by Thomas Davis
President John F. Kennedy once argued that our tax system “reduces the financial incentives for personal effort, investment and risk-taking.” Unfortunately, there has not been much improvement since JFK's presidency.
In fact, the tax code has become more complicated and burdensome. Since 1954, the number of words in the IRS regulations has increased by 939 percent. Just consider, how much time do you, or more likely your parents, spend preparing taxes? Or how much money do your parents spend having an accountant prepare your family's taxes? And how much time does a company spend making business decisions with respect to the tax code?
The answer is astounding: Economists estimate that we spend over $200 billion every year and about 5.8 billion hours complying with the tax code. American companies spend another $200-300 billion making business decisions based on tax implications. The average American spends twenty-seven hours preparing his or her income tax forms, and almost 45% of tax compliance costs are directly incurred by individuals.
While the current situation is complicated, the proposed solution is simple. It's called the FairTax. Some of the nation's most eminent economists and businesspeople have researched and developed a system applying a national sales tax of 23% on all goods and services at the retail level. In return, no more income tax. No more corporate income tax. No more payroll taxes, gift tax, alternative minimum tax, self-employment tax, capital gains tax…you get the picture. By the way, no more embedded tax in the goods and services you currently purchase, which averages around 22%.
Whether you realize it or not, the cost of corporate income taxes, payroll taxes and other taxes have been factored into the price of the goods and services you purchase. So when politicians try to tax what they deem to be greedy businesses by assessing higher corporate income taxes, those taxes are actually passed on to you, the consumer. By eliminating embedded taxes, the prices of what you buy after applying the 23% consumption tax would hardly change from current prices. The difference is that you bring home your entire paycheck and that tax is transparently assessed at the end, not through an onerous and bureaucratic system applied within a price tag.
And don't worry; this simplified system is revenue neutral. The government will collect as much money using the FairTax as it does under the current system, having no effect on current ability to fund government programs. Actually, economists expect economic growth to be around 10.5% for the first year, effectively increasing the government's revenue.
Under the FairTax, you would get your entire paycheck and would only pay tax on what you consume, encouraging Americans to do something we do not do well — save. In order to make the FairTax fair, all people would receive a prebate, or advanced rebate, that reimburses them for tax paid up to the poverty line. In other words, you only pay tax for living beyond your necessities.
Without a corporate tax, America will encourage companies to come back to the United States, providing new jobs for Americans. Without embedded taxes factored into the price of a product, American companies can export goods and sell them at prices lower than foreign products.
While the benefits are numerous and the drawbacks are few, I encourage you to question the FairTax Act of 2007. Challenge it. Look for shortfalls. But don't forget to take the time to find credible answers. Read The FairTax Book by Neal Boortz and Congressman John Linder. Visit FairTax.org. Search the Web for scholarly criticism. You will see that the FairTax stands for innovation and equality. Do you?
Regression
To the Prestigious Vanderbilt University,
I am one of those fairtax nuts. I admit it. Unfortunately, I did not attend your university. I say this because I'm highly impressed that this topic made it into a student newspaper. The Cavalier Daily(UVA's student newspaper) would have never allowed it. Even so, I would like to address a few points I found in the comments section.
1. Mr. McNish - There is a clause in HR 25 mandating a "prebate" that absolves taxing people on poverty level spending. I.e. - I have a family. I earn poverty level wages(as already stated by the Government). I am mailed a check to cover 23%(or 30%, you number trolls) to cover the tax on a monthly basis. The net result---the working poor pay NO TAX. This tax is not regressive. It taxes people only on money they themselves have designated as excess.
2. 23% = 30%. Ok, maybe not. But seriously, if the income tax on your income is 23% leaving you with seventy seven percent of the income, do you say the government took 30% of your income?
I.e.- I earn 100 dollars. The government takes 23. I am left with 77. 23 is 30% of 70. Or 23% of 100.
