The FairTax: Answering a Critic
[This post was originally a comment response to Cheryl on Frank Hill’s post HERE. As it turned out longer than expected, I figured I’d bring the discussion to the forefront. I co-own the site and can do that. 🙂 ]
Cheryl,
Thanks for your patience. This took longer than expected to pen. (Well, type. Technicalities!)
Before I enter into a point/counterpoint with you based on your previous commentary, I figured it would be beneficial to first lay out exactly what the plan is that I support so we have a baseline for discussion.
Here is the FairTax in a nutshell.
The FairTax is currently a bill before Congress (House Resolution 25) that enjoys the support of some 63 co-sponsors along with primary sponsor John Linder of Georgia. While primarily supported by Republicans, it does enjoy bi-partisan support…as well it should.
The FairTax calls for the elimination of the personal and corporate income tax, the payroll tax, capital gains and dividend taxes, the gift tax, the estate tax, the self-employment tax, and the alternative minimum tax. It basically takes Title 26 of the US Code, the Income Tax, throws it out the window, and makes all of our lives remarkably easier.
It replaces all of these taxes with a simple, flat, one rate inclusive consumption tax on the retail purchase of all new goods and services. Businesses to business transactions are not taxed. The current estimated rate for this new tax is 23%. That means if the sticker on a store shelf says $100, $23 will be sent to the collection authority (most likely the current state sales tax agency) by the retailer.
One of primary principles of the FairTax is that all Americans should not have to pay taxes up to the poverty level of spending. Therefore, the money needed to pay for the taxes at that rate of spending is rebated to each legal American household at the beginning of each month.
Let’s quickly now eliminate some casual misconceptions of what the FairTax is.
The FairTax has nothing to do with state and local taxes. It is a Federal revenue collection bill.
It does not eliminate wasteful spending at the Federal level. It is a revenue collection bill, not a spending bill.
The FairTax as written is revenue neutral to the Federal Government. It is not a tax cut bill.
It does not cut through a lead pipe and then effortlessly slice a tomato.
There is no perfect tax system.
With that said, let’s take a look at a few of your concerns.
Lobbyists will see to it that the products you buy will be taxed on the basis of the latest pet agenda, currently the Climate Change scam. So that weed-eater would be taxed at a rate much higher than the battery driven car you purchase.
This is a common attempt to change the parameters of the FairTax and thus turn it into something to oppose. The FairTax, as written, does not tax different things at different rates. If it did, I would no longer support the bill. This discussion actually needs to remain focused on what is actually being called for.
To your point though, of course, the possibility exists with ANY tax system for lobbyists to get in the way and muddy things up. They certainly do that now! Of course now they are helped in their dirty work with a tax code consisting of over 60,000 pages of special interest loopholes and such cryptic scribblings that not even IRS agents can consistently answer the same question the same way. It’s easy to sneak in a tax or benefit when each change individually has a marginal impact on the entire beast. People just aren’t paying attention to what affect exempting offshore fisherman from tax X has on their own bottom line.
The current tax code is a breeding ground for lobbyist and special interest manipulation.
And what makes anyone think that the 20% rate today would not be increased to 30% next year…or 40% the year after that.
This is not an argument against the FairTax. It is an argument against every possible tax system! It is an argument against politicians with no backbone. It is an argument against run away spending. We the people must remain vigilant in opposing the out of control spending that would call for such tax increases regardless of what the revenue collection system is.
Your plan doesn’t really address the other LOCAL taxes people pay already in sales taxes, property taxes, state income taxes, etc.
You are correct. The FairTax is a federal revenue collection bill. You want state tax reform? Elect good Governors and state legislators. You want property tax reform? Elect good Mayors, city council members, and county commissioners.
The only way to tax people fairly is a FLAT tax. And even then we would have to baby-sit congress to keep them from incrementally increasing it as time goes by.
So there we are. We have an agreement now that it doesn’t matter what tax system you go to, we the people must “baby-sit” (as you say) Congress to keep taxes low.
I like the idea of the Flat Tax, and it is an improvement over what we have now. I don’t mean to totally discount it. The Flat Tax and the FairTax actually share some important similarities. They are both flat-rate taxes that are neutral with respect to savings and investment, for example.
