recognize and confront this problem costs us more than $100 billion in exports
annually.12 In effect, the U.S. tax system is distorting the international marketplace and is
literally moving good jobs out of this country at a devastating and unsustainable pace. The
FairTax remedies this by taxing foreign-produced goods as U.S.-produced goods are taxed and
by exempting exports fully from taxation, thereby restoring a level playing field for U.S. and
foreign-produced goods.
-
The FairTax promotes home ownership better than the current system.
Under the FairTax home purchases are more tax advantaged than they are today. For working
Americans, the “true cost” of buying a home goes down. In a nutshell, homes are more
affordable because:
• The majority of homes are used, thus are not taxed.
• The entire house payment (interest and principal) is paid with pretax dollars by every
homeowner, contrasted with the current system’s interest deduction only to itemizers.
• Interest rates no longer bear upstream costs, driving them lower.
• New home prices do not bear taxes and compliance costs imposed upstream.
• Savings and investments needed to buy homes are not taxed multiple times.
Even though the FairTax makes the mortgage interest deduction irrelevant, housing
becomes more affordable and homebuyers have more money with which to purchase their
homes. There are several reasons for this: (1) Most home sales are for used homes, and unlike
today taxpayers use pretax earnings to buy used homes; (2) unlike the current tax regime, the
FairTax does not tax the earnings used to pay mortgage interest. Even if the mortgage interest
deduction offset all income taxes, interest would still be paid with what one has left over after
payroll taxes; (3) mortgage debt is paid at a lower interest rate since the FairTax lowers the
interest rate of such debt; (4) while a new home is taxed, the FairTax imposes a lower marginal
tax rate on the earnings used to buy the home; (5) unlike the current tax regime, the FairTax fully
untaxes capital gains from the sales of used or new property; (6) the FairTax removes all
embedded tax costs of current construction by untaxing the businesses involved in home
construction and producing building supplies; and (7) the FairTax enables homeowners to save
for a home faster by not taxing savings, unlike today.
In the chart below, we compare how much today’s mortgage interest deduction benefits
the homebuyer relative to the full nontaxation of interest and principal payments on mortgages
under the FairTax by drawing only the most conservative assumptions. To purchase the
$230,000 home mentioned above (assuming a 30-year term and mortgage rate of 6.6 percent),
the prospective homebuyer would have to pay $298,806 in interest in addition to the price of the
home. Since the current system taxes income and payroll, these taxes must be taken into account
when figuring out how much the homebuyer would have to earn over the lifetime of the loan to
pay the loan off. Taking these taxes into account, our homebuyer would have to earn $633,660
to completely pay off the loan.
The FairTax simplifies tax compliance, thereby reducing tax evasion.
Several factors bear upon compliance – both fraud and non-fraud – from the scholarly research.
The most important are the number of taxpayers, marginal tax rates, the complexity of the
system, the number of decisional junctures (opportunities for each taxpayer), transparency or the
risk of detection, the magnitude of punishment if caught, non-financial motivation to cheat
(including perceptions of unfairness), and enforcement resources and safeguards in place.
Research reported above shows that the FairTax dramatically lowers marginal tax rates.
Lower rates, all other things being equal, imply lower evasion because the benefits from evasion
decline while the costs of evasion remain comparable. However, precisely because of the larger
base and lower marginal tax rates, the benefit from lawful tax avoidance or illegal tax evasion
under the FairTax is much less at the margin relative to either the current system or competing
alternative tax systems that have higher marginal tax rates.
Virtually any sales tax would reduce the number of points of collection (and
enforcement) dramatically; the FairTax reduces them by about 80 percent (145 million to 25
million) because individuals no longer have to file annual returns. The Government
Accountability Office, among others, has specifically identified the negative relationship
between compliance costs and the number of focal points for collection. Virtually any sales tax
would concentrate the lion’s share of revenue collection to fewer than ten percent of retailers,
further simplifying collection and enforcement. Any sales tax would reduce form and filing
complexity from today’s Rube Goldberg contraption to a simple sales tax return, largely
completed by point-of-purchase software.
Perception of the fairness of the tax system is increasingly regarded as an important
consideration. Studies have persuasively shown that attitudes are important determinants of
compliance. Under the FairTax, as the costs of compliance shrink and the perceived fairness of
the tax system increases, some of the hostility to the tax system will decline.
What is the FairTax Plan?
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an
integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal
taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion
legislation, the repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 1025) abolishes all federal
personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and
self-employment taxes and replaces them with one simple, visible, federal retail sales tax – administered primarily
by existing state sales tax authorities. The IRS is disbanded and defunded. The FairTax taxes us only on what we
choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and
intelligent solution to the frustration and inequity of our current tax system
Once again : Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
Decker the Tax Lawyer does not want you to watch these :
http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
and
http://www.youtube.com/watch?v=IWfIhFhelm8 (http://www.youtube.com/watch?v=IWfIhFhelm8)
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
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Democrat Mike Gravel - On Fair Tax
Good Video
-
watch this :
Mike Gravel - Plan to Fix the Tax Structure
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Ron Paul on taxes
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Ozark, either you are going to address the math that shows the Fair Tax to be a flat tax scam that hurts the poor and middle class or you're going to continue posting irrelevant shit based on cooked numbers.
What's it going to be?
We know these things to be true about the Flat/Fair Tax Scam:
1. The Fair Tax assumptions INCLUDE sales tax the government pays to itself. That's double dipping aka a Ponzi Scheme. For the moment, the true rate of taxation is 31% and not 23%
2. It is extremely likely that the IRS will still exist with more work than ever before b/c of this "transparent and simple tax" (See Reply #122 in this thread)
3. The true Fair Sales Tax is 38%. As an inclusive sales tax, the tax is 30% on purchases of all services and all new products - Sec 1 (b) (2). The Bill requires that the NST be printed on the cash register receipt - Sec 510. You buy an Item. The receipt states: "$1.00 Item", "$0.30 NST", "$1.30 Total".
I've shown you the questionable math and faulty reasoning your Fair Tax Scam is based on:
--The Gov counts the taxes it pays to itself as "income" even though you claim it's a revenue-neutral tax. That's what we in the real world call a Ponzi Scheme.
--The Laffer Paper you posted admits that the actual Rate of Tax is 30% (see page 5) then it engages in the same irrelevant comparison with Income tax. Apples and oranges my friend.
Why should I believe you about the Fair Tax? You've used obviously cooked numbers and methodology....You really believe that an inclusive Flat Tax is not inclusive and does not have the regressive effects of all flat taxes. You really believe no federal system for audit or enforcement will be necessary. You really believe that, after cutting everybody's taxes and paying out almost half a trillion dollars in prebates, there will be no shortfall in Tax Revenue to the Government?
I have to say, you sure sound like a first class rube to me.
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The following is a list of professional and university economists, that endorse the FairTax Plan.
(Decker wants you to believe they are either stupid, or have an ulterior motive )
Donald L. Alexander
Professor of Economics
Western Michigan University
Wayne Angell
Angell Economics
Jim Araji
Professor of Agricultural
Economics
University of Idaho
Ray Ball
Graduate School of Business
University of Chicago
Roger J. Beck
Professor Emeritus
Southern Illinois University,
Carbondale
John J. Bethune
Kennedy Chair of Free
Enterprise
Barton College
David M. Brasington
Louisiana State University
Jack A. Chambless
Professor of Economics
Valencia College
Christopher K. Coombs
Louisiana State University
William J. Corcoran, Ph.D.
University of Nebraska at
Omaha
Eleanor D. Craig
Economics Department
University of Delaware
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Henry Demmert
Santa Clara University
Arthur De Vany
Professor Emeritus
Economics and Mathematical
Behavioral Sciences
University of California, Irvine
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Demissew Diro Ejara
William Paterson University of
New Jersey
Patricia J. Euzent
Department of Economics
University of Central Florida
John A. Flanders
Professor of Business and
Economics
Central Methodist University
Richard H. Fosberg, Ph.D.
William Paterson University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Professor James Frew
Economics Department
Willamette University
K. K. Fung
University of Memphis
Satya J. Gabriel, Ph.D.
Professor of Economics and
Finance
Mount Holyoke College
Dave Garthoff
Summit College
The University of Akron
Ronald D. Gilbert
Associate Professor of
Economics
Texas Tech University
Philip E. Graves
Department of Economics
University of Colorado
Bettina Bien Greaves, Retired
Foundation for Economic
Education
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management
and Leadership
Arizona State University
Darrin V. Gulla
Dept. of Economics
University of Georgia
Jon Halvorson
Assistant Professor of
Economics
Indiana University of
Pennsylvania
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
James M. Hvidding
Professor of Economics
Kutztown University
F. Jerry Ingram, Ph.D.
Professor of Economics and
Finance
The University of Louisiana-
Monroe
Drew Johnson
Fellow
Davenport Institute for Public
Policy
Pepperdine University
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Richard E. Just
University of Maryland
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
David L. Kendall
Professor of Economics and
Finance
University of Virginia's College
at Wise
Peter M. Kerr
Professor of Economics
Southeast Missouri State
University
Miles Spencer Kimball
Professor of Economics
University of Michigan
James V. Koch
Department of Economics
Old Dominion University
Laurence J. Kotlikoff
Professor of Economics
Boston University
Edward J. López
Assistant Professor
University of North Texas
Franklin Lopez
Tulane University
Salvador Lopez
University of West Georgia
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
Glenn MacDonald
John M. Olin Distinguished
Professor of Economics and
Strategy
Washington University in St.
Louis
Dr. John Merrifield,
Professor of Economics
University of Texas-San
Antonio
Dr. Matt Metzgar
Mount Union College
Carlisle Moody
Department of Economics
College of William and Mary
Andrew P. Morriss
Galen J. Roush Professor of
Business Law & Regulation
Case Western Reserve
University School of Law
Timothy Perri
Department of Economics
Appalachian State University
Mark J. Perry
School of Management and
Department of Economics
University of Michigan-Flint
Timothy Peterson
Assistant Professor
Economics and Management
Department
Gustavus Adolphus College
Ben Pierce
Central Missouri State
University
Michael K. Pippenger, Ph.D.
Associate Professor of
Economics
University of Alaska
Robert Piron
Professor of Economics
Oberlin College
Mattias Polborn
Department of Economics
University of Illinois
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
Barry Popkin
University of North Carolina-
Chapel Hill
Steven W. Rick
Lecturer, University of
Wisconsin
Senior Economist, Credit Union
National Association
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory Univeristy
John Ruggiero
University of Dayton
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina at
Chapel Hill
Dr. Carole E. Scott
Richards College of Business
State University of West
Georgia
Carlos Seiglie
Dept. of Economics
Rutgers University
John Semmens
Economist
Phoenix College
Arizona
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and
Finance
Marshall School of Business
University of Southern
California
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
James F. Smith
University of North Carolina-
Chapel Hill
Vernon L. Smith
Economist
W. James Smith
Dean of Liberal Arts and
Sciences and Professor of
Economics
University of Colorado at
Denver
John C. Soper
Boler School of Business
John Carroll University
Roger Spencer
Professor of Economics
Trinity University
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and
Resource Economics,
University of California, Davis
Curtis R. Taylor
Professor of Economics and
Business
Duke University
Robert Vigil
Analysis Group, Inc.
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
F. Scott Wilson, Ph.D.
Canisius College
Mokhlis Y. Zaki
Professor of Economics
Emeritus
Northern Michigan University
Democrat Mike Gravel - On Fair Tax
Mike Gravel - Plan to Fix the Tax Structure
Ron Paul on taxes
Dave Ramsey Supports the Fair Tax
John Stossel speaks to the Fair Tax Rally
Ken Hoagland explains the Fair-Tax Initiative.
So which it is Decker Dummy, are these people who endorse the Fair Tax idiots too ?
And dont forget,
Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
-
The following is a list of professional and university economists, that endorse the FairTax Plan.
(Decker wants you to believe they are either stupid, or have an ulterior motive )
Donald L. Alexander
Professor of Economics
Western Michigan University
Wayne Angell
Angell Economics
Jim Araji
Professor of Agricultural
Economics
University of Idaho
Ray Ball
Graduate School of Business
University of Chicago
Roger J. Beck
Professor Emeritus
Southern Illinois University,
Carbondale
John J. Bethune
Kennedy Chair of Free
Enterprise
Barton College
David M. Brasington
Louisiana State University
Jack A. Chambless
Professor of Economics
Valencia College
Christopher K. Coombs
Louisiana State University
William J. Corcoran, Ph.D.
University of Nebraska at
Omaha
Eleanor D. Craig
Economics Department
University of Delaware
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Henry Demmert
Santa Clara University
Arthur De Vany
Professor Emeritus
Economics and Mathematical
Behavioral Sciences
University of California, Irvine
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Demissew Diro Ejara
William Paterson University of
New Jersey
Patricia J. Euzent
Department of Economics
University of Central Florida
John A. Flanders
Professor of Business and
Economics
Central Methodist University
Richard H. Fosberg, Ph.D.
