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“Either 'taxation without consent is robbery,' or it is not. If it is not, then any number of men who choose may … call themselves a government; assume absolute authority over all weaker than themselves [and] plunder them at will…”     Lysander Spooner

May 19, 2007

More on the Fair Tax II

by tarran

Thanks to the handful who wrote rebuttals to my previous post with arguments of their own. If I understood correctly, they boil down to the following counterarguments:

1) Your fears are not based on the proposed legislation, but rather on what might happen.

I am pretty confident in my predictions, in that they fit public choice theory. If one looks at the actual history of government, one sees politicians repeatedly breaking down limits on their power and finding new ways to reward their cronies. I think the rise of the income tax itself is quite instructive; it was originally conceived as a method to shift the tax-burden away from the poor by reducing consumption taxes. Its originators claimed that it would tax only the ultra-rich and the rates would never rise above 8% or so. However, when in World War I the tax revenue from imports collapsed, the U.S. government wasted no time in exploiting this new source of revenue.

2) Politicians won’t bring back the income tax. It will be easier simply to raise the consumption tax rates

Ah yes, but what if we have another depression? When the economy is contracting (and the current monetary system ensures that we will continue having booms and busts into the forseeable future), people curtail their spending, either by buying used goods, or by doing without. Guess what that would do to government revenues? ;)

3) The fair tax expands the tax base.

This, to me, is not a point in its favor. Making it easier for the government to comandeer additional resources away from genuine consumer wants leaves us all worse off, and I say this as a small-businessman who is really being screwed by the current regime. To those not familiar with my political views, I am an anarchist. Even if the taxes levied by government amounted to one penny levied on some poor soul by lot, I would be railing against the high taxes.

4) Coward! At least we are not giving up! You must be one of them French Surrender Monkeys!

I really get irritated by this argument. First, it assumes that it’s either the Fair Tax or nothing. This is a false dichotomy. I think the Fair Tax will make things worse. That statement does not imply that I think the current system is good, or that I think we should just surrender and give up. Hell, you could really shake things up simply by ending payroll withholding and requiring people to pay their income taxes quarterly.

5) What do you mean people don’t care! Everyone I talk to loves the idea!

That’s wonderful, but completely beside the point. My point is that people don’t care about the total amount of taxes they or their neighbors pay. They may want the burden to be distributed more “fairly”. However they are quite comfortable with the size of the burden.

6) The Fair Tax is a great idea because it encourages savings.

I actually agree with this. I think it is one of the strongest things going for it, especially since it is savings that fuel economic growth.


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47 Comments

  1. Tarran:

    “The fair tax expands the tax base…This, to me, is not a point in its favor.”

    How is it fair that only the people who actually produce something are expected to pay taxes? How fair is it that illegal aliens can recieve handouts without at least paying into the system? How is it fair that criminals can make their money tax free while the rest of us pay into the system by making an honest living?

    We also have to think of the looming Social Security crisis. When the baby boomers retire, there will be more people collecting their checks than people paying into the system. I’m not suggesting this is the solution to the Social Security mess; its unfortunate we were unable to privatize the thing. But it surly would help if the burden was distributed more equally.

    Comment by Stephen Littau — May 19, 2007 @ 3:02 pm
  2. Stephen,

    You bring up some good points. At first blush, it seems that these things are not fair. In the end, I question if the Fair Tax creates a truly fair situation.

    1) All taxes are paid by people who produce things, even consumption taxes. A tax siphons wealth out of the economy , destroys some of it and redistributes the rest. That wealth is always siphoned away from those who produced it. The details of how precisely wealth creators are separated from the stuff they’ve produced really do not change that fact.

    2) I’m not sure what handouts you are accusing illegal aliens from receiving without paying into the system. Perhaps you mean they are freeloading on law enforcement and fire protection. Yes, a consumption tax would force everyone in the U.S. to “pay into the system”. However, many illegal aliens already pay into the system via payroll tax withholding. The ones that don’t are so dirt-poor that I doubt that they are buying much in the way of new goods anyway. Again this problem could be solved by allowing anyone who wishes to enter the U.S. to do so legally. Oh and cut welfare too. Anyway, I don’t see them as being more burdened by this tax.

    3) As to criminals, aren’t they already operating outside the system? Let’s be frank. The criminals who make gobs of money, guys like Pablo Escobar and John Hancock, are ones who operate in the black-market. They are producing goods or services that the public wants that the government tries to suppress. They are not enjoying the benefits of the courts and governmental protection. Why should they be forced to pay for them?

    If the government really wanted to bring criminals back into the fold, it should cease its criminalization of perfectly honorable professions like crack dealing, meth manufacturing, prostitution, loansharking and bookmaking.

    As to thieves, I would prefer to focus on forcing them to reimburse their victims completely, rather than siphoning off a percentage of their take for our own use.