The Flat Tax, however, retains the invasive income tax administration apparatus and can easily revert to a graduated, convoluted mess, as it has many times over many years. It still requires individuals to file their income with the Federal government, a responsibility eliminated by the FairTax. It also retains much of the cumbersome rules of the current tax code in order to determine what “income” actually is.
Furthermore, the Flat Tax eliminates neither payroll taxes nor business taxes, thus retaining a level of complexity as well as the hidden cost of business taxes in the prices of the products we buy. Remember, businesses don’t pay taxes; they simply transfer taxes from the final customer to the government.
Respectfully, the Flat Tax had a chance, but has both a track record of not remaining flat and it has no real grassroots movement to support its implementation. The current flat tax proposal before congress, HR 1040, has eight cosponsors, six of whom also cosponsor the FairTax.
How do you plan to address services? Add 20% to your next haircut or dry cleaning bill? Add 20% to the price of excavating a tract of land?
The FairTax replaces the income tax. Service providers currently pay income tax, and thus should not be exempt from the FairTax. Neither the consumption of services nor the consumption of goods should be tax preferred.
This segues to another lesson.
It is estimated that 22% of the cost of every product or service is simply the hidden taxes and compliance costs of the current tax code. Because this cost of the current tax code will be removed under the FairTax, prices will drop as a result of competition. Adding the FairTax back on top of this new, lower price will not yield a final price that is 23% higher than the current cost of that product.
This is true for both goods and services.
By the way, in your excavating example, because land excavation is more than likely a business to business transaction (clearing company to homebuilder), that does not represent a taxable transaction under the FairTax.
My opinion of the so called “Fair Tax” is that it is just another way to tax the rich….and disenfranchise the lower income population in our midst.
Quite the contrary. Under the FairTax, because of the rebate I mentioned earlier, the marginal tax rate paid by those at poverty level is zero. Those spending at twice the poverty level pay an effective tax of only 11.5 percent — a rate much lower than the income and payroll tax burden they bear today.
As for the “rich”, their level of taxation is dependent solely on the amount of spending they engage in. The money they don’t spend, they save by investing in stocks and bonds or putting into banks, which benefit from the increased assets and make capital more readily available to loan to new endeavors. Capital also comes flooding back to this country rather than wasting away in Switzerland or the Bahamas because there is no longer a tax liability for savings and investment in this country.
The “Fair Tax” eliminates the interest deduction on mortgages. Take that away and then add this 20% to the price of a house and what have you got? A lot of people who can no longer afford a house.
Yes, the mortgage interest deduction goes away, but who cares? All that does is allow the interest to be paid with pretax dollars. Under the FairTax, all purchases are paid with pretax dollars!
Furthermore, an existing house is considered a used good. The FairTax is not charged on the sale of pre-existing houses. As for new construction, the elimination of the chain of taxation currently built into the price of a house will yield a significantly lower construction cost, and thus a lower pre FairTax sale price. The addition of the tax will simply bring the price back up to current market value…give or take a little.
The wholesalers have to pay employment taxes, yes. If you are going to pay for Social Security, Medicare, and unemployment insurance with a “Fair Tax” can you honestly say those costs are not going to go up?
Social Security is anything but secure. The current system has failed and is nearly bankrupt. Major changes in the form of lower payouts or higher taxes are required to continue the programs solvency. That is a whole other debate.
As for the FairTax, it funds Social Security from a broad sales tax, rather than a narrow, regressive payroll tax. Remember, the FairTax is revenue neutral to the Federal Government. The system is still screwed up, but the FairTax does not make the problem any worse than it already is. Actually, it could be argued that in an environment where fewer workers are paying payroll taxes for an ever-increasing retirement population, collecting that money from a broader source, including visitors to this country (both legal and illegal) will help in solving the funding problem.
Shoot me if you want to…I cannot see how replacing X taxes with Y taxes changes anything for the better, lowers the impact to the consumers, keeps corruption out of the system, or makes life any easier for us.
There are a plethora of reasons why the FairTax is a significant improvement over the current scheme. It would take another post of nearly this length just to go over the benefits.
Just a few include:
- The elimination of the individual responsibility to file any type of income statement with the Federal Government.
- Savings of an estimated $482.7 billion each year in compliance costs alone.
- No more complicated and convoluted tax code that rewards governments chosen winners and losers.
- Visitors to this country, both legal and illegal, will contribute to our tax base when they make purchases.