William Paterson University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Professor James Frew
Economics Department
Willamette University
K. K. Fung
University of Memphis
Satya J. Gabriel, Ph.D.
Professor of Economics and
Finance
Mount Holyoke College
Dave Garthoff
Summit College
The University of Akron
Ronald D. Gilbert
Associate Professor of
Economics
Texas Tech University
Philip E. Graves
Department of Economics
University of Colorado
Bettina Bien Greaves, Retired
Foundation for Economic
Education
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management
and Leadership
Arizona State University
Darrin V. Gulla
Dept. of Economics
University of Georgia
Jon Halvorson
Assistant Professor of
Economics
Indiana University of
Pennsylvania
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
James M. Hvidding
Professor of Economics
Kutztown University
F. Jerry Ingram, Ph.D.
Professor of Economics and
Finance
The University of Louisiana-
Monroe
Drew Johnson
Fellow
Davenport Institute for Public
Policy
Pepperdine University
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Richard E. Just
University of Maryland
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
David L. Kendall
Professor of Economics and
Finance
University of Virginia's College
at Wise
Peter M. Kerr
Professor of Economics
Southeast Missouri State
University
Miles Spencer Kimball
Professor of Economics
University of Michigan
James V. Koch
Department of Economics
Old Dominion University
Laurence J. Kotlikoff
Professor of Economics
Boston University
Edward J. López
Assistant Professor
University of North Texas
Franklin Lopez
Tulane University
Salvador Lopez
University of West Georgia
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
Glenn MacDonald
John M. Olin Distinguished
Professor of Economics and
Strategy
Washington University in St.
Louis
Dr. John Merrifield,
Professor of Economics
University of Texas-San
Antonio
Dr. Matt Metzgar
Mount Union College
Carlisle Moody
Department of Economics
College of William and Mary
Andrew P. Morriss
Galen J. Roush Professor of
Business Law & Regulation
Case Western Reserve
University School of Law
Timothy Perri
Department of Economics
Appalachian State University
Mark J. Perry
School of Management and
Department of Economics
University of Michigan-Flint
Timothy Peterson
Assistant Professor
Economics and Management
Department
Gustavus Adolphus College
Ben Pierce
Central Missouri State
University
Michael K. Pippenger, Ph.D.
Associate Professor of
Economics
University of Alaska
Robert Piron
Professor of Economics
Oberlin College
Mattias Polborn
Department of Economics
University of Illinois
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
Barry Popkin
University of North Carolina-
Chapel Hill
Steven W. Rick
Lecturer, University of
Wisconsin
Senior Economist, Credit Union
National Association
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory Univeristy
John Ruggiero
University of Dayton
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina at
Chapel Hill
Dr. Carole E. Scott
Richards College of Business
State University of West
Georgia
Carlos Seiglie
Dept. of Economics
Rutgers University
John Semmens
Economist
Phoenix College
Arizona
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and
Finance
Marshall School of Business
University of Southern
California
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
James F. Smith
University of North Carolina-
Chapel Hill
Vernon L. Smith
Economist
W. James Smith
Dean of Liberal Arts and
Sciences and Professor of
Economics
University of Colorado at
Denver
John C. Soper
Boler School of Business
John Carroll University
Roger Spencer
Professor of Economics
Trinity University
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and
Resource Economics,
University of California, Davis
Curtis R. Taylor
Professor of Economics and
Business
Duke University
Robert Vigil
Analysis Group, Inc.
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
F. Scott Wilson, Ph.D.
Canisius College
Mokhlis Y. Zaki
Professor of Economics
Emeritus
Northern Michigan University
Democrat Mike Gravel - On Fair Tax
Mike Gravel - Plan to Fix the Tax Structure
Ron Paul on taxes
Dave Ramsey Supports the Fair Tax
John Stossel speaks to the Fair Tax Rally
Ken Hoagland explains the Fair-Tax Initiative.
So which it is Decker Dummy, are these people who endorse the Fair Tax idiots too ?
And dont forget,
Decker is a bloodsucking Tax Lawyer, who makes a living out of people having problems with the current tax code.
So Do any of you on GetBig really think Decker would be for a new Fair Tax system, that would do away with individuals and businesses having to file taxes, and needing his services ?
I think even the dumbest of the dumb can figure this one out, the answer is HELL NO ! ! !
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
Tap a tap a tap tap tap tap.
I love the way you tap dance around any meaningful debate.
Argument by authority.
See, look at the people Ozark listed. They all can't be as dumb as him or have an ulterior motive. Why not? Libertarians love shit like the Flat/Fair Tax Scam b/c in effect, it shrinks government due to lack of funding and it rids the country of progressive tax rates which hit high-end earners. Greenspan likes flat taxes too. That Fraud The Heritage Foundation is full of Fair Tax Supporters as is the quasi-libertarian think-tank the Cato Institute.
So now you force me to repost this:
Ozark, either you are going to address the math that shows the Fair Tax to be a flat tax scam that hurts the poor and middle class or you're going to continue posting irrelevant shit based on cooked numbers.
What's it going to be?
We know these things to be true about the Flat/Fair Tax Scam:
1. The Fair Tax assumptions INCLUDE sales tax the government pays to itself. That's double dipping aka a Ponzi Scheme. For the moment, the true rate of taxation is 31% and not 23%
2. It is extremely likely that the IRS will still exist with more work than ever before b/c of this "transparent and simple tax" (See Reply #122 in this thread)
3. The true Fair Sales Tax is 38% (8% from the inclusion of Gov. paying itself + 7% for treating the inclusive tax as exclusive). As an inclusive sales tax, the tax is 30% on purchases of all services and all new products - Sec 1 (b) (2). The Bill requires that the NST be printed on the cash register receipt - Sec 510. You buy an Item. The receipt states: "$1.00 Item", "$0.30 NST", "$1.30 Total".
I've shown you the questionable math and faulty reasoning your Fair Tax Scam is based on:
--The Gov counts the taxes it pays to itself as "income" even though you claim it's a revenue-neutral tax. That's what we in the real world call a Ponzi Scheme.
--The Laffer Paper you posted admits that the actual Rate of Tax is 30% (see page 5) then it engages in the same irrelevant comparison with Income tax. Apples and oranges my friend.
Why should I believe you about the Fair Tax? You've used obviously cooked numbers and methodology....You really believe that an inclusive Flat Tax is not inclusive and does not have the regressive effects of all flat taxes. You really believe no federal system for audit or enforcement will be necessary. You really believe that, after cutting everybody's taxes and paying out almost half a trillion dollars in prebates, there will be no shortfall in Tax Revenue to the Government?
I have to say, you sure sound like a first class rube to me.
-
Update !
Dummy Decker,
A few day's ago, you agreed, and said you would like to take a vote on Getbig, to see who likes the idea of a Fair Tax, and who does not.
Well since that time, everyone who has stated an opinion on here, has been for it, 2- 0 , that means you lose , "Mr smarter than everybody Lawyer" loses ! Shocked
2;) Or if you prefer to take the poll from the very beginning of this discussion, we can do that as well.
For against
Ozmo 240
Colossus 500 camel jockey
BeachBum
w8tlftr
and after the facts have been posted on here recently, it seems 240 and camel jockey have been silent, seems like they might have jumped from your ship, or at the very least, are not 100 % against it anymore. but even counting them on your side, that is still 4-2, that still means Mr Big tax lawyer loses ! Shocked
3.) And lastly, You came on GetBig, being "Mr big lawyer", (you had to point it out on here that you were a tax lawyer, thinking that would impress us, but all it did was show your true intentions, and you got called on it by me ) thinking you could easily persuade all of us dumber than you, average joe's, as you are the smart one, the lawyer, but what happened ? You lost !! Shocked
So either the majority of people reading this believe the Fair Tax is a better system than our current, or you suck at being a lawyer Shocked
I think it is both ! :o :o :o
Vote for Ron Paul
-
Update !
Dummy Decker,
A few day's ago, you agreed, and said you would like to take a vote on Getbig, to see who likes the idea of a Fair Tax, and who does not.
Well since that time, everyone who has stated an opinion on here, has been for it, 2- 0 , that means you lose , "Mr smarter than everybody Lawyer" loses ! Shocked
2;) Or if you prefer to take the poll from the very beginning of this discussion, we can do that as well.
For against
Ozmo 240
Colossus 500 camel jockey
BeachBum
w8tlftr
and after the facts have been posted on here recently, it seems 240 and camel jockey have been silent, seems like they might have jumped from your ship, or at the very least, are not 100 % against it anymore. but even counting them on your side, that is still 4-2, that still means Mr Big tax lawyer loses ! Shocked
3.) And lastly, You came on GetBig, being "Mr big lawyer", (you had to point it out on here that you were a tax lawyer, thinking that would impress us, but all it did was show your true intentions, and you got called on it by me ) thinking you could easily persuade all of us dumber than you, average joe's, as you are the smart one, the lawyer, but what happened ? You lost !! Shocked
So either the majority of people reading this believe the Fair Tax is a better system than our current, or you suck at being a lawyer Shocked
I think it is both ! :o :o :o
Vote for Ron Paul
Tap a tap a tap tap tap tap.
That's quite a two-step around the issues Ozark.
If I am wrong about the Flat/Fair Tax Scam, I will admit it b/c I am a man.
You on the other hand, when faced with the facts, run like a frightened school girl....screaming that you've "won" as you run away.
-
Decker Dummy,
I have been answering your questions for over a week now, go back and read dipshit, maybe you might learn something.
You don't run GetBig, or anything for that matter, you are just a bloodsucking self-centered scum tax lawyer.
Want more info dummy decker ? go to www.fairtax.org (http://www.fairtax.org)
Once again, You lost ! :o :o :o :o :o :o :o
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
-
Decker Dummy,
I have been answering your questions for over a week now, go back and read dipshit, maybe you might learn something.
You don't run GetBig, or anyting for that matter, you are just a bloodsucking self centered scum tax lawyer.
Want more info dipshit ? go to www.fairtax.org (http://www.fairtax.org)
Once again, You lost ! :o :o :o :o :o :o :o
Vote for Ron Paul
Tap a tap a tap tap tap tap.
That's quite a two-step around the issues Ozark.
If I am wrong about the Flat/Fair Tax Scam, I will admit it b/c I am a man.
You on the other hand, when faced with the facts, run like a frightened school girl....screaming that you've "won" as you run away.
-
Tap a tap a tap tap tap tap.
That's quite a two-step around the issues Ozark.
If I am wrong about the Flat/Fair Tax Scam, I will admit it b/c I am a man.
You on the other hand, when faced with the facts, run like a frightened school girl....screaming that you've "won" as you run away.
I have answered all of those questions, and the one about the IRS going away 4 times now, you keep asking it, and I keep answering it , go back and re-read dummy, you might just learn something
You don't run GetBig, or anything for that matter, you are just a bloodsucking self-centered scum tax lawyer.
Want more info dipshit decker ? go to www.fairtax.org
Decker Dummy, You lose ! ! ! ! !
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
-
I have answered all of those questions, and the one about the IRS going away 4 times now, you keep asking it, and I keep answering it , go back and re-read dummy, you might just learn something
You don't run GetBig, or anything for that matter, you are just a bloodsucking self-centered scum tax lawyer.
Want more info dipshit decker ? go to www.fairtax.org
Decker Dummy, You lose ! ! ! ! !
Ron Paul
(http://www.fairtax.org/images/scorecard/Paul_Ron-t.jpg)
Yes "I'll vote for the FairTax if it comes up.." http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx (http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx)
Vote for Ron Paul
This is what I'm talking about. You don't even know what you are posting. You think that descriptions like "Transparent and Simple" are substitutes for fact-based argument.
Ozark, either you are going to address the math that shows the Fair Tax to be a flat tax scam that hurts the poor and middle class or you're going to continue posting irrelevant shit based on cooked numbers.
What's it going to be?
We know these things to be true about the Flat/Fair Tax Scam:
1. The Fair Tax assumptions INCLUDE sales tax the government pays to itself. That's double dipping aka a Ponzi Scheme. For the moment, the true rate of taxation is 31% and not 23%
2. It is extremely likely that the IRS will still exist with more work than ever before b/c of this "transparent and simple tax" (See Reply #122 in this thread)
3. The true Fair Sales Tax is 38% (8% from the inclusion of Gov. paying itself + 7% for treating the inclusive tax as exclusive). As an inclusive sales tax, the tax is 30% on purchases of all services and all new products - Sec 1 (b) (2). The Bill requires that the NST be printed on the cash register receipt - Sec 510. You buy an Item. The receipt states: "$1.00 Item", "$0.30 NST", "$1.30 Total".I've shown you the questionable math and faulty reasoning your Fair Tax Scam is based on:
--The Gov counts the taxes it pays to itself as "income" even though you claim it's a revenue-neutral tax. That's what we in the real world call a Ponzi Scheme.
--The Laffer Paper you posted admits that the actual Rate of Tax is 30% (see page 5) then it engages in the same irrelevant comparison with Income tax. Apples and oranges my friend.