    4) Now I turn to the looming Social Security crisis. Great! I consider the system to be destructive. I don’t want to feed it any more money, just as I was opposed to giving my alcoholic grandmother access to whiskey. Let it collapse. Let it crater to the ground. This may seem harsh, but from my doctrinaire free-market anarchists perspective, it’s the right thing to do, and far less destructive in the long run than allowing it to consume wealth indefinitely.

    Comment by tarran — May 19, 2007 @ 3:54 pm
  3. Tarran,

    I used to be a very big proponent of the FairTax. I still believe that the FairTax, as written, would be an enormous improvement over our current tax system. Taxing anything creates incentives and unintended consequences, and I think the incentives and unintended consequences are far better than those created by our current system.

    That being said, I understand your point that it’s a false front. I’ve grown to doubt that it would have a prayer at being implemented as written, and I agree that politicians would jump at the first opportunity to start creating hidden taxes/etc to slowly ratchet it back up. As my political views have moved closer and closer to your position, I find myself just wanting to tear the whole damn thing down, rather than play shell games of trading one slightly less destructive system for our current Leviathan…

    But I have to take issue with one thing you said:

    “That’s wonderful, but completely beside the point. My point is that people don’t care about the total amount of taxes they or their neighbors pay. They may want the burden to be distributed more “fairly”. However they are quite comfortable with the size of the burden.”

    I think they don’t understand the size of the burden. How many people do you know who only focus on their refund, not their bill. I know that when I tell my wife how much we actually paid (not paying attention to whether we get a chunk back), she gets angry. And she’s pretty much a Democrat. I don’t think people are comfortable with the size of the burden; I think politicians have found ways to hide the burden so well that few even understand how heavy it is. It goes back to your public choice theory idea: they’ll find ways, whether it be through hidden user fees, inflation, “corporate” taxes, etc, to make you not realize just how much of your money is going into their coffers. If nobody knows the scope of the burden, you can’t claim that they’re comfortable with it.

    Comment by Brad Warbiany — May 19, 2007 @ 6:02 pm
  4. There is no way that the fair tax would create a worse situation than the current burdensome and oppressive mess that creates slaves who are in constant fear out of the honest citizens of this country. In the current system, it’s better to be an illegal alien rather a citizen in our own country because they know the IRS is not going to comine knocking on their door in the middle of the night. In a free country, you should not have to live in constant fear and stress from a government agency who itself cannot decipher a ridiculous tax code. The current tax system is a farse and completely broken beyond repair. It needs complete replacement and the Fair Tax can only make the situation better, not worse and there is no way to deny that.

    Comment by Ali Money — May 19, 2007 @ 9:21 pm
  5. You say you don’t like the Fair Tax or the current system and your only suggestion is to do away with withholding. Withholding is the newest part of the income tax, begun during WWII to provide cash flow for the war. It was supposed to end with the war but congress lied to us again.

    I don’t care that you do not like the Fair Tax. I come from an environment where, if you criticize something you must have a better solution. I haven’t heard you espouse a better system.

    So long as there is a Federal system the functions performed by that system must be paid for. How about we abolish the Federal system and have 50 countries instead? We can be another Europe although with the advent of the EU they are moving closer to what we have.

    Sorry, but to me you are just another talking keyboard.

    Comment by Duane Neighbors — May 19, 2007 @ 11:21 pm
  6. Duane,

    It seems to me, from articles I have read regarding Anarcho-Capitalism, that what Tarran might say is a better system is the lack of a system. No taxes. I could be wrong, of course… and I might be interpreting what I have read incorrectly.

    For example, road building.

    If you want a road built, then you would need to pay for it yourself. If you can convince other people that they need or would want the road, then they can help pay for it.

    If you want it repaired, pay for the repairs, or convince other people to pitch in.

    Comment by Ted — May 20, 2007 @ 1:54 am
  7. Thanks Ted, that is pretty much correct.

    I just don’t see the Fair Tax as substantially affecting the size, or the intrusiveness of government. In some ways it would be an improvement over the current system. In other ways it is not. Given the history of Congress lying to us and betraying its promises, as Duane pointed out, I see many dangers in it, so I don’t support it.

    I should add, Duane, that your sarcastic comment about having 50 countries is not a problem; large markets and small polities seem to be the best guarantors of peace and prosperity. If the United States Constitution were to be repealed, converting the U.S. into 50 independent states that engaged in free trade with each other we would be much better off. If the states were dissolved and all we had were counties, all trading freely, it would be even better.

    Small polities tend to be nicer to the people living within them. Raise taxes too high or oppress excessively, and people move across the county line. Small polities are also limited in their warmaking potential. I doubt any county would ever waste money trying to build nuclear bombs or aircraft carriers.