- The elimination of embedded taxes in the price of American goods makes our exports more price competitive overseas.
- The elimination of business taxes and compliance costs make the United States the “go to” country for business development in the world. Many Fortune 500 companies, when asked about the FairTax, have said that if it passes their next plant will be built in the US.
- No more deductions from your paycheck. What you earn, you keep. You decide when to spend it and when to be taxed.
I could go on and on.
Please refer to FairTax.org to get an even better outline of the FairTax and it’s benefits.
It took me a little while to come around when I first heard of the plan back in 2004, but once it “clicked”, I haven’t been able to turn back. I have yet to find an argument against it that can’t be answered.
Thanks for reading this, I hope I answered some questions and perhaps sparked some others. I promise to be less verbose in future discussion. 🙂
Last time I checked, there were over 35,000 registered lobbyists on Capitol Hill.
that is more than 65!!!!!!! lobbyists for every single congressman or senator!
Holy Cow! You could field a professional football team for each representative with those numbers…or at least a marching band playing the kazoos!
You want to know why the consumption tax is better than the current income tax system? Go no further than the 65-to-1 ratio…..
NO ONE knows how complicated the income tax system is because these people are every smart and very skilled and adept at keeping it that way…for their clients which is the way things work in DC.
the Consumption Tax is the way to go if we want to get into the 21st century any time soon…..
Christian, I posted my reply on http://myteapartychronicle.blogspot.com Not sure how to copy and paste all of it here so I leave it to you to know what to do with it. Gotta run …..thanks!!! 🙂
My major concerns fall into the category of the lure that a 23% sales tax rate will hold for smugglers/criminal accounting practices, etc. We have seen this problem in the sale of cigarettes back when the difference is NY tax was substantially higher than the NC tax. 23% is a very attractive sum if one can avoid paying it. Which brings me to the subject of what will all of those tax accounts do for income? If I could hire a good one to run 2 sets of books, I could cheat the taxman for enough to pay the salary and keep much more for myself. Still, I believe the fair tax to be a vast improvement but must be enacted with the simultaneous repeal of the 16th amendment which authorizes the income tax. Otherwise the band of thieves we call Congress will do both.
Hi Kim, thanks for the comment.
You bring up two issues, and believe me, you are not alone in questioning. Let’s take them one at a time.
First, fraud.
Since the beginning of taxation, there has been fraud, and there will continue to be fraud until the good Lord comes back to free us from all this. There are litterally hundreds of billions of dollars a year lost to the government through not only fraudulent practices, but given the complexity of our current code, many who don’t even realize they aren’t paying the appropriate legal tax. This, of course, translates into higher taxes for all those who are playing above board.
Will there be fraud under the FairTax? Absolutely. However, I contend there will be less for the following reasons.
First, not every American has to file a tax return under the FairTax. Only businesses do. Therefore there are millions of fewer points at which the potential fraud can take place, and these are more easily monitored for evasion. Additionally, (and I can’t remember the exact numbers right now) but the vast majority of taxable transactions take place with the Walmarts of the world. These folks aren’t going to be cheating.
Second, this is how easy it is to get caught cheating. Remember when I mentioned that business to business transactions are not taxed? Well, while technically accurate, the way that takes place is thus. When a business does purchase a good from another business, the tax IS paid. The amount of that tax is subtracted as a credit on the monthly payment that business makes to the state. Now, if suddenly a particular business was claiming all kinds of credits to render their tax burden to zero, it will be a pretty red flag that will indicate something fishy is going on. Either that business isn’t paying the right tax, or they keep buying goods and never sell anything!
Also, your cigarette example is definately accurate…I know…ahem…plenty of people that took advantage of such situations. The FairTax is country wide though, so there really isn’t anywhere to hide.
Your second question regards the 16th amendment. I believe it actually is part of the bill now that the move to repeal it will be started upon passage. However, I don’t believe it is necessary. (I would support it 110% though!) Right now, congress could pass a sales tax on top of the income tax. They could have done it for almost 100 years. They haven’t.
If you eliminate the tax code, which the FairTax does, we’d be in the same situation we are now. The possibility will exist that we have both, but the likelyhood isn’t that great…especially if we elect the right leaders. Remember, the 16th only allows an income tax…it doesn’t require it.