Why should I believe you about the Fair Tax? You've used obviously cooked numbers and methodology....You really believe that an inclusive Flat Tax is not inclusive and does not have the regressive effects of all flat taxes. You really believe no federal system for audit or enforcement will be necessary. You really believe that, after cutting everybody's taxes and paying out almost half a trillion dollars in prebates, there will be no shortfall in Tax Revenue to the Government?
I have to say, you sure sound like a first class rube to me.
Jeez, I'd settle for a straight answer from you on why the Flat/Fair Tax Scam counts Governmental payments of the tax to itself...i.e., a Ponzi Scheme.
For the love of God just answer that simple and transparent question.
-
not only is Decker a bloodshucking self-centered scum tax lawyer, but she is lazy too !
for the 5th time :
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
-
not only is Decker a bloodshucking self-centered scum tax lawyer, but she is lazy too !
for the 5th time :
The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.
The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.
So does the tax evasion answer or the elimination of 80% of tax returns (hell, let's make it a hundred %) answer my question about why Scammers like you include gov. taxes paid to the gov. itself in defining tax revenue under your scam?
Thank you for not answering any question I posed to you.
You've just confirmed to the world that you have no idea what the hell you are talking about.
Your cutnpaste ass is done.
-
Decker, I have answered, and re-answered your questions for close to a week now.
Everyday day I come on here, and see another message from you attacking the FairTax, and then I post a rebuttal, and then later when you have a free minute at work, you do the same back at me.
Now it seems that nobody is reading this message but you and I, and yet we continue to go back and forth :)
Look, here are the facts :
1.) you are a bloodsucking self-centered tax lawyer,
2.) I am just an idiot.
3.) You and I are never gonna agree on the FairTax
4.) lately, nobody else on GetBig seems to give a shit one way or the other . ;D
We can continue on, back and forth, with no audience if you want,
or
We can agree to disagree, and stop wasting space on here.
It is up to you :)
p.s. Vote for Ron Paul
-
Decker, I have answered, and re-answered your questions for close to a week now.
Everyday day I come on here, and see another message from you attacking the FairTax, and then I post a rebuttal, and then later when you have a free minute at work, you do the same back at me.
Now it seems that nobody is reading this message but you and I, and yet we continue to go back and forth :)
Look, here are the facts :
1.) you are a bloodsucking self-centered tax lawyer,
2.) and I am just an idiot.
3.)You and I are never gonna agree on the FairTax
4.) lately, nobody else on GetBig seems gives us shit one way or the other . ;D
Lets just agree to disagree, and stop wasting space on here.
Vote for Ron Paul
No no Ozark. You came on here like piss in the wind, calling me names and acting like a general idiot, insulting what I do for a living although you have no idea what I do. You did it just to be mean since I refused to agree with you.
You've answered nothing. So I will repost one question to you. We'll see what you're made of with your next answer.
Just explain away these numbers (which are taken from the Laffer Report that you posted):
Here is the first deception of the report.
Table 3: Estimated 2004 Revenues if the FairTax Proposal were in Effect on page 6 shows Personal Consumption Expenditures of $8,214.30 for the year and a net Fair Tax Revenue of $1,862.65.
Divide $1,862.65 by $8,214.30 and you get a 23% tax rate.
Wait a moment, what's that?
You are including sales tax revenues the government is paying itself? But isn't this a revenue-neutral tax meaning that for every dollar that goes out as an expenditure, a dollar of revenue comes in?
So the government is paying itself and these scammers are counting that. What a Ponzi Scheme.
Let's do a little math.
$8,214.30 - $1,843.40 (total government consumption) = $6,370.90 (Personal Consumption Expenditures without the shady Gov. pays itself tactic).
What tax rate is that? $1,862.65 divided by $6,370.90 = 29%
23% is not the same as 29% is it?
There's our first deception.
Now let's add in Total Government Gross Investment from that same chart. $372.50 + $1,843.40 = $2,215.90
$8,214.30 - 2,215.90 = $5,998.40
Divide $1,862.65 (Total Fair Tax Revenue) by $5,998.40 and you get: 31% as a REAL TAX RATE. (This isn't including the 7% from the inclusive/exclusive debate).
Are those numbers wrong? Why?
It has occurred to me that we are the only two people who've posted in open chat for hours on end. That's just a bit weird.
Oh well, I gotta work late tonight.
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as you wish Decker Dummy ;D
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Representative John Linder and Senator Saxby Chambliss filed legislation in the form of H.R.
25/S. 1025, the Fair Tax Act of 2007 (from here on H.R. 25). This legislation calls for
abolishing most existing federal taxes, including the personal and corporate income taxes,
payroll taxes, and the estate and gift taxes and replacing them with a progressive national
consumption tax. Under the FairTax, the federal government would raise almost all of its
revenue by taxing consumer purchases at a “tax-inclusive” rate of 23 percent.1 The FairTax is
progressive, as it provides for a rebate of taxes (called a “prebate”) to be paid to each household
on its spending up to the poverty level.
H.R. 25 has several objectives, including tax simplification and economic growth. It abolishes
the Internal Revenue Service (IRS), the federal agency that currently collects and administers
federal taxes, and shifts the vast majority of these responsibilities to the individual state sales tax
authorities.2 Adopting such a fundamental reform would have implications for the entire process
of collecting and administering taxes in the United States. The roles and responsibilities of
governments at all levels, businesses, and individuals would change under the FairTax.
Individuals would no longer file tax returns, businesses would be responsible for collecting and
remitting the tax to the states, and state governments would process the revenue collections and
forward the appropriate revenue amount to the federal government.
These changes prompt important questions pertaining to the cost of administering and complying
with the FairTax:
(1) What are the administration, collection, and filing costs under the FairTax, and whom do
they fall upon?
(2) How do these costs compare to costs under the current system?
(3) Would these costs increase or decrease under the FairTax when compared to the current
system?
This report attempts to provide answers to these questions.
For this study, BHI estimates the net (additional) administration, collection, and filing costs
(usually called simply “administrative costs”) of the FairTax by considering each of the revenue
collection layers individually – retailers and service providers (sellers), state governments, and
the federal government. BHI also accounts for the savings the private sector would enjoy
because of no longer having to file the income, estate, gift, and payroll taxes that are replaced by
the FairTax. We do our analysis for 2005, the most recent year for which there are data on
states’ collection agencies’ operating costs or budget appropriations.
1 This means that the tax on a good priced at $77.00 would be $23.00, so that the total price is $100.00. The “taxexclusive”
rate would be about 30 percent (= 23/77).
2 H.R. 25 prohibits any funding of the IRS three years after its enactment. It provides for collection of the FairTax
by state sales tax authorities and specifies how the federal government and the states will jointly administer the tax.
It requires the Secretary of the Treasury to establish an Office of Revenue Allocation to arbitrate any disputes
between states regarding the destination of sales for purposes of allocating sales tax revenue among the states.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 4
As shown in Table 1, we find that the FairTax saves $346.51 billion in administrative costs in
2005 when compared to the administrative costs of the taxes it replaces. This implies a saving of
$14.70 per $100 of the gross revenue the FairTax would collect. We find these estimates robust
enough to ensure that even if any additional spending is needed under the FairTax to hold
avoidance and evasion to their current levels, this increased spending would never overcome the
savings the FairTax brings when compared to the current taxation system.
Table 1: FairTax Net Administrative Costs (Savings)
Cost component $ billions
1. Net sellers’ FairTax collection costs 60.31
2. Net state governments’ FairTax collection costs 9.66
3. Net federal savings (9.38)
4. Private sector savings (407.11)
5. Total FairTax costs (savings) [1. + 2. + 3. + 4.] (346.51)
6. Total FairTax costs (savings) per $100 of revenue (14.70)
Billions of $ except per $100 figures. Numbers may not add up because of rounding.
I. Introduction
The U.S. federal tax code has undergone major changes since the last important attempt at tax
simplification in 1986. In subsequent years, Congress enacted legislation to raise and then lower
income tax rates, reduce the tax rates on capital gains and dividends, increase deductions for IRA
contributions, create Roth IRAs and medical savings accounts, increase the earned income tax
credit for the working poor, and make other changes. The result is over 60,000 pages of tax
code, rules, and rulings that can confuse even the most adept tax professionals.
With federal tax reform again on the table, several groups and legislators have proposed
alternative plans. The FairTax plan is one such proposal. Essentially, it aims to replace most
current federal taxes with a national retail sales tax. In 2005, Representative John Linder and
Senator Saxby Chambliss filed legislation in the form of H.R. 25. Such a fundamental overhaul
of the federal tax system would impact nearly every individual and institution in the United
States. The tax collection, administration, and filing processes would be completely revamped
under the FairTax.
Under current tax law, individuals are required to file income, estate, and gift tax returns. Under
the FairTax, these obligations disappear as individuals pay the FairTax when they buy goods and
services, but the obligation of filing would shift to the retailer or service provider selling those
goods and services.
Businesses currently file corporate income taxes and both file and collect payroll (employment)
and personal income taxes. Instead, under the FairTax, businesses would collect the FairTax
from their retail customers and remit the revenue to the state sales tax authority.
The federal government currently collects the taxes that would be replaced under the FairTax. At
the same time, it processes personal income taxes and payroll taxes for its employees and pays
employer payroll taxes. Under the FairTax, the federal government would pay the FairTax on its
purchases and collect it on the wages and salaries of its employees.
State and local governments currently process the personal income tax and payroll tax for their
employees. Under the FairTax, these governments pay the FairTax on all their purchases and on
the wages paid to their employees. Moreover, state governments, if they so choose, would
administer and collect the FairTax from the sellers.
In this report, we estimate how replacing the above-mentioned federal taxes with the FairTax
would affect the costs of tax administration, collection, and filing. In our analysis, we do not
consider tax evasion or avoidance issues that could be raised when replacing the tax system,
although we recognize that these matters affect the cost of tax revenue collection. Our purpose is
to estimate the effect of adopting the FairTax on costs, assuming tax avoidance and evasion
remain at their current levels. Our estimates also assume that the FairTax would have been in
place for a long time, so we do not estimate the start-up costs that would be incurred in
establishing the FairTax. The motivation for this is that we want to compare apples to apples.
Were we to compare the costs of both establishing and running the FairTax with only the costs of
running the existing system, we would be comparing apples to oranges, not apples.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 6
The paper is organized into ten sections. The following section reviews the literature on the
matter. Section III presents the estimation of the revenues to be collected under the FairTax.
Section IV explains the FairTax revenue collection process. Section V estimates the net costs to
the sellers, while section VI does the same for state governments and section VII for the federal
government. Section VIII estimates the net savings of the private sector, and section IX puts it
all together with an estimate of the total costs/savings that the FairTax brings about. Section X
summarizes our conclusions.
II. Literature Review
A review of the academic literature indicates that no consensus exists regarding the costs of
administration, collection, and filing for different types of tax systems. Some researchers
conclude that income taxes are less costly compared to sales taxes, while others find the
opposite. Researchers even disagree over the factors that determine the relative administrative
cost of a tax. However, there is consensus, as suggested by Shlomo Yitzhaki, that one goal of
tax policy is to reduce the “social cost” of taxation by minimizing administrative costs and, thus,
the deadweight loss of the system.3
The obvious obstacle to comparing the administrative costs of the current system with the
FairTax, as William Gale and Janet Holtblatt note, is that no system like the FairTax has ever
been in place.4 Therefore, any study attempting to make this comparison would need to make
assumptions about the administrative costs of a hypothetical sales tax and then estimate those
costs, as we do here.
Joel Slemrod states that the costs of administering sales taxes are generally lower than the costs
of administering the federal income tax, and notes that, for a commodity tax system,
administrative costs are less the more uniform the rates are, concluding that moving toward an
optimal system would entail making tax rates more uniform.5 He adds that a national retail sales
tax could, however, entail higher costs than a federal income tax, owing to enforcement
problems that arise with a much higher rate than the currently enforced ones. Matthew N.
Murray argues that a national retail sales tax would have high administrative and enforcement
costs much like the current income tax system.6 He argues that a radical improvement in
compliance cannot be expected with a national retail sales tax. However, he does point out that
available evidence does not support a claim that higher sales tax rates would drastically increase
administrative costs and noncompliance.
Researchers also link the growth in compliance costs seen over the last century with the growing
complexity of the existing federal tax code. Scott A. Hodge, J. Scott Moody, and Wendy P.
Warcholik contend that the intricacy (complexity) of the tax code increases the administrative
costs.7 Their study calculated that the number of sections in a subchapter of the income tax code
increased by 615 percent from 1954 to 2005. Evidence of this kind suggests that the FairTax,
3 Yitzhaki (1979).
4 Gale and Holtblatt (1998).
5 Slemrod (2000).
6 Murray (1997).
7 Hodge, Moody, and Warcholik (2005).
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 7
with its single rate and absence of complex rules, would significantly reduce administrative
costs.
The tax structure can increase compliance costs by increasing noncompliance due to complexity.