    We can be another Europe although with the advent of the EU they are moving closer to what we have.

    Yes. I actually feel sorry for the poor bastards. Some of the original architects of the EEC were students or colleagues of Ludwig von Mises. those guys must be rolling in their graves at how their vision was so thoroughly corrupted.

    Comment by tarran — May 20, 2007 @ 9:26 am
  8. Brad,

    But people do not try to educate themselves. Every paycheck, they see hundreds going to the various governments, and they accept that.

    Every year, they sign a form which tells them the total amount that they “owe”, and they don’t care enough to look.

    I think that breaking the tax up into even smaller chunks over hundreds or thousands of receipts – $10.00 here, $30.00 there – will arouse even more apathy.

    Comment by tarran — May 20, 2007 @ 9:33 am
  9. Tarran…

    The major problem with the 50 country hypothesis is, what language would you prefer, Arabic, Chinese, Russian or Spanish? Few, if any, of those 50 countries would be capable of defending themselves.

    The FairTax was never promoted to solve the problem within our current government. The FairTax is simply a replacement collection method which shifts the compliance from individuals to businesses. Since there are many times fewer businesses than individuals enforcement should become much easier.

    To me there is only one way to change the government. Let’s vote out every incumbent. That might send the message but I still wouldn’t bet the farm on it. This country needs a balanced budget requirement and a line item veto to begin stopping the rampant spending. To all of those who are expecting a magic cure I can only say:

    “It’s the spending, Dummy”

    Comment by Duane Neighbors — May 20, 2007 @ 12:36 pm
  10. The best thing about the Fair Tax is that it eliminates the income tax and IRS. What a sense of freedom Americans will have to be able to invest their money in real estate, savings accounts, and other places without worrying about how much they’ll have to give the government of their profits at the end of the year! The money earned as interest can be reinvested, or spent how ever the person wants, without worrying about keeping a record of everything in order to fill out a form on April 15th to figure out how much they have to hand over.

    Comment by Carolyn Bourdeau — May 20, 2007 @ 1:29 pm
  11. We could eliminate about two thirds of the bloated Federal Government and never miss a thing . The Fair Tax is a first step in that direction .
    The politicians do not represent us , they represent the source of their major funding which comes from the lobbyist’s clients . The Fair Tax would cut that source down to size . The populace would vote by the direction and controlling of their spending habits , truly voluntary actions .

    The embedded ( hidden ) taxes would be eliminated disclosing our real burden .

    The Federal Reserve should also be abolished and returning the control of money to the U.S. Treasury away from the International Banking Cabal and the mega corporations they control .

    The Fair Tax is the tool we need to embark down the road to the recovery of our Republic . We the people are the ones who must do this , not the corrupt politicians who are bought and paid for .

    America has many ills and we must begin somewhere .

    Comment by James Hanlon — May 20, 2007 @ 8:10 pm
  12. I hate to admit it (Because I’d love for the Fair Tax to be a simple answer), but I really think you have a point Tarran, especially in regards to apathy for smaller tax chunks spread out.

    Take my wallet for instance. If I have a few 1s, a few 5s, a few 20s, and a couple 50s, I know it is easy for me to go through those smaller denominations without really really thinking about it. But when I have a 50, I really think about breaking it before I do. I mean, seriously.

    And once it has been broken, it’s easier for me to slip into the mindset of “oh well.”

    So, I can definitely see your point in these regards.

    Comment by Ted — May 20, 2007 @ 8:59 pm
  13. James, if eliminating lobbyists is the goal, then why not institute a flat tax? Under Steve Forbes plan, there would be only one deduction for a personal exemption available for everybody. That way, should Congress increase the exemption, everybody would benefit.

    Too often the FairTax is seen as a cure-all. However, Tarran is correct in seeing how officials will ineviatably institute an even greater tax on all of us. And while the worry about the small chunks of taxes not being seen, as long as people understood they were paying a certain percentage, I think that would not be as big of a challenge as thought. However, the current talk of 23% is way too high. Nothing more than 15% will convince anybody the FairTax is better.

    Comment by trumpetbob15 — May 20, 2007 @ 9:30 pm
  14. The easiest thing in the world is to find fault, complain & then have some unfeasible expection to be the answer. So what is your proposal? No taxes at all? How about we just scrap the US government and start over. Or you could just select 20% of the population to pay for all government services because people don’t care how much they pay in taxes and the rest will have your free ride. Keep your sights on the unfeasible and we will be forever stuck with the monster we have now. The FairTax is the most researched tax system (developed by economists not politicians)ever to be proposed. You obviously like walking barefoot & will never get it.