I spend 100 dollars under the fairtax. The government takes 23. 23 is 30% of 70. Or 23% of 100.
If the income tax is inclusive, the compared tax should be able to be considered in the same light.
3. The scientologist argument is SO ridiculous it really discredits your intelligence. Poor excuse for a scare tactic. It is just not the case.
4. To the author, well done, sir.
Thanks to anyone who gave a look at the thoughts of an interloper. I love the idea of a massive transfer of power from the oversized federal government to the vastly superior decision making ability of the American people. If anyone is interested in further discussion, please email me at Jmm4dh@virginia.edu.
Jake
No reply for days
I see no one has posted in days. Did we win? :)
Taxation Schemes
As President Kennedy and others have pointed out, the progressive tax system creates disincentives for study, hard work, innovative thinking, entrepreneurialism, and risk-taking. Thus what is so great about a "progressive" tax system other than it robs from the rich?
The FairTax system, as created by the economists, Lendner, and explained by Boortz, would, in all probability, still collect the bulk of taxes from the wealthy. The FairTax taxes spending. It is clear that the wealthy spend quite a bit more money than the poor! What would change?
Pardon the double post previous. First time here. I thought I had previewed when I must have posted.
Brooks A. Mick, M.D.
Discussion?
It appears to me that both the bunkers and debunkers and de-debunkers are basing their opinions on assumptions. The FairTax folks--and I incline toward their position for the simple reason that the non-monetary benefit, that of removing the heavy social-engineering boot of government from the necks of citizens, will be a major benefit in getting corruption out of government--believe that the embedded taxes WILL be dropped from the cost of goods. They may be right, as the various costs of regulations, etc., were promptly cut from the cost of airline tickets when that industry was deregulated.
The FairTax opponents believe that most of the costs would remain in the price of goods. They don't seem to have much faith in capitalism! It would only take one seller to cut his prices, going for market share, for the rest to fall in line. Otherwise, they would be priced out of the market.
Brooks A. Mick, M.D.
Discussion?
It appears to me that both the bunkers and debunkers and de-debunkers are basing their opinions on assumptions. The FairTax folks--and I incline toward their position for the simple reason that the non-monetary benefit, that of removing the heavy social-engineering boot of government from the necks of citizens, will be a major benefit in getting corruption out of government--believe that the embedded taxes WILL be dropped from the cost of goods. They may be right, as the various costs of regulations, etc., were promptly cut from the cost of airline tickets when that industry was deregulated.
The FairTax opponents believe that most of the costs would remain in the price of goods. They don't seem to have much faith in capitalism! It would only take one seller to cut his prices, going for market share, for the rest to fall in line. Otherwise, they would be priced out of the market.
Brooks A. Mick, M.D.
Diminishing marginal utility of money.
Assuming that the tax is revenue-neutral, let's say that both the FairTax and the current tax system bring in equal amounts of money. However, FairTax supporters assume without warrant that eliminating supply-side corporate taxes will bring about a commensurate decrease in price for the consumer, so that the consumer would still pay roughly the same price for a good. If modern economics has taught us anything, it is that markets are imperfect; consumers would probably pay slightly lower prices before tax, but the net effect would in all probability increase the average price of goods after tax. Consumers would have more money to spend because of the elimination of the income tax--at least at the higher ends. The average consumer would see a net decrease in buying power.
The reality that is the diminishing marginal utility of money makes FairTax an even more regressive tax system than the one we have in place right now. Paying 23% for every act of consumption is incredibly those on low and fixed incomes and would doubtlessly contribute to the further economic stratification of society. Why? Because proportionally, people with low incomes spend more of their money consuming goods.
Let's say both a low-income individual making $1,000 a month and a high-income individual making $10,000 a month both spend roughly $500 on necessities each month. Both then are taxed $46 on their purchases as per FairTax. However, that $46 dollars means far less to the high-income individual than it does to the low-income individual. While these two individuals would be taxed the same dollar amount, the low-income individual loses a lot more utility as a consequence of the diminishing marginal utility of money. Losing $46 out of $500 means a lot more utility lost than losing $46 out of $9,500.