James Alm, Roy Bahl, and Matthew N. Murray note that the structure of a tax system provides
incentives for tax evasion and that, in considering tax reform, it is therefore important to consider
how taxpayers will respond to changes in the tax structure.8 Marsha Blumenthal and Joel
Slemrod note that only a few studies account for the relationship between changes in the tax
structure and changes in compliance.9 Their study found that certain features of tax reform
influenced compliance costs for individual taxpayers. For example, reducing the fraction of
itemizers reduced compliance costs, because calculating itemized deductions is time consuming.
Nevertheless, the authors say they could not determine if greatly simplifying the tax system
would greatly reduce compliance costs.
It is important to specify how administrative costs are measured. Blumenthal and Slemrod
delineate filing cost as being the monetary value of time spent on tasks related to filing tax
returns as well as expenditures on goods and services used to facilitate the filing procedure.10
Most studies measure administration and collection costs of tax systems in terms of cost per
dollar of revenue collected. The lower the cost per dollar of revenue collected, the more efficient
the tax system.
Although studies do not exist which compare a national retail sales tax with the current tax
system, many studies do estimate the administrative costs of the existing state sales taxes and the
current federal system. John F. Due and John L. Mikesell provide the most recent estimate of
administrative costs for state sales taxes.11 They surveyed eight states from 1991 to 1993 and
reported administrative costs ranging from $0.41 to $1.00 per $100 of revenue collected. As a
quick comparison, we note that the IRS reports a collection and administration cost of $0.60 per
$100 of revenue collected in 1993 and of $0.44 in 2005.
Government administration and collection costs capture only a portion of the administrative costs
of a tax system. Individuals and businesses also incur costs of paying and filing their taxes, and
a complete estimate of administrative costs should include all three components. Moody
estimates individual filing costs to have been $104 billion in 2002 at a rate of $30 per hour.12
Slemrod has a lower dollar estimate for individual compliance costs in 2004; $85 billion at a rate
of $20 per hour.13
The Government Accountability Office’s 2005 report cites a number of studies of business
compliance costs with the federal income tax such as the already-mentioned study by Moody,
wherein he estimated that retailers spent $85 billion in 2002 at an estimated cost per hour of
$37.26.14 Joel Slemrod and Varsha Venkatesh put the number much lower, at $22 billion in
-
2001; however, this study excluded the largest 1,350 corporations and all businesses with less
than $5 million in assets.15 Slemrod later reviewed his previous studies and estimated that
retailers spent a total of $40 billion, at a rate of $20 per hour, complying with the federal income
tax in 2004.16
PricewaterhouseCoopers conducted the first national estimate of retailer compliance with local
and state retail sales tax over the period of August 2004 through March 2005.17 This study found
that in 2003 the average annual state and local retail sales tax compliance costs were $3.09 per
$100 of sales tax revenue collected. As a percentage of taxable sales, costs for smaller
businesses were found to be more than six times greater than those for the large retailers.
Robert J. Cline and Thomas S. Nuebig asked how compliance costs for multi-state retailers are
affected by the different complexities of the sales tax.18 In their analysis, they use the 1998
Washington Department of Revenue study as the base for estimates of the compliance costs for
companies with different sizes and serving different states.19
Hodge, Moody, and Warcholik note that compliance costs vary by type of taxpayer, income
level, and state.20 They estimate that individuals, businesses, and nonprofits spent an estimated 6
billion hours, at a cost of $265.1 billion, in 2005 complying with the federal income tax code – a
figure that they expect to rise dramatically over the next decade.
In 1996, the Tax Foundation estimated the total compliance costs of the current federal tax
system, the flat tax, the USA Tax system (a business cash flow tax), and the national retail sales
tax.21 They found that the current federal system cost $225 billion in 1996, while all three
alternatives would reduce costs dramatically. They estimate that the flat tax would cost $9.2
billion, the USA Tax $36 billion, and the national retail sales tax just $8.2 billion.
Building on the work of these studies and using estimates of our own, we calculate the cost of
administration, collection, and filing for governments, businesses, and individuals for the
FairTax and for the current system. We next proceed to estimate FairTax revenue collections.
III. FairTax Revenue Collections
In this section, we estimate the tax revenue that would have been collected under the FairTax.
To do this, we calculate the FairTax base in 2005 and the spending-neutral tax rate, following the
15 Slemrod and Venkatesh (2002).
16 Slemrod (2004).
17 PricewaterhouseCoopers. “Retail Sales Tax Compliance Costs: A National Estimate,” Volume One: Main Report
9, April 2006. Prepared for Joint Cost of Collection Study. Available at
http://www.pwc.com/Extweb/pwcpublications.nsf/docid/E1F22DB30D07DBA785257164006DDE9E/$file/jccspart-
1-vol-.pdf.
18 Cline and Nuebig (1999).
19 Washington State Department of Revenue. “Retailers’ Cost of Collecting and Remitting Sales Tax,” December
1998. Available at http://dor.wa.gov/docs/reports/Retailers_Cost_Study/retailstudy.doc.
20 Hodge, Moody, and Warcholik (2005).
21 Hall (1996).
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 9
methodology set forth in Bachman, et al.22 We then present the corresponding estimates of the
gross and net FairTax revenue that would have been collected in 2005. The reason for selecting
2005 is that it is the most recent year for which there are data on the operating costs of state
government revenue collection agencies, data on budget appropriations, or other data necessary
for our calculations.
At first glance, the FairTax is a revenue-neutral proposal and may be seen as a proposal to
replace the amount of revenue that the federal government would have under current law dollarfor-
dollar. However, because the imposition of a sales tax is likely to affect prices, simply
replacing the dollar value of the current tax revenue may not allow the federal government to
maintain the real value of the services it currently provides. The tax-inclusive FairTax rate for
2007 is set to be 23 percent in H.R. 25, but many authors have argued that this rate would not
raise enough revenue to keep the federal government’s purchasing power constant. Besides
keeping current spending constant in real terms, the estimated rate must also ensure raising
enough additional revenue to finance the FairTax rebate of taxes on poverty level spending
(prebate) and the administrative credit paid to businesses and governments collecting the tax.
Table 2: FairTax Base and Rate Estimates
A. Revenue $ billions
1. Revenue to be replaced 1,943.14
2. IRS savings (9.74)
3. Net revenue to be replaced [1. + 2.] 1,933.40
B. Base
4. Private consumption 8,274.10
5. Federal government consumption 834.10
6. State and local government consumption 969.74
7. Gross tax base [4. + 5. + 6.] 10,077.93
C. Base adjustments
8. Non-taxed transfers adjustment 249.51
9. Prebate base adjustment (2,011.30)
10. Administrative credit base adjustment (48.02)
11. Adjusted tax base [7. + 8. + 9. + 10.] 8,268.12
12. Tax-inclusive rate [3. ÷ 11.] 23.38%
13. Tax-exclusive rate [3. ÷ (11. - 3.)] 30.52%
Billions of $ except percentage figures. Numbers may not add up because of rounding.
Source: Authors’ estimations using CBO and IRS data for 2005.
Bachman and his coauthors accounted for these facts when estimating the base and rate that
would be needed for 2007.23 However, because we had selected 2005 as our reference year for
22 Bachman, et al. (2006).
23 Ibid.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 10
this study, we needed to calculate the base and the rate that would have been needed in 2005 to
then estimate the revenue that the FairTax would have raised that year. For this, we apply the
methodology used by Bachman, et al. to 2005.24
Table 2 presents our estimates of the FairTax base and the rates for 2005. We start on line 1 with
the net revenue collected by the taxes that would be replaced by the FairTax in 2005, which the
IRS reports to be $1,943.14 billion.25 Since the IRS will neither be responsible for administering
the taxes that are being replaced nor for most of the FairTax administrative operations, this will
reduce the revenue needed to finance the IRS.26 We estimate these “savings” to be $9.74 billion
and reflect them on line 2.27 Therefore, the net revenue to be replaced in 2005, as shown on line
3, is $1,933.40 billion. As mentioned before, there are other items that would adjust the revenue
needed under the FairTax. Such items are: Non-taxed federal government transfers, the prebate,
and the administrative credit to be given to sellers and state and local governments. However,
the spending needed in these categories depends on the rate in place. Since we are calculating
the rate at this point, we have to make the corresponding adjustments to the base, not the revenue
itself, in order to accommodate for these changes in spending.
We now consider the FairTax base. In very basic terms, this base is composed of all private and
government final consumption of goods and services, except for spending on education. In
section B of Table 2, we present the estimation of the FairTax base for 2005.28 Private
consumption is estimated at $8,274.10 billion, federal government consumption at $834.10
billion, and state and local government consumption at $969.74 billion. The gross base
calculated by adding these three numbers is estimated to be $10,077.93 billion, as shown on line
7.
We now present the estimates of the adjustments made to the base to accommodate for changes
in the revenue that are related to the FairTax rate. The first adjustment is to account for the fact
that the change of tax system reduces the nominal amount of federal government transfers
needed. Since there is lower spending in real dollars in this category, this is equivalent to
increasing the base. Consequently, on line 8 we present an estimate of an increase to the base of
$249.51 billion to accommodate for the lower revenue needed for federal transfers. The FairTax
must also raise sufficient revenue to fund the FairTax prebate and the administrative credit. The
prebate is a rebate of taxes (albeit in advance, giving rise to the term “prebate”) to qualified
households that effectively exempts all households’ purchases up to the poverty level. The
administrative credit is the amount that the sellers and the state and local governments will keep
from the revenue they collect. Since these are both increases in the revenue to be collected, we
accommodate for them when calculating the tax rate by decreasing the base. On line 9 we show
24 The explanation of the methodology used to estimate the gross base, the adjusted base, and the rates is beyond the
scope of this study so we refer the reader to the work of Bachman, et al. (2006).
25 IRS Data Book, FY 2005, Publication 55b.
26 Note that these savings only require an adjustment of the revenue, and not an adjustment of the base of the
FairTax. Less spending by the federal government implies lower taxes paid by taxpayers, which implies a higher
disposable income. Marginal propensity to consume is very close to 1 for the United States, which implies that this
drop in federal consumption will be picked up by private consumption. Finally, since the tax base for the FairTax is
all consumption (except education), this means that the base does not need to be adjusted.
27 We explain how we estimated the IRS savings in Section VII.
28 The estimates for this section of the table were obtained using the same CBO estimates as in Bachman, et al.
(2006) but for 2005. We refer the reader to Table 2 on page 667 of that paper for the specific sources.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 11
an estimate of ($2,011.30) billion for the adjustment needed in the base because of the prebate,
and on line 10 we present an estimate of ($48.02) billion for the adjustment needed because of
the administrative credit. By adding lines 7 through 10, we obtain the estimate of the adjusted
FairTax base, which is $8,268.12 billion as presented on line 11.
By dividing the estimate on line 3 by the estimate on line 11, we calculate the estimated taxinclusive
FairTax rate for 2005 of 23.38 percent (line 12), which implies a tax-exclusive FairTax
rate for 2005 to be 30.52 percent (line 13). With the tax-inclusive FairTax rate estimate, we now
calculate the tax revenue that would have been collected by the FairTax in 2005. We should note
at this point that since the federal government will reimburse households with the prebate, we
can consider the amount of revenue collected inclusive of the prebate as the FairTax gross tax
revenue, and the amount of revenue collected minus the prebate as the net FairTax revenue.
Table 3: FairTax Revenue Estimates
A. From FairTax revenue $ billions
1. Gross FairTax revenue 2,356.60
2. Prebate (470.32)
Net FairTax revenue [1. + 2.] 1,886.28
B. From revenue to be replaced
4. Net revenue to be replaced 1,933.40
5. Transfers revenue adjustment (58.34)
6. Administrative credit revenue 11.23
Net FairTax Revenue [4. + 5. + 6.] 1,886.28
Billions of $. Numbers may not add up because of rounding.
Source: Authors’ estimations using CBO and IRS data for 2005.
Table 3 presents our FairTax revenue estimates. We calculate the net FairTax revenue from two
perspectives as a check to see that our estimations balance. First, we calculate the gross FairTax
revenue by multiplying the estimate of the gross tax base on line 7 of Table 2 by the taxinclusive
rate of 23.38 percent, which yields the estimate of $2,356.60 billion presented on line 1
of Table 3. We next calculate the amount of the prebate by multiplying the estimate on line 9 of
Table 2 by the same 23.38 percent rate. This yields the negative estimate of $470.32 billion
presented on line 2 of Table 3. We then add these two estimates to get the net FairTax revenue
of $1,886.28 billion.
The second perspective we use is to adjust the estimate that we show on line 3 of Table 2 with
the revenue estimates of the transfer reduction and the administrative credit. The thinking
behind this perspective is that the revenue the FairTax must be collecting, without counting the
prebate, must equal the net revenue that was being collected before, adjusted by the changes in
spending to keep federal government spending constant. Therefore, in part B of Table 3, on line
4 we present again the value of the net revenue to be replaced: $1,933.40 billion. Since the
federal government’s transfer requirements decrease, we must reduce this revenue by the amount
no longer needed for those transfers. The negative amount of $58.34 billion, presented on line 5,
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 12
is calculated by multiplying the estimate on line 8 of Table 2 by 23.38 percent.29 Similarly, since
the administrative credit is an increase in the needed revenue, we multiply the estimate on line 10
of Table 2 by 23.38 percent and obtain an estimate of $11.23 billion.30 Adding lines 4 through 6
of Table 3, we obtain the net FairTax revenue of $1,886.28 billion.