    Comment by Doug McCue — May 21, 2007 @ 5:15 am
  15. The bottom line is that the current system is horrible. I have owned a small business for 24 years and not a year goes by that I don’t get hammered back to almost square one by taxes. Given a choise I would save money and then grow my business but that has proven all but impossible given the bite taken out of those savings each year. People in general will spend money on what they want and the fairtax will capture the revenue it is designed to capture when they do….from everyone.

    Comment by Michael — May 21, 2007 @ 6:04 am
  16. There are so many myths and “presumed” opinions about the FairTax. Get the facts straight and do some research. I see a lot of anti-government comments and that government is too big. I agree that the government could go on a big diet. The Fairtax will help to awaken the majority to the true cost of government and we will see changes take place as politicians can no longer hide and lobbyests no longer pitch their ways. Americans will revolt and it won’t take the majority to make change happen–it never has in the past. The FairTax does level the playing field. The Fairtax does un-tax the poor. The FairTax does produce the same revenue. The FairTax is a more consistent source of revenue over income tax and will maintain a better source in economic slowdowns over an income tax system. The politicians will try to impliment “salvation” tactics by manipulating things–that is proven history, but with the FairTax–it will be visible and a lot harder to fleece Americans in front of their eyes. The FairTax will bring economic prosperity. The FairTax will bring jobs, businesses and investment back to American shores. The compliance cost and over-seeing will be a tenth of the current burden as well as compliance to pay. 10 million Businesses have a lot more at risk not paying the collected taxes then 150 million individuals and if I could manage 1 business over 15 individuals I would jump at the chance at doing so.

    To trumpetbob15: You say that 23% is too high and 15% would be more acceptable needs to wake up. Do you think you are only paying 15% now??? I wish that was the case! When you take into account the federal withholding alone we are paying more like 25% and this does not include the hidden costs of taxes in everything you buy today including corporate taxes, matching SS and Medicare taxes, compliance costs. These add another good 15 to 20% alone. The Commission on tax reform that so many tout as gospel to answers for tax reform, when they are not the scholors who have extensively researched the FairTax, states the percentage is more accurate at about 50% to maintain the status quo–they are telling you it is taking 50% of everything you earn to currently fund the government today! I am all for lower taxes and am a firm believer that the government is too costly–another strong reason for the FairTax. The FairTax is going to make most taxation VISIBLE again to every American and they are going to get mad at what they see–then real reform in government spending will take place!

    To Tarran and Ted, I believe the opposite will happen to your apathy theory. Americans are apethetic today because they do not see or even know what the true cost of government is because of the hidden costs in products. Out of sight-out of mind. When the FairTax is law, you see that the federal government is tacking on 23% or 50% or whatever it has to be to be revenue neutral–you are going to cryout at every register! You are going to see everyday the cost and when election time comes, I feel you will vote for accountability and fiscal responsibility for the price you are now seeing you pay. I agree some will still stay apethetic, but I believe far more than today will start to raise their voices!

    Tarran: you talk about the “dangers” you see in the FairTax. This reminds me of the story of the bucket of 20 frogs. There is only one thing that can save them and that is to reach the rim and jump out or face starvation and surely die. So 10 start to jump and climb, one on top of another to get out. The other 10 stay at the bottom not believeing it can happen. Those 10 criticize and yell at the 10 for even trying–saying it can’t happen, you’ll kill yourself trying. One by one the 10 frogs climbing keep falling back to the bottom, losing strength and falling victim to the cries but one frog. He kept trying, slipping and trying again, eventually climbing above the other 10 and with little energy left reaches the rim and jumps out. The remaining 19 say he was a fluke and just lucky when the come to find out he was deaf.

    Comment by Doug Sleeth — May 21, 2007 @ 9:08 am
  17. Doug Sleeth,

    My question for you then is why is the FairTax better than the Flat Tax? Both attempt to bring the tax code back to the type of law envisioned by James Madison when he said,

    “It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.”

    Yes, many, many people pay more than 50%. However, the FairTax still needs to feel like an improvement. Who cares if it is revenue neutral? If you want to convince people, let them know they will be paying less. Sure, most actual taxpayers will save money under 23%, but wouldn’t it be an easier sell to people if the tax were lower? On the comments to this post, there are many claiming the FairTax will reduce help reduce government by making the tax visible. So why not go beyond that and reduce the tax rate up front instead of promising to do so in the future?

    Ultimately, proponents of any tax reform need to convince people. Complaining about critics, especially those of us who do understand the FairTax proposal, will not help make the case any quicker. Explain in real terms, using real incentives, why the FairTax is better. And just because Tarran or Ted didn’t explain a different scenario does not lessen their critiques of the FairTax.

    Oh, and Doug McCue, I don’t know if you were meaning to be sarcastic, but the “No taxes at all? How about we just scrap the US government and start over” line is one I could actually agree with. Thanks for an ideal solution.