I might be persuaded to support something like FairTax if such a tax scheme eliminated all taxes on food, medical care, and other necessities while putting a higher tax rate on luxury goods. Unless such modifications are forthcoming, any claims that the FairTax is not regressive are flawed at best, disingenuous at worst.
Kevin McNish
Arts & Science '08
More info...probably too much lol
Submitted by Kevin McNish on Mon, 01/14/2008 - 14:05.
Assuming that the tax is revenue-neutral, let's say that both the FairTax and the current tax system bring in equal amounts of money. However, FairTax supporters assume without warrant that eliminating supply-side corporate taxes will bring about a commensurate decrease in price for the consumer, so that the consumer would still pay roughly the same price for a good. If modern economics has taught us anything, it is that markets are imperfect; consumers would probably pay slightly lower prices before tax, but the net effect would in all probability increase the average price of goods after tax. Consumers would have more money to spend because of the elimination of the income tax--at least at the higher ends. The average consumer would see a net decrease in buying power.
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Without warrant implies the supporters are making claims without anything to back them up. By supporters, I’m not sure if you are referring to me or the 80 or so professional economists. I try to back up what I say.
It is not just the corporate taxes that are eliminated, but also employers’ matching shares of Social Security and Medicaid and all the costs associated with complying with the tax code; all the way down the multitude of businesses and services involved in the supply chain of any retail product or service.
Now I’d like to discuss compliance costs. In my research I’ve found that the Tax Foundation has been very conservative in the way they derived the $265 billion (2005 dollars) that they used in calculating the estimated drop in prices of 22%. (The following is a bit confusing since there are figures from several different years)
Quote from The FairTax Book page 45:
“Of these three types of tax compliance costs, only the second is included in the Tax Foundation’s $194 billion tax compliance cost estimate.”
This shows that they only used one of three sources that contribute to compliance costs. The $194 billion is a 2001 figure from the same sources as the $265 billion 2005 figure.
Quote from The FairTax Book page 49:
“As discussed earlier, the Tax Foundation estimates of compliance costs cover only those costs incurred responding to the IRS. Earlier in this chapter, we recited Tax Foundation figures showing the number of man-hours and the total cost for individual compliance costs at $194 billion.”
This shows the source of the official compliance costs estimates; costs incurred responding to the IRS.
Quotes from: http://www.fairtax.org/PDF/WhatTheFederalTaxSystemIsCostingYou.pdf
(It is well worth reading this entire pdf because it discusses how compliance costs are regressive and affect the working poor, how compliance costs hit small businesses hard and other useful info)
“The tax gap affects all taxpayers…
With an estimated tax gap--which is the difference between what taxpayers should pay and what they actually pay on a timely basis--of $345 billion, this means that the 130 million taxpayers paid on average $2,649 more in taxes to subsidize the unwillingness or inability of some taxpayers to pay their fair share.” (2001 dollars)
This explains the hidden cost of the tax gap, the first source of compliance costs, in 2001 dollars of $345 billion. The tax gap is not used to derive the $194 billion figure (2001 dollars).
“Time is money.
According to a detailed study by the Tax Foundation, in 2005 individuals, businesses, and nonprofits spent an estimated 6 billion hours complying with the federal income tax code at an estimated cost of over $265.1 billion. This amounts to imposing a 22.2 cent tax compliance surcharge for every dollar the income tax system collects.”
This shows the latest estimate in 2005 of compliance costs of $265 billion. This is the second source and is the only one used for the official compliance costs.
Aside: It’s kinda fun to do this little problem. Assume that the average American lives 76 years. Doing the math shows it takes every second of the entire lives of 9,012 Americans just to fill out taxes for one year. Imagine that!