If we wait until the 16th is repealed, we’ll have to wait a very long time for tax replacement. Instead of just a majority of legislators and the President’s signature, we’d need 2/3’s of both houses of Congress PLUS 3/4’s of the states to sign on. Frankly, I don’t see this happening anytime soon.
Again, I’d love to see the repeal, but not as a prerequisite for the FairTax.
Thanks again for your comment. I hope that answered your questions.
~Christian
Yes, I agree, there is always fraud and the higher the possible gain the more fraud there will be. Although, in the case of tax avoidance, the term should probably be “civil disobedience” not “fraud”. Still, that wouldn’t stop me from supporting a “Fair Tax” plan. What would stop me is a failure to link repeal of the 16th to the creation of a Fair Tax. As for the failure of Congress to levy a sales tax in a hundred years, are you not aware of the current rumbling regarding a VAT? Not to mention the ongoing levy of fees, tariffs, etc., etc., tax, tax, tax? As for electing the “right” leaders: I don’t believe in the “we just need a better king” notion of governance. I want them in chains that are so restrictive that individuals who thrive on power will avoid elected office like the plague. In short: No Fair Tax without the nullification of the 16th Amendment! Period! The Fair Tax wouldn’t be in force for a year before some progressive blood sucker would be calling for an additional income tax on the “Rich” so they could pay their fair share.
Kim,
I think we share a basic agreement that the government is way too large and powerful.
Again though, if your fear is that passing the FairTax without immediately repealing the 16th would lead to both an income tax and sales tax in a year, then I again ask why we don’t already have both now! The dangerous possibility of having both already exists!
Plus, it’s doubtful that the same majority in Congress that just voted to abolish the IRS code would so soon seek to put it back in place. There would be riots, and they know it.
I also still say that I’m more than willing to take the “risk”. Right now what we have is an abomination. I don’t want to wait until we have a 2/3’s majority before we do anything about this current national embarrasement of a tax code!
Thanks again. ~C
Hello Christian,
It has been some time since we first met. Sorry to see that you are still flogging the Fairtax scheme. Fortinately, it is going nowhere, imho, but I may have to revise my belief that the average shelf life of a Fairtax supporter is less than two years?
You wrote that you have yet to find a criticism of the Fairtax scheme that you couldn’t answer. Try some of these and we will see.
(1) Federal taxation of State and Local government consumption is clearly unconstitutional and will be struck down by the Supreme Court. This simply means that the Fairtax sales tax rate will have to be increased significantly. Have you forgotten that our country is a Republic with two sovereign powers, Federal and State. Sovereign powers don’t tax each other, and our Supreme court has always operated under the long held doctrine of “Intergovernmental Tax Immunity”!
(2) Two transition issues that impact seniors are the double taxation of after tax savings when spent, and the unfairness of forcing retirees to resume paying for their hard earned SS pension and health care benefits with their sales tax dollars. After paying my FICA premiums for 45 years or so, what is fair about charging me again? Major break in faith by the federal government. Isn’t going to happen!
(3) By including payroll contributions on the list to be replaced by the Fairtax, and providing a prebate to offset taxes on spending up to the AFFT adjusted poverty level, a group of an estimated 30 million workers would pay no net federal tax annually. Compare that 30 million to the less than 1 million workers today that pay no income tax and also qualify for refundable tax credits, (such as the EITC), in an amount that totally offsets their 7.65% payroll contribution. Is having 30 million workers disconnected from the cost of the federal government a good idea? I don’t think so!
There is much else wrong with the Fairtax as outlined in HR25. You also need to check your percentages needed to pass and ratify a Constitutional Amendment. Your’s are backwards. I’d also like to point out that you are still clinging to the long discredited “free lunch” myth. Assuming we all get 100% of our gross pay, business embedded tax costs of around 9% of sales could be removed and retail prices will have to rise by 18% after adding the 30% sales tax. Boortz screwed this up in book #1, and has been scrambling to correct his mistake ever since. That 22% everyone has branded on their forehead is mostly employee income tax and payroll contyribution withholding according to Dale Jorgenson, the author of the 1997 embedded tax study. We can’t get all our gross pay and expect retail prices to remain the same. There is no free lunch!!!
Hank, my nemises, how are you bud? We haven’t debated on this for what, 5 years? Do you have a google alert out on my posts or something? Haha.