    Comment by trumpetbob15 — May 21, 2007 @ 2:09 pm
  18. Dear Mr. TrumpetBob15,

    I can give you one example of how you will pay less. Assume that all the money you spend now, you will still spend under the FairTax – “spending neutral” if you will. That leaves ALL of the rest of the money you earn will be used at your discretion – unlike anything we have now under the current system. Let’s say you wisely choose to invest and save ALL the rest of the money you earn at compounded TAX FREE interest rates. Interest yielded from how much more you are able to save under the FairTax, as opposed to now, is the amount you will save over the current system. Let’s go a step further. You even more wisely choose to keep a keener eye on your spending (now that you can actually SEE what you are being taxed at the register), so you save EVEN MORE than you would have expected, yielding yet even more TAX FREE interest. Wow, there may even come a point where you could invest all that savings into a business for yourself, become a success, and make EVEN MORE TAX FREE money. Or, on the other hand, you don’t feel so lucky, and you give it all to your daughter or son so they can invest it in their first home, built in 1985, TAX FREE since it is not a new home. How much do you think you have saved over the current system? Well, “WHAT IF” a 747 crashed into your home the day after FairTax implementation? I guess the savings answer must be none, so the FairTax just can’t be a workable plan. By the way, ANY tax with the INCOME associated with it – Flat, Bumpy, Blue or Green – is no better than we have now – it will be manipulated to death and reincarnate, not to mention the government will STILL have to see your private records to be sure you are not cheating, unlike the FairTax.

    Comment by Hadley Lamar — May 21, 2007 @ 8:47 pm
  19. I’m sorry, I forgot to include the idea of your spending NOT INCLUDING your basic necessities, just the extras and luxuries, since the FairTax plan is SO generous that it allows everyone, poor and rich, a prebated allotment every month to cover the tax you have spent on those necessities. Oh wait, “the critics” say that amounts to the largest entitlement program in the history of the US, so the FairTax plan just can’t be good… Hey, ENTITLE ME BABY!

    You have to understand that for a bunch of governemt geeks to even consider a new tax plan, it must present the same amount of money that is currently being generated, just to get them to consider it. This is a realistic approach. We all know government is too big as it is. The FairTax is NOT a plan to reduce government. As long as your favorite incumbent is continually voted into office without check to build bridges to nowhere, it will continue to grow. THAT part, my friend, is up to you.

    Consider also, how much more difficult it will be for the G.geeks to raise the tax just 1%, than it would be now for them to continue to increase the code by another 10,000 pages.

    Comment by Hadley Lamar — May 21, 2007 @ 9:05 pm
  20. Hadley Lamar,

    Thanks for responding with some actual savings. While I understand the idea behind the FairTax (having read not only Neal Boortz’s book, but also Steve Forbes), wouldn’t the argument still be there about some sort of collection agency and somebody defining what is “new” and what is “used” as mentioned by Tarran I believe in his original post? Personally, I like the idea behind the FairTax, but like everything else, it needs to have some stipulations in it that protects it from government agents wanting more and more money. Perhaps that is for later when the idea is more widespread, I don’t know.

    So here is my ultimate question. Without massive taxpayer protections, why would the FairTax be better than a Flat Tax with one across the board deduction and one rate of say 15%? (I think Forbes said 17%, but why try for revenue neutral? The government doesn’t pass tax increases to keep the revenue neutral so why should tax ideas have that requirement?)

    Either way, something needs to be done. It is annoying to research a tax section and Congress basically says, “Yeah, we don’t know what we are doing so the Secretary of the Treasury (or the Commissioner of the IRS) will write this tax law.” How that is constitutional is beyond me.

    Comment by trumpetbob15 — May 21, 2007 @ 9:38 pm
  21. Dear Mr. TrumpetBob15,

    First, I must say, that the only thing that MAY APPROACH being perfect, is the atom. Mix in a few other perfect atoms, yet the chances for an imperfect molecule become astounding.

    Surely, taxes must be well toward the lower rungs of perfections.

    you ask – “wouldn’t the argument still be there about some sort of collection agency and somebody defining what is new and what is used…”

    I say, sure, define in the law what is new and what is used. So what? You HAVE to give G.geeks something to perfect. I would be anxious to know if the shirt I put on in the morning is used because I wore it before, or new because I didn’t wear it yesterday! Either way I won’t be paying for it again. And, I’ll be giving GOVERNMENT the opportunity to tell me! Actually, I’ll be grateful to know once and for all. The New IRS, renamed “indeterminable return systems”, at 1/10th the size (saving gazillions of dollars there, I might add, as opposed to the Flat Tax, which keeps the IRS in place as is), will collect taxes from all businesses – only; NOT individuals (as opposed to the Flat Tax). Further, they will only have ONE percentage to figure, so they might actually be able to accomplish their jobs without too much trouble – “how much was collected?” – the only 4 words on a business’ tax form. On the other hand, one flat percentage on INCOME? “Which income?” Those two words alone recreate the 16,000 page code that we have already.

    you say – “it needs to have some stipulations in it that protects it from government agents wanting more and more money. Perhaps that is for later when the idea is more widespread, I don’t know.”