These estimates assume that there is no monetary accommodation and, consequently, that prices
do not increase. If prices were to increase, the base values would be adjusted accordingly, and
the tax-inclusive rate would yield the necessary revenue. The advantage of the assumption of no
monetary accommodation is that we can compare the revenues and costs between the two
taxation systems directly. We observe, therefore, that the net revenue under the FairTax in 2005
is lower than the net revenue replaced, in real terms. The prebate is a tool for redistribution of
income, meaning that it simply causes the FairTax to collect and return additional revenue.
Therefore, at this point, we observe that, overall, taxpayers would have to pay less in taxes to
maintain the current services provided by the federal government under the FairTax than it does
under current law, which implies that the FairTax would increase the taxpayers’ purchasing
power.
IV. FairTax Revenue Collection Process
The process of collecting the FairTax from the consumer and putting the revenue in the hands of
the federal government, as specified by H.R. 25, involves three sectors: Sellers, which include
both retail stores and service providers, state governments, and the federal government itself.
The sellers collect the tax on their sales to individuals, state and local governments, and the
federal government. They then deduct the administrative credit (0.25 percent) from their
collections and forward that money to the state sales tax authority. The state then remits the tax
collections from the retailers plus the tax on their purchases of labor (compensation paid to
government employees) minus the administrative credit to the U.S. Treasury. Finally, the federal
government receives the monies from the states and remits the FairTax on its labor purchases. It
should be noted that, for this paper, federal governmental enterprises are considered to belong to
the sellers’ sector and not the federal government sector. This is because government enterprises
collect the FairTax on the services they sell to the consumer, as do businesses in the private
sector.
In order to compare the administrative costs under both tax systems, we must identify the net
(additional) costs/savings that the FairTax would bring in each of the three layers of FairTax
revenue collection, which would allow for more precise pinpointing of specific issues. This
presents a difficulty, however, since the savings that the FairTax would bring to the private
sector (individuals, businesses, and nonprofit organizations) cannot be easily distributed among
these three layers. The simple solution, which we apply in this study, is to consider the savings
to the private sector separately and bring all the estimates together, later, to calculate the total
costs/savings resulting from the implementation of the FairTax. We start by estimating the net
costs to sellers of collecting the FairTax from their sales and sending the money to the state
governments. We then consider the costs to the state governments of administering the FairTax
29 The negative rate shows that an increase in the base is equivalent to a reduction in the revenue.
30 The negative rate shows that a decrease in the base is equivalent to an increase in the revenue.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 13
as well as collecting the tax revenues from the sellers, the taxes on the labor purchases of local
governments and their own labor purchases, and finally remitting the money to the U.S.
Treasury. We then estimate the net savings that the federal government would enjoy, while
accounting for the costs of collecting the FairTax on its labor purchases as well as processing the
prebate payments. Before bringing it all together to estimate the total costs/savings, we estimate
the savings in the private sector. We point out that when estimating the costs of collecting the
FairTax revenues and remitting them to the appropriate authority, we do so under the assumption
that the FairTax, like the existing federal tax system, would have been in place for a long time,
for the reasons given in the introduction. Thus, we are not considering the start-up costs of
implementing and then running the FairTax.
V.
-
Retailers and Service Providers (Sellers)
In this section, we calculate the costs that retailers and service providers would have incurred in
2005 to collect and remit the FairTax from buyers and send the collections to their respective
state government. Under the FairTax, sellers of final goods and services would collect a large
share of the FairTax and remit it to the state government after retaining their share of the
administrative credit. To estimate the costs of performing those tasks in 2005, we use the
national average cost of $3.09 per $100 of revenue estimated by PricewaterhouseCoopers based
on a study of the costs incurred by businesses nationwide collecting and remitting state sales
taxes.31 There are two underlying assumptions behind this estimate: First, the cost per dollar of
revenue in 2005 is the same as in 2003; second, the collection of a national sales tax with the
same base across states and three times more revenue across the nation would be, on average, at
least as efficient as collecting sales taxes across the states with different bases and exemptions.
We believe this second assumption to be very conservative because of the following reasons:
· In their study, Cline and Neubig show how retailers collecting revenues in different states
bear significantly higher compliance costs than retailers collecting in just one state.32 They
claim that “compliance cost drivers affecting multistate retailers include wide variations in
what is taxable across states, significant differences in which consumers and what uses are
exempt, and many tax base and rate changes passed each year.”33 Their estimates for firms
with tax collection responsibilities in 15 states range from 7 to 9 times those of retailers
collecting from one state. For firms with responsibilities in 46 states, the costs range from 12
to 14 times the costs for firms with responsibilities in one state, varying with the firm size.
The FairTax presents two opportunities to reduce these costs:
o The FairTax imposes a single, uniform rate on all goods and services independently
of the state or locality in which the purchase is made. This means that the retailers
would not have to determine whom to collect the tax from and what rate to charge
them, thus reducing the time and effort required to comply with the tax when
compared to current state retail sales taxes; and
31 Pricewaterhouse Coopers, op. cit.
32 Cline and Neubig (1999).
33 Cline and Neubig (1999) p. iii.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 14
o The FairTax would also provide an excellent opportunity, and some pressure, for
states and localities to align their sales tax bases with the FairTax and to “piggyback”
on the FairTax for the calculation of their respective sales taxes. This practice is
currently followed by a number of states on their income taxes, so it seems reasonable
to expect that they would take such a measure. Unfortunately, we cannot estimate
how much the FairTax would save in compliance costs if they did so.
· Through our estimates, we find that the revenue that would have been raised in 2005 under
the FairTax is more than 3.5 times the total sales tax revenue raised by the states in that same
year. As we will see when we consider the state government sector, this increase in revenue
decreases the total cost per $100 of revenue, causing a gain in efficiency for the states. It is
therefore more than reasonable to think that this could also be the case for retailers and
service providers. Unfortunately, no data is available that we could use to estimate whether
these economies of scale are present or not.
Since the estimate we are using from the PricewaterhouseCoopers report is expressed in terms
of cost per dollar of revenue, we need to estimate the FairTax revenue that retailers and service
providers would collect in order to estimate the total cost that they would be incurring. As we
explained previously, the only amount of revenue that retailers and service providers would not
collect is the revenue from state and local governments’ purchase of labor and the revenue from
the federal government’s purchase of labor. Therefore, on line 1 of Table 4, we start our
estimation of the revenue collected by retailers and service providers with the gross FairTax
revenue from line 1 of Table 3.
Table 4: Sellers’ FairTax Collections
1. Gross FairTax revenue 2,356.60
2. Federal government wages revenue (62.41)
3. State and local government wages revenue (92.97)
4. Revenue to be collected by retailers [1. + 2. + 3.] 2,201.21
Billions of $. Numbers may not add up because of rounding.
Source: Authors’ estimations using CBO and IRS data for 2005.
We then estimate the tax revenue that would be collected on the federal government’s labor
purchases by multiplying the estimated federal purchases component of the base on line 5 of
Table 2 by the estimated share of government wages in their purchases given by Bachman, et al.
(32 percent) and by the FairTax-inclusive rate we calculated in Table 2 (23.38 percent).34 This
calculation yields an estimate of $62.41 billion, which enters with a negative sign on line 2 of
Table 4. Similarly, in order to calculate the amount of revenue that would be raised on state and
local government labor, we multiplied the estimate of the state and local government purchases
on line 6 of Table 2 by the estimate of the share of state and local government wages in their
consumption given by Bachman, et al. (59 percent) and by the FairTax-inclusive rate.35 The
-
revenue thus estimated is $92.97 billion, which also enters with a negative sign on line 3 of
Table 4. Finally, summing lines 1 through 3 in Table 4 yields an estimate of $2,201.21 billion.
Having the estimate of the FairTax revenue collected by retailers and service providers in 2005,
we can use the estimates from the PricewaterhouseCoopers report to estimate the costs that
would be incurred in collecting and remitting such revenue. In their study,
PricewaterhouseCoopers presented estimates of the gross retail sales tax cost, 3.09 percent, and
of the national average of net implicit transfers, 0.60 percent. The PricewaterhouseCoopers
estimates are from businesses that collect and submit sales tax to the states, which is the same
obligation that they would have with the FairTax.
Net implicit transfers include both vendor discounts of 0.50 percent and net float of 0.10 percent.
Vendor discounts are a practice very similar to the administrative credit of the FairTax, where 26
states and the District of Columbia allow the retailer to retain a percentage of the sales taxes
collected. We note that the weighted average national vendor discount estimated in this report is
very similar to the administrative credit percentage in H.R. 25 of approximately 0.50 percent.
However, the 0.50 percent under the FairTax includes both the administrative credit of sellers
and the administrative credit of state governments. At the seller level, we could apply only 0.25
percent to the revenue collected there. The net float is generated by the interest the seller gains
by being able to hold on to the tax collected before remitting it to the states. These gains have to
be deducted from the sellers’ gross collection costs.
Table 5: Sellers’ Costs under the FairTax
$ Billions
Per $100 of
Revenue
1. Gross collection costs 68.02 3.09
2. Administrative credit (5.50) (0.25)
3. Net float (2.20) (0.10)
4. Net collection costs [1. + 2. + 3.] 60.31 2.74
Numbers may not add up because of rounding.
Source: Authors' estimates and PwC report.
In Table 5, we calculate the costs to retailers and service providers under the FairTax. On line 1,
we present the gross cost of collecting and remitting the FairTax that we obtain by multiplying
the estimate of the revenue collected by retailers on line 4 of Table 4 by 3.09 percent, which
gives our estimate of $68.02 billion. Line 2 presents the estimate of the administrative credit the
retailers would get, calculated by multiplying the estimate of the revenue collected by them on
line 4 of Table 4 by 0.25 percent, which is $5.50 billion. Line 3 gives the estimate of the net
float of $2.20 billion that is calculated by multiplying the estimated revenue collected by the
sellers on line 4 of Table 4 by 0.10 percent. Adding lines 1 through 3 in Table 5 yields an
estimate of $60.31 billion for the net costs to sellers to collect and remit the FairTax.
VI. State Governments
In this section, we estimate the costs to state governments of administering the FairTax. State
governments play a key role under the FairTax, for H.R. 25 makes them responsible for most of
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 16
the administrative tasks of the tax. Under the FairTax, states will collect the revenue from
retailers, administer the registration of retailers and service providers as sellers, and administer
the registration of households for the prebate. However, since most states already have a sales
tax and/or an income tax in place, these registration costs would be almost negligible, for both
sellers and/or households would already be registered in one form or another with the states.
Several authors have emphasized that for those states which currently have a personal income tax
that “piggybacks” on the federal personal income tax, there would be an increase in the cost of
administering their existing personal income tax because the FairTax repeals the federal income
tax. This argument needs some consideration.
The presence of a state income tax that uses the same base as the federal personal income tax
does not imply that the state government’s employees who have to administer it do not know
how the federal government’s personal income tax base is calculated for individuals with
different socioeconomic characteristics. If these administrators are performing their jobs
correctly, they very well ought to know this by heart. The removal of the federal personal
income tax will not cause these administrators to suddenly lose that knowledge and, therefore,
should not increase the cost of the state government to administer its own personal income tax if
it decided to keep having the personal income tax. This argument is valid as well for any type of
state corporate income tax that may relate its base to the federal corporate income tax. In
addition, the presence of the federal FairTax would create pressure on the states that currently
have a sales tax in place to conform the state tax base to the FairTax base, thus simplifying the
tax collection process. In this study, however, we assume that there is no change in the
composition of the states’ taxation systems. Further, because of the argument presented above,
we do not consider that costs would increase for states with income taxes because of the mere
disappearance of the federal income taxes.
Currently, there are five states that do not have a sales tax in place. The cost of administering the
FairTax for those states would be arguably higher than for the states that have been
administering their own form of a sales tax for some time now. On the other hand, H.R. 25
allows for these states to rely on other states to administer and collect the FairTax for them.
Therefore, this higher cost would be incurred only if state governments that currently do not have
a sales tax decided to administer the FairTax collected in their states, so the higher cost would
not be a direct consequence of the imposition of the FairTax.
Also, the higher cost would be temporary; in time, these states would reach the same level of
efficiency as the states with a sales tax currently in place. As mentioned above, we estimate the
costs of administering, collecting, and filing the FairTax under the assumption that it has been in
place for a long time. Our methodology in this section therefore estimates the total cost for state
governments using only the 45 states that currently have a sales tax in place, which implies that
we are assuming that the other 5 states and the District of Columbia will incur the same average
cost as the 45 states that currently have a sales tax in place.36
36 Even though the District of Columbia has a sales tax in place, we were not able to find all of the required data for
our analysis for it, so we did not include it in our models.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 17
Table 6: State Governments’ FairTax Collections
1. Revenue remitted by retailers 2,195.71
2. State and local government wages revenue 92.97
3. Revenue collected by state governments [1. + 2.] 2,288.68
Billions of $. Numbers may not add up because of rounding.
