Huckabee campaigning for 23% sales tax

[Decker]

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

[Decker]

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.

[Decker]

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.

[Decker]

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. 

[Ozark]

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   
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 :



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

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 ) :   

http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/

--------------------------------------------------------------------------------------------------------------------------------

 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.



----------------------------------------------------------------------------------------------------------------------------------

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

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.

--------------------------------------------------------------------------------------------------------------------------------





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 ! ! !           








Vote for Ron Paul

[Ozark]

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 ! 

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 !   

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 !!   

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   


 





Vote for Ron Paul  http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx

[Ozark]

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

and

  http://www.youtube.com/watch?v=IWfIhFhelm8





Vote for Ron Paul

[Decker]

Decker,

I see that you conveniently  left off the rest of the discusion   
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 :



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

How about we post the entire page ( and not just the part you like ) :   

http://www.ronpaul2008.com/articles/104/taxes-spending-and-debt-are-the-real-issues/

--------------------------------------------------------------------------------------------------------------------------------

 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.



----------------------------------------------------------------------------------------------------------------------------------

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

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.

--------------------------------------------------------------------------------------------------------------------------------





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 ! ! !           








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.

[Decker]

...

I see that you conveniently  left off the rest of the discusion   
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.

[Decker]

exactly !









Decker does not want you to watch these : 

 http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx

and

  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.

[Ozark]

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

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.

[Ozark]

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.

[Ozark]

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.

[Ozark]

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

[Decker]

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.

[Ozark]

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 ( accounts for the individual income taxes paid on this income, which have already been taxed in Equation (7):
( 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.

[Ozark]

and here is more :

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

[Ozark]

and even more :

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.

[Ozark]

still not enough  ?

okay, here you go Decker Dummy :

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.

[Ozark]

more ?

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 ! ! !            



Decker the Tax Lawyer does not want you to watch these :

 http://easylink.playstream.com/fairtax/RonPaul-FairTax.wvx

and

  http://www.youtube.com/watch?v=IWfIhFhelm8

Vote for Ron Paul

[Decker]

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.