    I say, You are right, it is for later; for when the G.geek says “we need 2% more to fund X, Y and Z”, he ACTUALLY has to SAY it, to the people, because he knows that if you buy your bar of soap and all of a sudden it says 25% and not the usual 23% tax, he will need Capitol bomb-shelter protection. Transparent and open – no tricks allowed.

    you say – “why would the FairTax be better than a Flat Tax with one across the board deduction and one rate of say 15%?”

    First, I say, APPLES AND ORANGES. You seem to actually WANT to have the government peruse your personal records. Where, I ask you, is the LIBERTY in that? Why do you WANT it to be based on your INCOME? Those that can save their income, and invest it, are creating jobs and revenue untold! That’s even the CURRENT system. The more you make, the more you want – the more you want, the more you invest. The more you invest, the more EVERYBODY wins, including the original earner – and why not! Why be penalized for doing something good? Second, across WHICH board are you speaking? The existing one that says only taxpayers that already pay will continue to pay, and those that don’t will somehow want to start? Do you really think that Al Capone is going to say “Oh, OK, now that I only have to pay a flat 15%….” That’s ludicrous.

    you say – “(I think Forbes said 17%, but why try for revenue neutral? The government doesn’t pass tax increases to keep the revenue neutral so why should tax ideas have that requirement?)”

    I say, again, you are talking apples and oranges. You are talking two different laws – two different subjects. The FairTax plan is a tax collection plan, one that even Ben Franklin said, correctly, is 1/2 of the two sure things in life. If you want smaller government, keep a check on what your ELECTED politician is doing. DO NOT TAKE THE WORD OF THE MEDIA OR ANYONE ELSE!
    Go to http://thomas.loc.gov/home/thomas.html and see for yourself what your ELECTED G.geek is doing, saying, and voting. Write them, they actually DO have it read for them (because they don’t listen so well), but they WILL respond. Let them know how you feel, respectfully, and they will write back. They do listen, because votes are their only meal ticket.

    The basic differences?
    FairTax – consumption. Don’t want to pay? Don’t buy new stuff. Less government in your life.

    Flat Tax – income. Don’t want to pay? Go To Jail.

    Is it that difficult to understand?

    Comment by Hadley Lamar — May 21, 2007 @ 11:13 pm
  22. PS might I remind you of the header at the top of this very page…

    Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear. Ayn Rand

    :-)

    Comment by Hadley Lamar — May 21, 2007 @ 11:32 pm
  23. Dear Mr. TrumpetBob15 (et al),

    I felt compelled to now readress this earlier post of yours:

    “James, if eliminating lobbyists is the goal,
    [it is not the goal of the FairTax]

    then why not institute a flat tax? Under Steve Forbes plan, there would be only one deduction for a personal exemption available for everybody.
    [not everybody, only those who currently obey the law]

    That way, should Congress increase the exemption, everybody would benefit.
    [Not everybody, only those who currently obey the law, and only those who cheat the system]

    Too often the FairTax is seen as a cure-all.
    [no, but it does tax EVERYBODY, including foreigners]

    However, Tarran is correct in seeing how officials will ineviatably institute an even greater tax on all of us.
    [!! like they can't with the Flat Tax??? MORE likely with the Flat Tax than the FairTax - INCOME vs CONSUMPTION]

    And while the worry about the small chunks of taxes not being seen, as long as people understood they were paying a certain percentage, I think that would not be as big of a challenge as thought.
    [again, on INCOME, and why?]

    However, the current talk of 23% is way too high.
    [having read the FairTax book as you said, you must have missed the part about how the embedded taxes in a product that are already present - which are expensed to you - average about 22%, which go away, leaving you to pay about the same amount for that very same product once free market forces do their work - which they ALWAYS do]

    Might I add another savings for you under the FairTax? No more costs of filing taxes – taxpreparers, out. collecting receipts? out. 13-40 hours of prep time? out.

    Nothing more than 15% will convince anybody the FairTax is better.
    [your research into funding the government may be faulty. I'll go with the think tank guys who spent 20 million to get results that say that the FairTax is the most reasonable and feasible way to fund government - far and above the Flat Tax].

    Comment by trumpetbob15 — May 20, 2007 @ 9:30 pm

    Comment by Hadley Lamar — May 22, 2007 @ 12:03 am
  24. Hadley,

    I think your basic assumption is flawed:

    That leaves ALL of the rest of the money you earn will be used at your discretion – unlike anything we have now under the current system.