“And that’s not all.
The efficiency costs of the federal tax system dwarf compliance costs. Efficiency costs occur when tax rules distort the decisions of individuals and businesses regarding work, savings, consumption, and investment…According to research by the Government Accountability Office, efficiency costs are on the order of magnitude of two to five percent of Gross Domestic Product (GDP). Based on GDP of $13.259 trillion in 2006, efficiency costs are an additional $265 billion to $663 billion.”
This shows the third source of hidden compliance costs that was not used to derive the 2005 estimate of $265 billion.
It’s clear that the Tax Foundation decided these two hidden sources of compliance costs were too unreliable to use and I can appreciate that better safe than sorry approach. (the thought of 300 million angry citizens may have played a part lol)
However, if we allow ourselves to add these up we can see that it’s possible to realize a savings in compliance costs around 1 trillion dollars. This suggests not only will prices fall to around the predicted amount of the FairTax, but could fall significantly more.
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The reality that is the diminishing marginal utility of money makes FairTax an even more regressive tax system than the one we have in place right now. Paying 23% for every act of consumption is incredibly those on low and fixed incomes and would doubtlessly contribute to the further economic stratification of society. Why? Because proportionally, people with low incomes spend more of their money consuming goods.
Let's say both a low-income individual making $1,000 a month and a high-income individual making $10,000 a month both spend roughly $500 on necessities each month. Both then are taxed $46 on their purchases as per FairTax. However, that $46 dollars means far less to the high-income individual than it does to the low-income individual. While these two individuals would be taxed the same dollar amount, the low-income individual loses a lot more utility as a consequence of the diminishing marginal utility of money. Losing $46 out of $500 means a lot more utility lost than losing $46 out of $9,500.
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By your reasoning then if someone has plenty of dollars on his person and plenty more in the bank and I have no dollars at all then it should be legal for me to rob him because it will increase the marginal utility of the dollars.
Also your assumption appears to be the wealthy person’s dollars don’t affect anyone else. If they put their dollars in the local bank the bank will be able offer more loans and/or lower interest rates. The community realizes increased marginal utility of those dollars as more of its members are able to get affordable loans to start a business or buy a car ect.
I don’t think it’s appropriate to use this economic theory to try and justify the redistribution of wealth. As long as their wealth is invested here it helps our economy.
The latest estimate suggests there is around 13 trillion dollars belonging to wealthy Americans hidden in offshore accounts to avoid the income tax. When the FairTax passes America will become the tax free haven of the world and all that money will soon be back in our banks and other investments working for us. Also many foreign businesses and wealth will come here to avoid their countries taxes.
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I might be persuaded to support something like FairTax if such a tax scheme eliminated all taxes on food, medical care, and other necessities while putting a higher tax rate on luxury goods. Unless such modifications are forthcoming, any claims that the FairTax is not regressive are flawed at best, disingenuous at worst.
Kevin McNish
Arts & Science '08
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If you start with any exemptions, that will open the door to other manipulations of the code. That’s how we ended up with the current 67,000 pages of incomprehensible income tax code.
If you tax something higher compared to others then demand will decrease. I’m sure the luxury item manufacturers and employees would not appreciate that especially when the wealthy could just go overseas for such purchases. Besides, the luxury items are how we a going to get taxes from the wealthy.
If you read the “What the Federal Tax System is Costing You” pdf you’ll see good evidence how there is regression hidden in the current tax code.
I’m running out of steam…must sleep now….
Edit: Oh yeah the prebate. Thanks JakeMcP
regressive, but also disingenuous
I'd be interested to see how the waffling, evasive posters defending the "FairTax" might respond to Kevin McNish's extremely clear demonstration of how the tax is horribly regressive.
For my part, Kevin hit the nail on the head at the end of his post. The disingenuous character of how this policy is sold and publicly justified (i.e. calling it 'fair', for starters) is its most appalling aspect.