Source: Authors’ estimations using CBO and IRS data for 2005.
As in the previous section, our first step is to estimate the amount of revenue that the state
governments would be collecting. Under the FairTax, the state governments would receive the
money previously collected by the sellers once they have deducted the corresponding
administrative credit. Consequently, the estimate on line 1 of Table 6 is $2,195.71 billion, which
equals the estimate on line 4 of Table 4 ($2,201.21 billion) times 99.75 percent (1 minus 0.25
percent). In addition to this revenue, the state governments are responsible for collecting the
FairTax on labor purchases by themselves and by local governments in their state. Therefore, on
line 2 of Table 6, we include the estimate of the FairTax on state and local government wages
presented on line 3 of Table 4, which comes to $92.97 billion. The total revenue collected by the
state governments would, therefore, be the sum of these two figures, $2,288.68 billion, as
presented on line 3 of Table 6.
Having estimated the revenue for which state governments would be responsible, we next
estimate how much it would cost them to perform the tasks associated with the collection of that
revenue. There are no recent studies to which we can turn for an estimate. The most recent –
and most referred to in the literature – study is the one from Due and Mikesell where the data
used is from 1991 to 1993 for only eight states.37 They found that the costs of administering
state sales taxes for the different state governments ranged from $0.41 to $1.00 per $100 of
revenue collected. Since this study uses data of over a decade ago and for only eight states, we
decided to make our own estimates of the costs that state governments would be incurring.
The first piece of data we need in order to estimate the costs of collecting the FairTax revenue
for the states is an estimate of the costs that states incur in collecting their own sales taxes. In
our data gathering effort, we found that most state tax administration and collection agencies do
not disaggregate their administration and collection costs by type of tax. Most do not even report
their total administration costs. In most cases, we based our estimate on the budget
appropriations of the state agency responsible for tax revenue collection, although there were
some few instances where the agency would report their expenditures. In those rare cases, we
used the reported expenditure as our estimate for the cost. We note that by using estimates based
on the agencies’ budget appropriations our estimates are very likely to exceed the true values,
making our estimate of the cost of the FairTax for the states in 2005 a conservative one.
-
H.R. 25 requires sellers to remit the FairTax to the state sales tax authority. Although states’
sales taxes and the FairTax are different, the relationship with the sellers required by both is the
same. The FairTax simply increases the total amount of sales tax revenue that the states would
be collecting. This has a double effect: It increases the total revenue collected and the share of
37 Due and Mikesell (1994).
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 18
the the total revenue collected in the form of a sales tax. Therefore, we required detailed revenue
collection data for each state so that the share of sales tax revenue can be computed.
Table 7: Fiscal Years and Data Sources for the Different States
State FY Source of Cost Data Source of Revenue Data
Alabama 2004 2004 DOR Annual Report 2004 DOR Annual Report
Arizona 2005 2006-2007 Executive Budget 2005 DOR Annual Report
Arkansas 2005 2005 DFA Actual Expenditures 2005 DFA Annual Report
California 2005 2007 Budget Expenditures 2005 Revenue Collections Census Bureau
Colorado 2005 2007 Appropriations Report 2006 Legislative Staff Council Forecast
Connecticut 2005 2007 Budget Financial Summary 2005 DOR Annual Report
Florida 2005 2005 Final Budget Report 2005 DOR Annual Report
Georgia 2005 2007 Governor's Budget Report 2007 Governor's Budget Report
Hawaii 2005 2007 DOT Budget Report 2005 DOT Annual Report
Idaho 2005 2007 DOR Operating Budget 2005 STC Annual Report
Illinois 2005 2007 State Budget 2005 DOR Annual Report
Indiana 2005 2005 Budget Appropriations 2005 DOR Annual Report
Iowa 2005 2007 Agency Operating Budget 2005 DOR Annual Report
Kansas 2005 2007 Governor's Budget Report 2005 DOR Annual Report
Kentucky 2005 2005 DOR Annual Report 2005 DOR Annual Report
Louisiana 2005 2007 Budget Appropriations 2005 DOR Annual Report
Maine 2005 2007 Budget Appropriations 2007 Budget Revenues
Maryland 2005 2007 Operating Budget 2007 BRE Annual Report
Massachusetts 2005 2007 Budget Proposal 2005 DOR Annual Report
Michigan 2004 2006 Executive Budget 2004 Treasurer Annual Report
Minnesota 2005 2007 Budget Revenue 2005 Supplement to Tax Handbook
Mississippi 2005 2006 Budget 2005 STC Annual Report
Missouri 2005 2006 Revenue Appropriations 2005 DOR Financial and Statistical Report
Nebraska 2005 2007 Agency Appropriations 2005 DOR Annual Report
Nevada 2005 2005 DOT Annual Report 2005 DOT Annual Report
New Jersey 2004 2004 Budget Appropriations 2004 DOT Annual Report
New Mexico 2004 2006 Budget Appropriations 2004 Revenue Collections Census Bureau
New York 2005 2006 Budget Appropriations 2005 DTF Annual Report
North Carolina 2005 2005 DOR Budget Appropriations 2005 Tax Guide
North Dakota 2005 2007 Budget Appropriations 2005 STC Biennial Report
Ohio 2005 2005 DOT Annual Report 2005 DOT Annual Report
Oklahoma 2004 2007 Executive Budget 2004 TC Annual Report
Pennsylvania 2005 2007 Executive Budget 2005 Tax Compendium Statistical Supplement
Rhode Island 2005 2007 DOA Budget 2005 House Staff Revenues Facts
South Carolina 2005 2005 DOR Annual Report 2005 DOR Annual Report
South Dakota 2005 2007 Governor's Budget 2005 DOR Annual Report
Tennessee 2005 2007 Governor's Budget 2005 DOR Statistics
Texas 2005 2005 Proposed Budget 2007 Comptroller Biennial Report
Utah 2005 2007 Budget Summary 2005 TC Annual Report
Vermont 2005 2007 Executive Budget 2007 Executive Budget
Virginia 2005 2008 DOT Budget 2005 DOT Annual Report
Washington 2005 2005 DOR Annual Report 2005 DOR Annual Report
West Virginia 2005 2007 Executive Budget 2007 Executive Budget
Wisconsin 2005 2007 Executive Budget 2005 DOR Revenue Collections Report
Wyoming 2004 2005 DOR Annual Report 2004 Revenue Collections Census Bureau
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 19
For each state that has a sales tax, we therefore gathered data on tax collections and on
administration costs, as defined above, for fiscal year 2005. For six of the states there were no
data available for fiscal year 2005, so we gathered the appropriate information for fiscal year
2004. Table 7 shows the sources and dates for administrative cost and revenue data by state.
For all 45 states, we estimated the cost per $100 of revenue collected using the estimates of total
cost and total revenue collected for each state. For those states where data was collected for
fiscal year 2004, we inflated the total revenue using the consumer price index. We then
estimated the total cost in fiscal year 2005 by multiplying the inflated revenue by the cost per
$100 of revenue. We estimate the total revenue collected by state revenue collection agencies at
$645.14 billion and the total cost in fiscal year 2005 incurred by these agencies at $5.41 billion.
These estimates imply a total cost for the states of $0.84 per $100 of revenue collected, which
falls within the range given by Due and Mikesell.38 Even though it is on the upper end of that
range, we have already explained that this estimate is very likely to be a high estimate.
Table 8: Descriptive Statistics
Cost
$ millions
Revenue
$ millions IncDum SalesShare
Mean 120.27 14,336.53 0.91 0.38
Median 82.66 8,610.35 0.34
Standard deviation 168.82 17,150.62 0.29 0.13
Sample variance 28,501.77 294,143,656.30 0.08 0.02
Kurtosis 15.57 12.97 7.26 1.19
Skewness 3.68 3.19 -2.99 1.23
Range 967.38 97,303.82 1.00 0.58
Minimum 9.47 1,130.86 0.00 0.19
Maximum 976.85 98,434.69 1.00 0.77
Sum 5,412.32 645,143.81 41.00 17.11
Count 45 45 45 45
Table 8 shows descriptive statistics for the following variables:
· Cost – estimate of the state’s total tax collection and administration cost in millions of
dollars, by state;
· Revenue – estimate of the state’s total revenue collected in millions of dollars, by state;
· IncDum – 1 if the state has an income tax (personal, corporate or both) in place, 0
otherwise; and
· SalesShare – share of sales tax revenue of total tax revenue collected, by state.
38 Due and Mikesell, op. cit. The range they reported was $0.41 to $1.00 per $100.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 20
The average estimated state cost of administering and collecting tax revenues is $120.27 million,
which is higher than the median, with costs ranging from $9.47 to $976.85 million. The total
estimated state cost is approximately $5.41 billion. The
-
which is higher than the median, with costs ranging from $9.47 to $976.85 million. The total
estimated state cost is approximately $5.41 billion. The average estimated state revenue is
approximately $14.34 billion, also higher than the median estimate for revenue, with values
ranging from $1.13 billion to $98.43 billion. The total amount of state revenue collected is
$645.14 billion, which is just 28.19 percent of the aggregate amount of the FairTax revenue to be
collected.
The 45 states have different tax revenue collection structures, which may affect their respective
administration and collection cost structure. Income, sales, and property taxes are the largest
sources of revenue for all states in the United States, and all states have at least one of these taxes
as a source of revenue. Since all 45 states have a sales tax, we created a dummy variable for
whether the state also had any type of income tax in place to test whether this would have any
effect in the cost function. The dummy shows that 41 out of the 45 states (91 percent) had an
income tax in place and 4 did not.
Finally, the FairTax increases the amount of tax revenue in the form of a sales tax that the states
collect. This may have an impact on the cost structure as well, so we consider the share of total
revenue that is currently collected as a sales tax. We observe that, on average, states with a sales
tax in place collect 38 percent of their total revenue in the form of a sales tax, which is very
slightly higher than the median value of 34 percent. This value ranges from a minimum of 19
percent to a maximum of 77 percent.
In our effort to estimate the state cost of administering and collecting tax revenues, we
considered two different dependent variables: Total cost and total cost per $100 of revenue. The
models where we used total cost as the dependent variable outperformed their respective
counterparts in which total cost per $100 of revenue was used.39
Here we present five models using total cost as the dependent variable. All of these models
allow for different cost/revenue relationships depending on whether the state has an income tax
in place or not. The models considered are:
· Model 1 – different intercept for states with and without income tax, cubic relationship with
revenue, and a linear relationship with sales share;
· Model 2 – different intercept for states with and without income tax, quadratic relationship
with revenue for states with no income tax, cubic relationship with revenue for states with
income tax, and linear relationship with sales share;
· Model 3 – different intercept for states with and without income tax, quadratic relationship
with revenue, and linear relationship with sales share;
· Model 4 – same intercept for states with and without income tax, quadratic relationship with
revenue, and linear relationship with sales share; and
39 Note that total cost per $100 of revenue can simply be computed from the estimate of total cost. If the true model
structure is the one with total cost as the dependent variable, then the models with total cost per $100 of revenue
would be invalid, since the error term would be heteroskedastic.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 21
Table 9: Ordinary Least Squares Estimates
Parameter Model 1 Model 2 Model 3 Model 4 Model 5
Revenue -0.2433 0.0284*** 0.0284*** 0.0265*** 0.0262***
(0.1621) (0.0038) (0.0037) (0.0033) (0.0033)
Revenue2 1.20E-05 -3.72E-07*** -3.72E-07*** -3.45E-07*** -3.45E-07***
(7.41E-06) (7.36E-08) (7.31E-08) (6.88E-08) (6.97E-08)
Revenue3 -1.41E-10
(8.39E-11)
IncDum -311.7965 38.8218 31.5184
(211.3580) (30.8860) (28.9046)
Revenue × IncDum 0.2450 -0.0266*** -0.0252*** -0.0230*** -0.0224***
(0.1621) (0.0044) (0.0039) (0.0033) (0.0033)
Revenue2 × IncDum -1.19E-05 4.94E-07*** 4.37E-07*** 4.07E-07*** 4.05E-07***
(7.41E-06) (1.10E-07) (7.37E-08) (6.86E-08) (6.94E-08)
Revenue3 × IncDum 1.40E-10 -4.40E-13
(8.39E-11) (6.25E-13)
SalesShare -82.5068* -56.8976 -59.7244 -65.3978
(48.4728) (47.1127) (46.6303) (46.4513)
Intercept 383.3572* 22.8386 24.1784 54.0191** 26.9691***
(217.8067) (35.0425) (34.7587) (21.4824) (9.7267)
Observations 45 45 45 45 45
SSR 42489.50 45804.96 46420.55 47873.07 50306.15
SST 1254078.07 1254078.07 1254078.07 1254078.07 1254078.07
Joint F statistic 128.3175*** 118.7039*** 164.7653*** 159.5740*** 239.2892***
R2 0.9661 0.9635 0.9630 0.9618 0.9599
Adj. R2 0.9586 0.9554 0.9571 0.9558 0.9559
AIC 336.3072 339.6883 333.8560 335.2425 331.1651
SBC 352.5672 355.9483 346.5026 347.8891 340.1985
F statistics of the restrictions tests
Alternative
Model 1 2.8091 1.6653 1.5204 1.6557
Model 2 0.4973 0.8353 1.2120
Model 3 1.1890 1.5904
Model 4 1.9821
Standard errors in parentheses. *** Significant at 1%; ** Significant at 5%; * Significant at 10%
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 22
· Model 5 – same intercept for states with and without income tax, quadratic
-
relationship with
revenue.