    If I understand correctly, and forgive me if I am wrong, you are assuming that people’s nominal wages, what we would call pre-tax wages will remain constant if the Fair Tax were to be adopted. This is actually highly unlikely.

    It’s basically a supply and demand thing.

    Let’s look at some service such as secretarial work. The current wages of a secretary tend to approach the wage at which the supply of man hours offered by service providers is equal to the number of man hours demanded by customers.

    This differs from the standard Supply & Demand chart in Econ 101 courses in that the purchasers are perhaps paying $50.00 per hour for the secretary, while the secretary is taking home $30.00 per hour, while the state confiscates $20.00 per hour as protection money. Now, let us assume that the income tax is lifted. Now suddenly the existing secretaries are making $50.00 per hour. At this point, the pool of secretaries starts to change; for some people the job will start being attractive at the higher wage. For others, a less stressful occupation that pays at the old levels will become attractive.

    Now this disequilibrium hits the whole job market simultaneously. What will happen is that people will migrate between professions in an unpredictable manner, with some professions seeing an increase of providers, and some seeing a decrease.

    However, we will see more people working. There are people for whom working is not worth their time with an income tax, who will be drawn back into the labor market by increased pay.

    The additional man hours, coupled with people’s judgement of what wages are worth their time to stay in a given profession will probably result in a reduction of wages.

    Thus, in all likelihood, people will not be raking in their original pre-tax income, but some smaller number (which would still be larger than their post-tax income under the current scheme). Combine this with the increased costs of goods, and I think there will be little benefit.

    In fact, in the aggregate, there would be no benefit: the revenue neutrality guarantees that production is being sucked out of the economy in equal amounts. The only real benefits in the long run would be savings on compliance costs, which represent a fraction of the taxed amount.

    By the way, one thing that is kind of bizarre is that the Fair Tax claims to tax payments service providers and not income. Yet, when one works for General Electric, they are selling their labor services, which General Electric is paying. Thus, the income tax is a consumption tax. It merely has a variable rate.

    I honestly see the Fair Tax as a small business killer; Now, my larger competitors, who can hire full time employees tax free are granted a major advantage over me since I cannot afford to hire employees, and must purchase advertising copy, and other forms of assistance on the market and pay a substantial tax for the privilege.

    Comment by tarran — May 22, 2007 @ 12:10 am
  25. Hadley,

    Nothing will ever be perfect. I am merely trying to approach this problem from a different angle. My whole point (I can’t speak for anyone else’s) of critiquing the FairTax is to determine whether it will live up to its hype and to examine whether the objectives can be met by another tax proposal.

    Ok, now you said, – “I say, sure, define in the law what is new and what is used. So what? You HAVE to give G.geeks something to perfect. I would be anxious to know if the shirt I put on in the morning is used because I wore it before, or new because I didn’t wear it yesterday! Either way I won’t be paying for it again.”

    But why should government have “something to perfect?” Isn’t the reason for reform to eliminate government regulation? And I would be worried if the government said the shirt I wore today was “new” because if I went to sell it, I would have to charge the tax on it.

    you wrote, – “when the G.geek says “we need 2% more to fund X, Y and Z”, he ACTUALLY has to SAY it, to the people, because he knows that if you buy your bar of soap and all of a sudden it says 25% and not the usual 23% tax, he will need Capitol bomb-shelter protection. Transparent and open – no tricks allowed.”

    But how is that different from the flat tax of 17% being raised to 19%? Under the FairTax I can look at my receipt and see the change and under the flat tax I can look at my paystub and see the change. The reason we don’t see the real tax percentage currently is because the massive code hides deductions that can affect the percentage paid. Under either system, with no hidden deductions, the percentage is easily seen.

    Regarding Al Capone and other criminals, do you really expect them to pay taxes on purchases? Does that mean the government is going to crack down on black market deals in order to get its money?

    Comment by trumpetbob15 — May 22, 2007 @ 1:38 am
  26. OK, I’ll try to do a quickoff during lunch here.
    Trumpetbob15
    If your congressperson wants to put into law that the shirt you wore yesterday and for the last year is now new because you want to sell it, then what rationalozation would you use to keep that person in office? Government is by definition, controlling and regulatory. I can’t change that. Neither will FIairTax or Flat Tax. I CAN change how/whether they enact. Again, with the Flat, we are talking INCOME, which requires you to report annually, be honest, and accept that government will continue to tweak WHICH income you should report (being from every single source – interest, dividends, earned, capitals, etc etc – requiring you to continue keeping all records, ready to divuldge upon request, and accept that there will be those who will get different exemtions than you, and accept that you will be in the 75-80% who will actually repot (at best). FairTax, simply just what you buy – NO GOVERNMENT requiring ALL of the above requirements. And how, do you think, Al is going to buy something and NOT pay the tax? “I wanna buy dat shoit, an don’t gimme no lip about no tax or I’ll shoot cha!”