Great article!
Great piece all around. Really, really good.
I cannot believe everyone doesn't get excited when they read about the FairTax!
I mean,
1. It is the only way to make the paperwork less aggravating. We, plus over 50 well-respected economists, understand that there is no other possible alternative to the current tax code other than to have the FairTax. It's either have the annoying paperwork of the status quo, or have the FairTax and everything that it entails. There is no alternative and I know this well.
2. It has the added benefit of shifting tax burdens off of the wealthy and onto the middle and working classes. This is probably my most favorite part. My dad says that he and his friends at the country club are sick and tired of be 'oppressed' by progressive income taxes, capital gains taxes, inheritance taxes, etc. Its time to really start waging a class-war to fix this obvious bias against the well-off.
3. It helps "starve the beast" (i.e. the Federal Government) from dolling out horrible handouts like medicare, medicaid and Pell Grants for college. I know Boortz, et. al sometimes claim its 'revenue neutral', but c'mon. You don't have to use that one around me. I'm happy to slice and dice social programs!
4. It would create a black market where goods would be bought and sold outside of the realm of enforceable taxation, which might require another big government agency to address this illegal problem, but why do that when the true goal is to have every market operate like a black one?
5. Also, I am so happy that we get to welcome some corporations busy exploiting third world countries back into the USA since this time around they won't have to contribute to socially conscious causes. Since this is the only way to create jobs and help the economy flourish, I think this is a great idea. Why don't we abolish the EPA also and have the FairEnvironmentalAgency, which would effectively create a market-friendly program in which corporations are allowed to pollute all they like (to help encourage them to come back to the US, thus creating 'growth' and jobs), but the catch is that the FairEnvironmentalAgency would take one cent on every billion coporate dollar earned and plant a tree in Alaska.
Great article. I am on board.
Cute
Cute response, seriously, really cute.
But do we really need cute? It's your money too, like most of it, that will be going to pay for the budget of the future where the interest on the debt of entitlement programs alone will dwarf the entire budget of today.
Gonna be kinda hard raising those kids and getting them through college when most of your income is confiscated in a futile attempt to keep America afloat. When all those baby boomers retire it will be two or less or your generation paying for much of the living and medical expenses of one boomer. And that's a fact Jack.
Being cute is good for a few laughs, but at what cost? I'd suggest spending at least an equal amount of time exploring solutions, any solution.
Well Done Article!
I'd like to thank the author Thomas Davis for a well written, concise yet very informative article that does a great job in discussing the major points of the FairTax. I'm a FairTax supporter and have read dozens and dozens of articles about it so this is no faint praise. Well done!
I feel I owe the author a possible shortfall. The original FairTax book has apparently been amended and the explanation is here: http://boortz.com/nuze/200509/09152005.html
It appears that Boortz and Linder are no longer comfortable with saying employees get to keep 100% of their paychecks. I think there is a logical explanation for this, but it may make the FairTax a bit of a harder sell to some employees. I would like to know what assumptions were made in the formulas or economic models that were used to derive the average embedded tax and compliance cost savings of 22%, but have yet to find that information on the net.
I'm assuming that since they originally used "take home 100% of your paycheck" that this implies they figured the employer would keep all employer contributions to FICA and FUTA or whatever and the employee would get their own share of those plus all their deductions for withholding.
However, I think Boortz and Linder realized they could not, nor should they, try to promise what all employers might do. There is the possibility that some employers may try to keep some of the employee's withheld taxes which is rightfully the employee's.
This is possible in the case where labor is abundant and jobs are in short supply. The employer could say "it's my way or the highway. You still will take home what you were before. If you don't like it there's the door."
A more likely scenario, in my opinion, is the case where a company is floundering because they had been losing market share. Their nearest competitor had invested in productivity enhancements while they had not. The employer could make the case that he wanted to use some of the employees' withholdings to modernize to save the company and their jobs. In this case the employees may readily agree, especially if they will still have the same take home pay.