First, indeed, my support of the FairTax has only grown stronger through the years. The income tax code has continued to grow in complexity as it overreaches into the lives of every American. IRS agents are going to be the new health insurance police. I’m even going to have to start 1099ing my local gas station every year! We have more co-sponsors than ever, and people across the board are beginning to more openly talk about the benefits of switching to a consuption tax (FairTax brand name aside).
Thanks for catching my 2/3’s and 3/4’s reversal. Product of writing tired, adjusted in my post.
To your questions…and these will be brief….
1. States and local governments are already paying federal taxes every time they purchase a product. The tax is built right into the price. You may consider this a mere technicality, but the transfer of local government money to the Feds already takes place…in an indirect manner.
Furthermore, many government enterprises run by state and local governments are considered businesses for the purposes of the FairTax and are thus exempt from paying the FairTax on new goods purchased for the enterprise.
2. Half true, but the benefits outweigh the negatives as a whole.
Seniors, like everyone else, receive the prebate for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. Plus, if seniors choose to work, they are freed from payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits like there is now.
The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax.
3. ???
In 2009, 47% of the population paid no income tax and the bottom 40% actually made a profit because their credits more than offset their liability. Your horror situation already exists!
And no, I’m not clinging to the “free lunch myth”. We’ve been over the Jorgenson/Kotlicoff studies ad nauseum in our conversations. If I remember correctly, you finally agreed that price/wage increases/decreases aside, because the exact outcome can not be predicted, SPENDING POWER is going to hold steady for the vast majority of Americans.
As I’ve mentioned, is the FairTax perfect? Absolutely not. Is it a vast improvement to what we have now? YES.
The Liberty aspect of the Fair Tax is huge for me. It will mean that the government will no longer be able to socialy engineer the country. Individuals will decide when they pay taxes. The K street lobbists will have to find productive work. Also, if we pass the Fair Tax, it will put enormuss pressure on socialized countries around the world to free up their economies, because the USA will become a giant capital magnet by untaxing capital formation and productivity and savings.
You will never convince me otherwise, as I doubt I will convince you. Fair enough, but I have more years left to live and minus RADICAL change, this country is totally screwed financially!
Christian,
Yep, my google alert service for all things “Fairtax” works just fine. And, I stay busy in retirement trying to correct all the gross misstatements that get made by proponents and opponents alike. Reading those “comic books” written by a radio talk show host and a soon to be retired, obscure Georgia Congressman gives rise to too much misinformation, imho. Reading HR25 is certainly more useful, and also, reading some of the unbiased research that can be found on fairtaxblog.com.
You are mistaken when you write that HR25 has more cosponsors than ever. Not true, and, in fact, I have a $10.00 wager with another NJ Fairtax enthusiast that when the counting is over at the end of the 112th Congress, the number of House cosponsors won’t exceed the 72 recorded in the 110th Congress. Care to get a little of that easy money?
(1) The argument that governments already pay taxes and people are already double taxed on their savings due to embedded taxes is totally false. And it isn’t just a technicality. Look Christian, businesses pay rent for their place of business but that doesn’t change my rent by one thin dime. Businesses purchase insurance, but my insurance premiums are unaffected. Business pay for utilities but my utility bills are not affected. And, yes, businesses pay taxes (sometimes), but why should I accept that my individual tax burden is somehow affected? Makes no sense at all. The only thing embedded tax costs affect are retail prices, or purchasing power if you prefer. It is just too much of a stretch to claim that State and Local Governments pay taxes to the federal government due to embedded tax costs, and it is equally absurd to try to fend off my individual double taxation criticism by claiming that embedded taxes are double taxes today. Just admit that in any radical shift in tax collection policy, there will be winners and losers, and move on. I can’t hear what you are saying over the sound of the tap dancing!!
(2) Which half is untrue? And, don’t assume that all seniors will be better off economically. For instance, a retired couple drawing $30,000 in two SS checks plus $18,000 in savings returns can live comfortably, yet pay not one dime in federal taxes today. The same $48,000 will likely pay $11,000 in federal sales taxes when spent, offset by a $5,000 prebate, for a net loss of $6,000 under the Fairtax. Try selling that scheme to the millions of seniors that would be affected. And, by the way, you need to reread HR25, Sec 801-806. Interest bearing investment and debt instruments will be subject to a significant implicit tax depending on the going Treasury rates. It is not true to claim that investments won’t be taxed!