In Table 9, we present the OLS estimates of the five models. We note that all models have a
very high fit to the data, as indicated by an R2 of about 0.96 throughout. Model 1 indicates that
only the sales tax share is significant in determining the cost and that it has an inverse
relationship with cost. Our concern with this model is that it includes several variables that are
highly correlated with each other, specifically the revenue related variables. Since revenue is
strictly positive, these variables will have high positive correlations which cause the estimates of
the standard errors to be biased upwards, causing parameter estimates to seem not significant
when they actually are. We notice that for states that have an income tax, the coefficient on
revenue cubed would be zero since -1.41E-10 + 1.40E-10 ≈ 0, so in Model 2 we consider a
quadratic relationship between revenue and cost for the states that have no income tax.
Model 2’s estimates show that only the coefficients for a quadratic relationship between cost and
revenue are significant. Sales tax revenue share is no longer significant, although it does keep
the negative sign. When comparing the specification of the two models, the adjusted R2, AIC,
and SBC all favor Model 1 versus Model 2, but the F statistic from the restriction test indicates
that the restriction is valid, so we cannot conclude that Model 2 is not the correct one.40
Following the indication on model 2 as to the correct specification of the model, in Models 3
through 5 we remove the variables that have insignificant coefficients in Model 2, one by one,
and test the validity of the restrictions against all previous models. We observe that the test of
the restrictions in Model 5 yields F statistics that are not significant when comparing it to Models
1 through 4 and that even though the adjusted R2 is slightly lower than Models 1 and 3, the AIC
and SBC are the lowest of all the models. Thus, we chose Model 5 for our estimations. The
advantage of Model 5 may be a result of the specific data sample used, but since our objective is
to estimate the cost to the states in 2005 and we are using data for 2005, we think that this model
is appropriate for the task.
Having chosen Model 5, we present it in a manner that is easier to use:
2
2
26.9691 0.0262 Revenue 3.45 07 Revenue if no Income Tax
Cost
26.9691 0.0038 Revenue 0.60 07 Revenue if Income Tax
E
E
+ ´ - - ´
=
+ ´ + - ´
The equation for the states that have no income tax uses the coefficients for the revenue variables
that are not related with the income dummy variable, whereas the coefficients in the equation for
the states that have an income tax add the coefficients of the corresponding variables. For
example, the coefficient on Revenue for the states that have an income tax is nothing but the
coefficient on Revenue from Model 5, 0.0262, plus the coefficient on Revenue × IncDum,
-0.0224: 0.0038. We note that the estimate of the FairTax revenue that needs to be collected at
40 When comparing models that use the same observations, R2, Adjusted R2, AIC, and SBC statistics adjust for the
different degrees of freedom used in the different models. Higher R2 and Adjusted R2 are preferred, whereas a lower
AIC and SBC will indicate the preferred model. In testing restrictions, the null hypothesis is that the restrictions are
valid, so a significant F statistic will allow for the rejection of the restricted model, whereas an insignificant one will
not allow for it.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 23
the state level is approximately 3.5 times the total revenue that states are currently collecting,
which can be confirmed by dividing the estimate on line 3 in Table 6 by the total revenue
collected of $645.14 billion presented in Table 8.
This means that the total revenue the states would collect under the FairTax is 4.5 times the
current revenue collected, since they would have to collect both the revenue for their spending
and the revenue for the FairTax. Even though our model has a good fit, we have to be very
careful to estimate costs with such higher revenues than the ones used to estimate the
coefficients. An increase of revenue in the levels presented would most surely allow states to
enjoy economies of scale, but only up to a certain point. In order to determine that point, we
transform the above equations to reflect the cost per $100 of revenue, since this is a measure of
the efficiency of revenue collection. To do that, we divide both sides of the equations by
“Revenue” and multiply by 100. The result is the following:
2.62 2696.91 Revenue 3.45 05 Revenue Cost if no Income Tax
100
Revenue 0.38 2696.91 Revenue 0.60 05 Revenue if Income Tax
E
E
+ - - ´ ´ = + + - ´
Figure 1: Estimated Cost per $100 of Revenue
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
0.00
2.50
5.00
7.50
10.00
12.50
15.00
17.50
20.00
22.50
25.00
27.50
30.00
32.50
35.00
37.50
40.00
42.50
45.00
47.50
50.00
52.50
55.00
57.50
60.00
62.50
65.00
67.50
70.00
72.50
75.00
77.50
Revenue ($ Billions)
Cost (Per $100 Revenue)
With Inc. Tax Without Inc. Tax
Figure 1 shows the relationship between cost per $100 of revenue and revenue, both for states
that have an income tax and states that do not. We observe that in both cases, state tax collection
is more inefficient for states that have lower revenues, although it is more efficient for those
states that have both an income and a sales tax than those that just have a sales tax. The gap in
efficiency closes as revenue increases, and states with no income tax eventually become at least
as efficient as their counterparts. We calculate the point where they both have the same cost per
$100 of revenue by setting the two equations above equal to each other and solving for revenue.
The point of intersection is at a revenue level of $55.28 billion, which represents a cost of $0.76
per $100 of revenue.
It is important to understand what the model we use actually estimates. It estimates the cost per
$100 that one state, given that state’s revenue and tax revenue collection structure, incurs. It is,
therefore, not appropriate to plug in the total revenue collected by all states to come up with a
single revenue figure.
Table 10: State FairTax Collection Costs
1. State FairTax cost per $100 of revenue 0.75
2. Current State cost per $100 of revenue 0.84
3. Cost savings per $100 of revenue [1. - 2.] (0.09)
4. State FairTax revenue collected 2,288.68
5. Gross state FairTax collection costs [1. × 4. ÷ 100] 17.25
6. Current state tax collections 645.14
7. Savings in state tax collections [3. × 6. ÷ 100] (0.55)
8. State and local government employees federal income tax revenue 158.01
9. Savings in collecting federal income tax [2. × 8. ÷ 100] (1.33)
10. Administrative credit [-0.25% × 4.] (5.72)
11. Net state FairTax collection costs [5. + 7. + 9. + 10.] 9.66
12. Net state FairTax costs per $100 of revenue [11. ÷ 5. × 100] 0.42
Billions of $ except per $100 figures. Numbers may not add up because of rounding.
Source: Authors' estimates using states' publicly available IRS and CES data.
To use the model appropriately, we distributed the total amount of revenue that would be
collected under the FairTax by state and added it to the current revenue that states are collecting
for their state taxes. Please note that we do not include federal taxes that state and local
governments withhold from their employees’ paychecks, since current federal taxes would
disappear under the FairTax. We use IRS total revenue collection data, except excise tax
collections, by state as the basis for distributing the FairTax revenue by state. We estimate that
the average revenue each state would have collected in 2005, including both the FairTax and
state taxes, is $65.20 billion, compared to the estimated average of $14.34 billion of current
revenue collections presented in Table 8. We note that the average revenue collected by the
states is beyond the estimated point of equal efficiency ($55.28 billion) with 17 states exceeding
this amount. We also note from Figure 1 that in absolute terms, the slope for states that have no
income tax is larger than the slope for states that have an income tax beyond this point.
Therefore, we used a cost of $0.76 per $100 of revenue collected for all states, whether they have
an income tax or not, that have to collect a revenue larger than $55.28 billion. We do this to
allow for the previously mentioned fact that the revenues the states would have to collect under
the FairTax are 4.5 times the revenues they are currently raising.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 25
We estimated the costs by states using Model 5, with and without this limitation. We obtained
estimates of a total cost of $17.46 billion without the limitation and of $22.12 billion with the
limitation. Therefore, we think that our limitation provides a conservative estimate of the cost
that states would incur. The total cost of $22.12 billion implies a cost of $0.75 per $100 of total
revenue collected by the states, including both the FairTax revenue and the states’ specific tax
revenues.
Table 10 shows the calculation of the states’ cost of administering and collecting the FairTax.
On line 1, we start with our estimate of the cost of $0.75 per $100 of revenue. We note that
states incurred a cost of $0.84 per $100 of revenue collected in 2005 and, since our estimate of
$0.75 is done including the state tax revenue collected, this means that the FairTax saves states
some money in collecting their current revenue. We include the current cost of $0.84 per $100
of revenue on line 2, and estimate the savings per $100 of revenue to be $0.09.41 Line 4 shows,
once more, the FairTax revenue collected by the states of $2,288.68 billion. On line 5, we
calculate the gross state FairTax collection costs by multiplying this revenue by the cost per $100
of revenue on line 1 and dividing by 100. We calculate this cost to be $17.25 billion. To
estimate the savings that the FairTax brings to current state tax collection costs, we include our
estimate of current state tax revenue collections in line 6: $645.14 billion. We calculate the
mentioned savings by multiplying this revenue by the estimate of the savings in line 3 and divide
by 100 to get $0.55 billion.
Because the FairTax legislation repeals the federal income tax, states will no longer have to
withhold federal personal income tax from their employees. We estimate the amount of gross
income tax revenue from state employees to be $158.01 billion by using data from Current
Employment Statistics (CES) of the Bureau of Labor Statistics (BLS) and IRS gross personal
income tax revenue for 2005. Using the CES data, we calculate that 14.27 percent of the
nonfarm labor force was employed by state and local governments. Applying this percentage to
the gross income tax revenue collected by the IRS in 2005, we get the estimate on line 8 of
$158.01 billion. We assume that state and local governments would be incurring the same cost
per $100 of revenue in collecting this revenue that the state governments are in collecting all
their current tax revenues, $0.84, so we multiply these two numbers and divide by 100 to obtain
the estimate of the savings on line 9 of $1.33 billion. Finally, we account for the fact that the
state governments would keep the administrative credit on their revenue collections and calculate
this amount on line 10 by multiplying the estimate on line 4 by 0.25 percent. Adding lines 5, 7,
9, and 10, we obtain the net state FairTax collection cost of $9.66 billion for 2005, which implies
a cost of $0.42 per $100.
Note that $9.66 billion is slightly lower than our estimate of the IRS savings presented on line
-
Very funny.
You still dance around the answer to my question.
Are you going to post the entire Chambliss Flat/Fair Tax piece of legislation which the Laffer report analyzes?
Why not post the Bible or Constitution...maybe your answer is in there?
You're unresponsive as ever.
I'll check back in in a while to see if you have the stones to answer my simple question.
-
2
of Table 2. In the next section, we are going to see that it is going to be slightly higher than all
the federal government savings. This means that, even though the administrative credit does not
cover all the costs to the states to administer and collect the FairTax, the federal government
could compensate the state governments for this by slightly increasing the tax rate. We also
note, however, that this would decrease the purchasing power of consumers, since the rate would
no longer be spending neutral.
VII. Federal Government
Under the FairTax, the federal government receives the tax collections from the states and is no
longer responsible for administering and collecting the taxes that are being replaced, so IRS
operating costs will decrease, as we have mentioned before. In addition, the different federal
agencies will no longer have to withhold personal income taxes for their employees, further
decreasing federal government costs. However, the different agencies now have to remit the
FairTax on their labor purchases. Finally, the federal government also has to issue the prebate
checks. In this section, we estimate the FairTax revenue the federal government will receive and
the net costs/savings associated with the tax change.
Table 11: Federal FairTax Revenue
1. Revenue remitted by state governments 2,282.96
2. Federal government wages revenue 62.41
3. Revenue collected by federal government [1. + 2.] 2,345.37
Billions of $. Numbers may not add up because of rounding.
Source: Authors’ estimations, CBO, and IRS data.
Consider the revenue the federal government would have collected, which we present in Table
11. On line 1, we have the estimate of the revenue it would receive from the state governments,
which is the total revenue collected by the states from line 3 in Table 6 multiplied by 99.75
percent (1 minus 0.25 percent) to remove the administrative credit kept by the states. This
operation yields the same result as adding line 3 on Table 6 and line 10 on Table 10: $2,282.96
billion. On line 2, we report the revenue that the federal government would raise on its
purchases of labor, which we presented on line 2 of Table 4: $62.41 billion. Summing these, we
get total revenue collected by the federal government of $2,345.37 billion. In order to check our
estimations of the revenue, we note that by adding the total administrative credit, presented on
line 6 of Table 3, to the estimate on line 3 of Table 11, we obtain the gross FairTax revenue,
presented on line 1 of Table 3, of $2,356.60 billion. This is as it should be, since the total
revenue collected under the FairTax has to be the revenue that the federal government gets to
spend plus the compensation to the sellers and the state governments in the form of the
administrative credits.