I think the first case would be extremely rare in America today, but it's not impossible. The second case is actually a hidden benefit of passing the FairTax; the possibility that some companies can be saved that would otherwise fail.
I realize I've made a lot of assumptions here. I really would like to know what assumptions the FairTax gurus made to come up with the 22% figure. Maybe there's an interested econ professor handy? :)
Thanks again for the great article.
EDIT: Since I posted this I've found part of what I've been looking for.
Quote from page 38 at http://www.fairtax.org/PDF/MacroeconomicAnalysisofFairTax.pdf
"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 – ?i – (0.5 * (?OASDI + ?HI))]
Where, w’ is the wages actually received by the worker, ?i is the marginal income tax rate, ?OASDI is the marginal tax rate from Social Security taxes, and ?HI is the marginal tax rate from Medicare taxes."
I think this shows clearly that the authors of the FairTax fully intended for employees' to keep 100% of their paychecks while their employers keep their own contributions to the employees' Social Security and Medicaid. Many of the naysayers insist otherwise. This supports my assumption that Boortz and Linder just realized they could not promise what all employers might do.
I believe it is thus safe to assume that the savings in embedded taxes uses this relationship. Another little detail that pops up often during online debates about the FairTax.
I did look for shortfalls
Nearly all of these dishonest talking points have been debunked many times. A few months ago, Bruce Bartlett had an elegant take-down of the idea that the revenue-neutral consumption tax rate would only be 23 percent, and his piece should be the final word on the subject:
http://online.wsj.com/article/SB118800635034508655.html
However, Bartlett does not address a further error that FairTax proponents often make, which you have repeated here. Specifically, you claimed:
"Whether you realize it or not, the cost of corporate income taxes, payroll taxes and other taxes have been factored into the price of the goods and services you purchase. So when politicians try to tax what they deem to be greedy businesses by assessing higher corporate income taxes, those taxes are actually passed on to you, the consumer. By eliminating embedded taxes, the prices of what you buy after applying the 23% consumption tax would hardly change from current prices. The difference is that you bring home your entire paycheck and that tax is transparently assessed at the end, not through an onerous and bureaucratic system applied within a price tag."
Essentially, you have overlooked the fact that in order to be revenue-neutral, the FairTax would have to be high enough to make up for income taxes as well. Even Neal Boortz has acknowledged this fallacy. A full explanation can be found here, under the heading "But the FairTax Will Lower Prices":
http://www.factcheck.org/taxes/unspinning_the_fairtax.html
More FairTax Debunking Debunked
Bruce Bartlett's non-sense just keeps showing up against Mr. Huckabee's FairTax because he'd like to see a complex VAT, called the "flat" tax. Apparently, this type of misinformation is a long-standing tradition by Mr. Bartlett. It is rebutted by Dan Mastromarco, below:
(Paraphrased) Reply by Dan R Mastromarco (LL.M., Taxation, Georgetown, principal in the Argus Group, adjunct professor at the University of Maryland, International Management Program, and research consultant to Americans for Fair Taxation - FairTax.org) to:
"A National Sales Tax Doesn’t Add Up" by Bruce Bartlett, December 29, 1999
Many engaged in true tax reform find Bartlett-type attacks exasperating, if not embarrassing. I'd like to convey perspective of both flat taxers and sales taxers who believe that such attacks are counterproductive, but first provide some political history by which to frame said perspectives.
For years Conservatives have posited that a VAT is bad policy (when liberals were discussing it), fearing it would become additional to an income tax (it was called a "money machine"). Circa 1980, conservative intellectuals touted Hall-Rabushka "subtraction method"[ H-R ] VAT which taxed business value added at the business side and labor value added at the labor side. Unlike European VATs (identical in scope), H-R became favorite of Dick Armey and Steve Forbes. It eliminated steeply progressive tax rates and tax on savings. Because of the prior VAT criticisms, H-R was packaged as the "flat tax" and is sold as an income tax to this day, rather than the VAT that its DNA characterizes it as being.