(3) I don’t know what your ??? means, but anyone can use IRS data and come to the same conclusion. Under current tax law, less than 1 million workers pay no income tax, plus qualify for refundable tax credits that totally offset their FICA contributions. In other words, less than 1 million pay no federal tax for some period in their work career. Under the Fairtax, because the poverty level for couples was increased 25% by AFFT, and because payroll taxes are to be replaced with sales taxes, 30 million working families will pay no net federal tax. And, in jobs that earn only cost of living adjustments each year, those workers may never pay any federal tax, yet will still get their pension and health care benefits when eligible. Back in 2007, you wrote that you thought everyone ought to contribute to the cost of the federal government. How then can you support a tax scheme that lets 30 million workers off the hook?
You and I will never agree on the plan described in HR25, but I would hope that we might agree on some changes which would eliminate my criticisms. For instance, leave Social Security out of the plan and focus on just replacing the dreaded income tax. That removes the 30 million criticism as well as the unfairness of making me pay twice for my benefits. It turns out that a 10% consumption tax on both new goods and all services would replace the income tax and be revenue neutral. A 20% consumption tax on just new goods would do the same thing.
You have been pushing this wet noodle up hill for 12 years and there hasn’t been a single hearing. Perhaps it is time to see if John Linders replacement (whoever it is) is more amenable to some modifications to the proposed plan that would improve the chances of Congressional consideration? Isn’t doing the same thing and expecting a different result the definition of insanity?
Best regards,
Hank
Hank,
This is my first substantive discussion on the FairTax for a couple years…you’ll forgive my rust.
I was remembering 62 co-sponsors as the previous high. If it was 72, then so be it. I would still argue that “support” is higher now than ever before. Five years ago I would mention FairTax and get blank stares. Now I get nods of acceptance and support.
Anyway, I really don’t want to go round and round with you again. We’ve been through all this before. For the sake of new readers though, very briefly…
1. Yes, there will be winners and losers with any radical shift in tax policy. Never once have I denied this. I just know without doubt that there will be significantly more winners than losers when the FairTax passes when the results are looked at in totality.
You say, “The only thing embedded tax costs affect are retail prices, or purchasing power if you prefer.” Bingo! You understand that prices are higher than they need to be because of the cost of the system. THIS IS A TAX! When I buy a computer at WalMart, I am in a disconnected way paying tax to the Federal Government. My money goes to Walmart, whose profits are increased, and tax is paid on that at the corporate level and in the taxes paid by Walmart shareholders.
Further, I don’t understand your point as it relates to this discussion, but you really don’t think others in your risk pool affect your insurance rates? Really?
2. My previous answer stands. The vast majority of seniors won’t be any worse off under the FairTax…many will be in a better position when their IRA’s are not taxed as they expected and there is no penalty to continue working. The overall spending power of the couple in your example isn’t affected much at all. Instead of having 48,000 to spend, they have 53,000 to spend. Assuming they spend every dime, I’m willing to bet that in either scenario they will end up with equally the same amount of “stuff”.
And frankly, we’ve got to get off this Social Security as sacred cow nonsense. I’m sorry, but it was destined to fail from the beginning like every other ponzi scheme and the generations that preceeded mine have mishandled it so badly by passing the buck onto my generation that I have to assume there will be no social security for me at all. Do you care about all the payroll taxes I’m paying now that I will never see a dime of? (I don’t really care and would love to abolish the system anyway. Retirement isn’t government’s responsibility.)
Anyway, we are going to have to start increasing the retirement age or lowering benefits with or without the FairTax just to keep it solvent. (Either that or start charging me even more for the benefits I’ll never receive)
The truth of the matter is that the social security system is bankrupt. Expanding the base from which it is funded via the FairTax, as well as the overall economic benefits and growth associated with passing the FairTax, will do more to help this dieing system than simply maintaining the status quo. We’re beyond that.
A small percent of seniors in very particular circumstances might lose a tiny bit of spending power. I really don’t care. Their generation allowed the system to progress this far and payback’s a bitch.
3. You say, “Under current tax law, less than 1 million workers pay no income tax, plus qualify for refundable tax credits that totally offset their FICA contributions.” Man, it’s a LOT more than that.