Having estimated the FairTax revenue that the federal government would have raised in 2005,
we now present our estimates of the savings it would face under the FairTax. Line 1 in Table 12
gives the IRS’s self-reported operating cost of $0.44 per $100 of revenue, which is used for the
estimates on other lines of the table. Line 2 states our estimate of the money that the IRS would
save by no longer having to administer and collect the taxes that are replaced by the FairTax:
$9.74 billion. This number is the same as the one on line 2 of Table 2, and is estimated by
calculating the share of total gross revenue the taxes being replaced brought in for 2005 and
multiplying by the operating costs reported by the IRS for 2005: $10.03 billion. Next, we
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 27
account for the fact that the federal government would have to collect the FairTax on its labor
purchases, so we include our estimate of the FairTax revenue raised on those wages on line 3:
$62.41 billion. This number is the same as on line 2 of Table 11 and on line 2 of Table 4.
Table 12: Federal FairTax Savings
1. IRS operating costs per $100 of revenue 0.44
2. Reduction in IRS operating costs (9.74)
3. Federal wages FairTax revenue 62.41
4. Federal wages FairTax revenue collection cost [1. × 3. ÷ 100] 0.27
5. Federal employees personal income tax revenue 16.21
6. Federal personal income tax filing costs [1. × 5. ÷ 100] (0.07)
7. Federal cost of processing and posting the prebate 0.16
8. Net federal savings [2. + 4. + 6. + 7.] (9.38)
9. Net federal savings per $100 of revenue (0.40)
Billions of $ except per $100 figures. Numbers may not add up because of rounding.
Source: Authors' estimates, OMB, IRS, and CES data.
To estimate the cost of collecting this revenue, we assume that the federal government would be
as efficient in collecting the revenue as the IRS is in administering and collecting existing taxes.
This assumption is consistent with the one we made when estimating the cost to the state
governments of collecting the FairTax revenue on state and local governments’ labor purchases.
Therefore, on line 4, we multiply the estimate on line 3 by the cost per $100 of line 1 and divide
the result by 100 to obtain a cost of $0.27 billion. Since there will no longer be a personal
income tax under the FairTax, the federal government will no longer need to withhold the
income tax for its employees. On line 5, we estimate the income tax revenue currently raised on
federal employees, which we obtain by estimating the share of total nonfarm employees hired by
the federal government (excluding governmental enterprises) using CES data, and multiplying it
by the gross personal income tax revenue of 2005. Our estimate is $16.21 billion. To calculate
the cost that the federal government would be saving under the FairTax, we assume, once more,
that all the federal government agencies are as efficient in collecting this revenue as the IRS is in
administering and collecting all the current tax revenue. Consequently, on line 6, we multiply
the estimate on line 5 with the cost per $100 on line 1 and divide by 100 to get savings of $0.07
billion.
The final item to be estimated is the cost the federal government would have in processing the
checks for the prebate. For this estimation, we used the costs of processing and posting W-2
forms in paper and electronic format, as well as the share of the forms in each format reported by
the Office of Management and Budget for 2004.42 The costs were $0.002 per electronic form
and $0.297 per paper form, and the shares were 60 percent for electronic forms and 40 percent
for paper forms.43 This implies a weighted average cost of $0.12 per form. We multiplied this
42 Office of Management and Budget, “Information Collection Budget of the United States Government: Fiscal Year
2005,” Managing Information Collection, Office of Information and Regulation Affairs. Available at
http://www.whitehouse.gov/omb/inforeg/icb/2005_icb_final.pdf.
43 Ibid., p. 18.
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 28
average by the number of households receiving the prebate in 2005, 113.04 million, and by 12
months, since the government would issue one check a month per household, to obtain the cost
estimate on line 7 of $0.16 billion. At this point, we are ready to calculate the net federal savings
caused by the FairTax, which we do on line 8 by adding lines 2, 4, 6, and 7. The results are
savings of $9.38 billion, which means that the FairTax causes savings of $0.40 per $100 of
revenue at the federal level.
VIII. Private Sector Savings
We have estimated the 2005 net administrative costs of the FairTax for both federal and state
government, as well as the costs for the sellers. We have, however, one more task to do before
we can estimate the total costs or savings that the FairTax would bring. Under the FairTax,
individuals would no longer have to file the personal income, estate, and gift taxes. Businesses
would not have to collect the personal income tax and other employment taxes from their
employees, as well as not having to file employment and corporate income taxes. To estimate
the savings the FairTax brings to the private sector, we have to estimate the costs associated with
filing the taxes replaced by the FairTax that individuals, businesses, and nonprofit organizations
currently incur. For this matter, we rely on the estimates presented by the Hodge, Moody, and
Warcholik study.44
Table 13: Private Sector Costs of Replaced Taxes
1. Individuals’ income, estate, and gift taxes 110.67
2. Businesses’ income tax 154.40
3. Employment taxes 142.04
4. Total current tax filing costs 407.11
Billions of $.
Source: Authors' estimates, IRS data, and Hodge, Moody, and Warcholik (2005).
On line 1 of Table 13, we present the Hodge, Moody, and Warcholik estimate of the cost to
individuals of complying with income, estate, and gift taxes on page 7 of their report: $110.67
billion. Line 2 sums their estimate for business compliance costs of $147.65 billion (page 8) and
their estimate of the costs for nonprofits of $6.76 billion (page 9), minus their estimate of the
compliance cost of the nonprofits for the return of the excise tax, of $8.6 million (page 9). The
total estimate is $154.40 billion.
We were unable to find an estimate for the cost of filing employment taxes. To estimate this
cost, we took the average cost per $100 of revenue of complying with the individual taxes and
the business taxes, implied by the estimates on lines 1 and 2 of Table 13, which is $18.41,
multiplied it by the gross revenue levied by federal employment taxes in 2005, and then divided
the result by 100 to obtain a cost of $142.04 billion, which is presented on line 3. This estimate
may be high, since it assumes that employment tax compliance costs are as high as the costs to
individuals and businesses of minimizing their income tax exposures. Knowing this, in the next
section we include a sensitivity analysis that considers total costs/savings brought forward by the
44 Hodge, Moody, and Warcholik (2005).
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FairTax under different assumptions for total private savings. On line 4 of Table 13, we
calculate the total costs of filing the taxes that are going to be replaced by adding lines 1 through
3, and we obtain an estimate of the total savings in the private sector of $407.11 billion.
IX. Total FairTax Costs (Savings)
We are finally ready to estimate the total costs/savings that the FairTax would have had in 2005.
We do that in Table 14.
Table 14: Total FairTax Costs (Savings)
1. Net sellers’ FairTax collection costs 60.31
2. Net state governments’ FairTax collection costs 9.66
3. Net federal savings (9.38)
4. Private sector savings (407.11)
5. Total FairTax costs (savings) [1. + 2. + 3. + 4.] (346.51)
6. Total FairTax costs (savings) per $100 of revenue (14.70)
Billions of $ except per $100 figures. Numbers may not add up because of rounding.
On line 1, we have the net sellers’ collection costs from line 4 of Table 5, $60.31 billion. On line
2, we include the estimate of the net state governments’ administration and collection costs of
$9.66 billion from line 11 of Table 10, while on line 3, we present the estimate of the net federal
savings from line 8 of Table 12, $9.38 billion. On line 4, we have the estimated private sector
savings from line 4 of Table 13, $407.11 billion. Finally, on line 5, we calculate the total
FairTax costs/savings by adding lines 1 through 4 and obtain an estimate of $346.51 billion
savings under the FairTax for 2005. This represents savings of $14.70 for each $100 of gross
revenue that the FairTax would have raised during that year.
In the previous section, we mentioned that the estimate for the costs of complying with the
employment taxes presented there may be too high. First, we must note that even without the
estimated saving on employment taxes, which would cause private savings to be $265.07 billion
(calculated by adding lines 1 and 2 of Table 13), we would have total savings of $204.47 billion
(calculated by subtracting lines 1 through 3 of Table 14 from the estimate of $265.07 billion).
Table 15: Sensitivity Analysis of the FairTax Costs
Private Sector
Savings Percentage
FairTax Savings
$ Billions
25% (41.18)
50% (142.96)
75% (244.74)
100% (346.51)
Tax Administration and Collection Costs: The FairTax vs. the Existing Federal Tax System 30
In Table 15, we present the estimates of the total savings the FairTax would have brought in
2005 if total private savings were 25, 50, 75, and 100 percent of the estimate on line 4 of Table
13. We observe that all of the estimates imply that the FairTax would save money. We also
observe that for the FairTax to bring no savings whatsoever, the estimate of the total private
savings it brings, including the savings in filing employment taxes, would have to be just 14.88
percent of the estimate we present on line 4 of Table 13 (calculated by dividing the sum of lines
1 through 3 of Table 14 by $407.11). Since this percent is so low, we are convinced that having
the FairTax in place would have freed up a substantial amount of money for more productive
purposes than to administer, collect, and file the taxes that the FairTax proposes to replace, while
still collecting the amount of revenue needed for the federal government to keep its real spending
constant.
X. Conclusions
In this study, we wanted to identify and separately estimate the costs/savings the FairTax would
bring about for each of the three strata involved in the administration and collection of the
FairTax – sellers, state governments, and the federal government. We also considered the fact
that the FairTax would bring huge savings to the private sector, which will no longer have to file
the taxes that are replaced by it. Our estimations are based on 2004 and 2005 data from state
budget documents and revenue reports, 2005 data from the IRS, from CBO and CES, and
estimates from Hodge, Moody, and Warcholik’s report for the Tax Foundation and the
PricewaterhouseCoopers report for the Joint Cost of Collection Study. Our estimates show that
the costs to administer the FairTax would have been significantly lower than the costs to
administer the existing system it replaces.
-
In this study, we have not considered any change in tax enforcement costs that the FairTax may
need to collect the necessary amount of revenue. The robustness of our estimates show,
however, that in order to have no savings whatsoever, state costs would have to be almost 35
times more than what we estimate (calculated by dividing $346.51 billion from line 5 of Table
14 by $9.66 billion from line 2 of Table 14 and subtracting 1). Even if we had not accounted for
the estimated savings from repealed employment taxes of $142.04 billion, state government costs
would have to be about 20 times more than what we estimate them to be.
We conclude, therefore, that the FairTax would be a much more efficient taxation system from
the point of view of the administration, collection, and filing costs that it would bring about when
compared to the administration, collection, and filing costs of the current tax system it replaces.
more tomorrow Decker, I am heading home for the day,
Later
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In this study, we have not considered any change in tax enforcement costs that the FairTax may
need to collect the necessary amount of revenue. The robustness of our estimates show,
however, that in order to have no savings whatsoever, state costs would have to be almost 35
times more than what we estimate (calculated by dividing $346.51 billion from line 5 of Table
14 by $9.66 billion from line 2 of Table 14 and subtracting 1). Even if we had not accounted for
the estimated savings from repealed employment taxes of $142.04 billion, state government costs
would have to be about 20 times more than what we estimate them to be.
We conclude, therefore, that the FairTax would be a much more efficient taxation system from
the point of view of the administration, collection, and filing costs that it would bring about when
compared to the administration, collection, and filing costs of the current tax system it replaces.
more tomorrow Decker, I am heading home for the day,
Later
I am not a computer and my circuits do not overload from your data dump. (hahahha....dump)
I read the Laffer Report.
There are some glaring errors in it.
Why are you so confrontational about this?
Masking your answers with pages and pages of a report that I've already read does nothing for the interests of truth and learning on this forum.
Taxes are taxes. Give an Econometrician a purpose and he can craft a tax to meet that end. Libertarians and Conservatives have been trying to get rid of the progressive income tax system in this country for many many years. They also try to kill Social Security by "saving it" with privatization. By definition, any Flat Tax is a tax hike for poor people and a tax cut for the rich. Prebates do not change that and indeed, when you run the numbers, the prebates fall short.
I believe in a social safety-net for society. We all need a helping hand up at some point in our lives. I see nothing wrong with spreading certain risks across the population through some government functions: medicare, Soc. Sec. and progressive taxation.
When someone comes along and, as a matter of principle, tells me that government is the problem or worthless, I have a hard time believing it b/c I've seen it work. My own principles don't permit me to jump on that anti-government pull-yourself-up-by-your-bootstraps perspective.
That's my motivation.
If you are going to not directly answer my question about the Laffer Report's assumption where the Gov. pays itself tax revenue which is counted in the proposal as more tax revenue, then save your time b/c I'm not interested in your answer.
The government cannot be a self-sustaining entity existing on its own tax payments.
As a libertarian, you ought to know that.
Good night Ozark.