Some conservative commentators have called for the repeal of the 16th Amendment and for the adoption of the flat tax, (despite the fact that it is styled as a direct tax and could not be adopted with such repeal). Mr. Bartlett has called the national sales tax [ie, the FairTax] a VAT (which it isn't), castigated VATs as evil, and has said that sales taxes have become VATs in Europe (which they didn't). In the next breath, he "throws his arms around" the flat tax (which is a VAT). He quotes Bill Gale that the [FairTax] would have to be imposed at 60 percent, but glaringly fails to recognize that if the two bases are the same, he would have to impose that rate for the flat tax to be revenue neutral. In truth, all economists know that the two plans differ NOT in economic effect or base, but in administration.
An income tax taxes savings and investment multiple times. Both flat tax and FairTax are neutral as to savings and investment, tax income only once, and are both consumption taxes. Both are single rate taxes, have nearly the same base, and would improve the U.S. standard of living. Neither redistributes wealth.
While some have even suggested that hey are the same plans under different names, the flat tax taxes value added at each stage in the production process, but the FairTax prefers to tax it when it is added up at the end and eliminate the need to make everyone a taxpayer and collector.
Substantive commonalities between the flat tax and FairTax doesn't mean that there are NO key political and policy distinctions that could be exploited in pitting one against the other. If FairTax supporters wanted to retaliate in response to the Bartlett-type critique, they would have much material with which to honestly do so:
• The flat tax will make small firms and farmers pay the tax even if they have no profit
• The flat tax is opposed by many small business groups
• The flat taxers implicitly support big government by disguising even more of the overall tax burden as the current law
• The flat tax has been kicking around for nearly 20 years
• The flat tax makes everyone a taxpayer and collector, while the FairTax exempts 115 million filers [2000 figure] from ever having to deal with the IRS
• The flat tax is regressive, but the FairTax would enable everyone to keep his full paycheck.
• The flat tax has not only stalled, it has lost public and Congressional support.
• The FairTax is instantly understood, while even some proponents of the flat tax don’t understand it
• There are no transition rules developed for the flat tax and they would be very difficult to craft
• The flat tax taxes exports and relieves imports from tax
• The flat tax confuses tax reform with temporary tax reduction and makes both twice as hard
• The flat tax retains the entire income tax apparatus which erodes as quickly as you can say, “tax bill”
FairTaxers could advance these truthful points without resorting to bigotry associated with a cultic religious organization. However, for the most part, FairTax supporters have chosen not to attack the flat tax, but rather accentuate the commonalities between the plans - despite the above-noted differences. The reason is that, in the battle for tax reform, the real enemy is our current system.
Income tax advocates look down upon the articles of Bruce Bartlett with smug chortling, as Bruce is doing their work for them. The IRS and the liberals who want an income tax to ensure (1) taxes can be raised without the American people knowing it, and (2) wealth can be redistributed from the middle class to the poor, do not even need to fight us - we're killing ourselves!
Perhaps Mr. Bartlett believes that the flat tax will help elect Republicans, effect tax reform, and provide tax cuts; however, the real effect of his criticism is to divide conservatives, to delay serious national consideration of tax reform, and to fertilize the roots of the income tax.
( Source - Addit'l at FairTax.org Whitepaper - May republish in whole or part. - Ian)
PS For comprehensive research points in favor of FairTax, review my comment at SLATE.
I didn't bother to look into
I didn't bother to look into your claims about the advantages of the FairTax vis-a-vis the VAT because that's not the subject at hand. You haven't refuted any of the specific claims from the Bartlett article that I cited (although you did glancingly address the supposed link between the FairTax and Scientology, which is a minor point). Instead you have chosen to discuss something else altogether.