And for every American that doesn’t pay taxes now and will continue not to under the FairTax, at least post FairTax there is a foreign citizen contributing to our tax base instead…growing the pie.
I am very happy to hear that you at least agree with the idea of a consumption tax. I’ve never heard that from you before. (There’s hope!)However, removing the income tax but leaving the payroll tax will not yield half the benefits of the plan as written…and it leaves social security totally screwed. I don’t want to go “halfsy” because when it fails to live up to expectations, there will be all the more rhetoric to bring back the income tax because the consumption tax “didn’t work”.
All grassroots movements take time. 12 years is nothing in the grand scheme of things. We’ve got Dems in charge now who aren’t even listening, and the GOP was so incredibly pathetic under GW Bush that they got what they deserved. I’m excited about the Tea Party and the influence it will have on these November elections. Our people are mostly FairTax supporters and hopefully the GOP will get the message and not wuss out like in the past and actually tackle some of these tough issues. If they don’t this time, well, it will be their last chance to get it right. If they don’t, welcome to the late great USA.
Christian,
Your Social Security comments confirm my belief that “Youth is wasted on the young”! SS is not a ponzi scheme, it will not go bankrupt, and you will get your benefits when eligible. Stop with the scare nonsense already! The Social Security plan has been modified every 30-40 years due to domographic changes, and it will be modified in the next ten years or so to restore solvency. A recent Senate report concluded that a 1% increase in FICA immediately would restore solvency for the next 75 years. Former Senator Bill Bradley wrote that there were at least four fixes possible. (1) increase the retirement age to 75; (2) remove the cap on earnings, (3) use a “chained” method of calculating the annual COLA which recognizes the impact of inflation on purchasing habits; and (4) bring all State and Local government employees into the plan. (that last one has serious constitutional problems and probably can’t happen.) Christian, if nothing is done, you would still get 80% of your benefits, so relax, my friend, the sky isn’t falling!
I share your concern about the failed record of the GOP when last in power, and hope that if the House switches in November, the GOP majority will do better. There are lots of good projects within the Tea Party ten point contract that I’d like to see accomplished. I’m optimistic!
In response to my #3, you wrote: “Man, it’s a LOT more than that”.
I went to considerable time and effort using IRS data to arrive at my 1 million estimate. Just what do you base your comment on?
You wrote: “The overall spending power of the couple in your example isn’t affected much at all. Instead of having 48,000 to spend, they have 53,000 to spend. Assuming they spend every dime, I’m willing to bet that in either scenario they will end up with equally the same amount of “stuff”.”
OK, lets see if that is true. Under current tax law, the couple has $48,000 to spend on “stuff” because they pay no federal taxes. Under the Fairtax, if they spend $53K, their tax burden would be $12,200. That means they can only buy $40,800 worth of stuff before taxes. That $48,000 worth of stuff today will have a pretax cost of $43700 under the Fairtax when business tax costs of 9% are removed, so it seems to me their Fairtax purchasing power will be off by $2900. What am I missing?
I’m going to assume that you, and other Fairtax supporters , still believe that the 2005 Presidents tax reform commission incorrectly trashed the Fairtax. I don’t agree, but am willing to work very hard to get a Fairtax hearing before the Revenue Subcommittee of the House W&M Committee. That is a necessary first step in the legislative process. Linder couldn’t (wouldn’t?) do it over the last twelve years. I think I know why, but would like to see a fair and unbiased hearing that will put to rest some of the Fairtax issues. I’d be willing to bet that the subcommittee will make at least three changes, including using an exclusive tax rate, eliminating the idiotic taxation of Governments, and reducing the horrendous prebate cost through a targeted method similar to the EITC. I suspect FICA will also be taken off the table. What’s left might even have a real chance of replacing the income tax at a “tithing” rate of 10%? Stay tuned!
Mr. Hank Van Gieson,
You have not paid FICA premiums for 45 years or so any more than I have. We have both been robbed at gun point in order to issue checks to an older generation. Now that we are that older generation, we must make sure that all those 20 and 30 somethings get robbed in their turn so that our checks will continue to flow. We will, no doubt, continue to receive our respective SS entitlements, but let us not pretend that it is some sort of annuity that we save up for and purchased with our own funds. While it is one degree of moral failure to accept the proceeds of theft in order to maintain life and limb, it is gross depravity to pretend that we have somehow earned to right to do so.