MikeMaio's debunking debunked
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Said by MikeMaio on Mon, 01/14/2008 - 01:05.
Nearly all of these dishonest talking points have been debunked many times. (snip)
http://online.wsj.com/article/SB118800635034508655.html
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Bartlett was debunked long ago here: http://www.fairtax.org/site/PageServer?pagename=news_myths_082907_redherrings
Bartlett has written several articles where he basically rephrases the same old arguments. Me thinks he has some kind of personal agenda.
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(snip)
Essentially, you have overlooked the fact that in order to be revenue-neutral, the FairTax would have to be high enough to make up for income taxes as well. Even Neal Boortz has acknowledged this fallacy. A full explanation can be found here, under the heading "But the FairTax Will Lower Prices":
http://www.factcheck.org/taxes/unspinning_the_fairtax.html
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Factcheck.org was debunked long ago as well:
http://www.fairtax.org/site/PageServer?pagename=news_myths_factcheck
Hey Mike, try to do a little more research next time. There are many people that post misinformation about the FairTax on the Internet. It really is a great idea or at least the best one I've heard of.
Hey, why not go ask an econ professor what they think?
As it is I'm going by the 80 or so highly credentialed economists from some of our most prestigious universities that support the FairTax as mentioned at the bottom of this page: http://www.fairtax.org/PDF/Open_Letter.pdf
Oh yeah, it doesn't hurt that Alan Greenspan likes the idea of a consumption tax as mentioned here: http://www.theconservativevoice.com/articles/article.html?storyid=3552
We really have to do something soon to fix the mess left to us by previous generations of the ever growing obligations of entitlement programs. If we don't the debt will explode and bankrupt our country. The FairTax will grow the economy faster than anything else I've heard of...well, short of no taxes at all lol. This has to be part of any plan to fix the mess.
I looked into all of the
I looked into all of the links you've provided, and they address very few of points made by either Bartlett or FactCheck. The writers mostly engage in a bunch of hand-waving, and their response to most of the points they think they can refute is to claim they have research from their biased right-wing think tanks showing that FairTax opponents have their facts wrong.
Also, your appeals to authority are not a valid form of argumentation. Not only that, but there is enough diversity among economists that you could find a professor somewhere to endorse pretty much any tax policy you could come up with, so please don't condescendingly suggest I ask one to explain to me why the FairTax is such a swell idea.
O'Rly?
The FairTax was developed by a bipartisan group of expert economists. Show me any right-wing think tanks you think are involved.
So it's perfectly ok for you to appeal to the supposed authority of Bartlett and Factcheck.org but I'm not allowed to appeal to the authority of the 80 or so highly credentialed economists that support the FairTax? How convenient.
I agree completely that there is much diversity among economists, such as the ones that are supporting the VAT/Flat tax hybrid idea as mentioned in a previous post. There are also many that have spent considerable time and effort understanding the current tax code so they can make excellent livings gaming the system for their employers. It's up to us to cut through the chaff and find the truth now isn't it.
Or we could just bury our heads in the sand. You see, the not to distant explosion of debt due to the entitlement programs is more your problem than it is mine. In fact, I'll be sitting pretty good while you pay for my living, medical and prescriptions drug expenses. However, I'm enough of a conservative that I don't believe in making future generations pay the expenses of mine, at least not as painfully as what will happen if we don't act soon.
I was serious about you asking an econ professor because I'm assuming you are attending Vanderbilt University so it may be a just short walk for you to find several. Not so for me, I'm far away from any university.
I've had a couple of econ classes years ago. I was raising a family at the time so I think they really sunk in because they were relevant. I find the more I study the FairTax the more those econ principles are coming back to me. So I'll be happy to discuss whatever concerns you about the FairTax. How about starting with three points that concern you the most? I prefer that you type in your own three concerns instead of just pasting in a link to some article.