    And Tarran, I appreciate your devils advocate views, but you could twist the lemon outta lemon juice if you tried hard enough. Your logic leaves much to be desired, with all due respect. I see where you are headed, but someone like you will never be happy with anything that is actually doable.

    Comment by Hadley Lamar — May 22, 2007 @ 11:54 am
  27. The ‘fair tax’ crushes the working poor who can’t afford to spare a dollar, and now this proposal would like to add an additional 23% to their purchases, which is far higher than the marginal rate they were paying before. A $2300 rebate in April is little solace in October and November when they can’t afford heat.

    Comment by David T — May 22, 2007 @ 1:33 pm
  28. David,

    The working poor stand to gain the most from the Fair Tax. Under this plan, families pay no taxes until they have spent above the poverty line. Instead of waiting for a rebate check once a year, everyone recieves a prebate check every month until the poverty line level is met. Besides, the working poor and everyone else is already paying the tax without even knowing it.

    Comment by Stephen Littau — May 22, 2007 @ 2:15 pm
  29. Stephen, I disagree.

    All goods under the fair tax have a 23% premium. How then do they ‘pay no taxes’ if the tax is built into the price a gallon of milk?

    How do you distinguish those who crossed the poverty line and those that have not for the year? If you lose your job in October and you were on track to cross the poverty line – but now you won’t – do you get a refund in the taxes you’ve paid? (…I smell a tax return coming up…)

    Furthermore, the working poor pay 15% on their current income, and with the standard deduction reduce their federal tax liability to about 12%. The fair tax – with rebate – does not come close to that. The fair tax crushes the poor.

    Comment by David T — May 22, 2007 @ 2:40 pm
  30. David T,
    I will try to correct a few of your misconceptions. First, the FairTax removes the current business income taxes from purchases (as mentioned above, about 22-23%) so that will ultimately break-even. Now, as for the prebate, everybody gets it, rich and poor.

    Hadley,
    I actually like the idea of the FairTax. However, as tarran pointed out in his critiques on this post and the previous one, there are certain issues to take care of. For me, the only way a FairTax could be implemented is through a Constitutional amendment, both to repeal the 16th and institute a legal FairTax. This is where my realism steps in because I just don’t see this happening with the current proposal of 23%. I would rather see a 15% tax because that will be more realistic to pass.

    Now, I understand a bunch of economists came up with 23%. I understand their logic, trying to be revenue neutral. But, that does not mean that is the best system for taxpayers. If we institute reform, why should we focus on revenue neutral? Why don’t we really appeal to people and say ALL taxpayers are getting a break, not just paying the same in a different form? By the way, this would also take away some of the ammo from the status quo-type people, those that see revenue neutral and wonder why to mess with reform then. An actual tax savings will convince people a little bit easier. That might just be the people I know though.

    Comment by trumpetbob15 — May 22, 2007 @ 5:47 pm
  31. Trumpetbob15,

    The FairTax is a new proposal on the WAY taxes are collected, not HOW MUCH is collected. Once it is implemented, there will HAVE to be some tweaks, no doubt. I’m sure that even the brilliant economists that have analyzed and approved this plan feel they CAN’T have gotten it perfect from day one. It is revolutionary. It’s new. But you MUST get the word INCOME out of your system. 15% is nothing more than a made up number that makes you “feel” good, and is being based on some number cropped form the INCOME tax. You have nothing honest to compare to with the FairTax, and the two systems are a complete dichotomy. THere are tables and graphs available at fairtax.org which will show you general, average expectations. With the current system, you have no choice but to pay a certain percentage, which varies as it is. With FairTax, YOU choose what your ultimate yearly percentage is by your spending. Currently there is a certain percentage of people that comply. With the FairTax, EVERYONE must comply, again, including foreigners. [as an aside - in Germany, where there is a VAT (which is so substandard to the FairTax that it is not worth going into), if you keep your receipts, you can apply to get a refund of your spent taxes, and I suspect that there will eventually be some type of similar arrangement here.] BUT, the FairTax will cause every Corporation in the world to want to be HQ’d here, so forget about me and you and our measly scapings – the US will become the wealthiest country in the world, instead of the most indebted under the current system.

    Remember, it’s not 23% of what you make, and I know you know that. so where you keep coming up with 15% is beyond me. And again, it must be able to generate the same amount as now, because the government can’t go broke by implementing the plan. Down the road, reduce government spending by reducing government spenders. Futhermore, I personally would be happy to pay the same amount as I pay now JUST to be able to get the G.geeks outta my hair and my money and my records, forget about all the money I could save and invest.

    Comment by Hadley Lamar — May 22, 2007 @ 7:13 pm
  32. Hadley,

    I get 15% based on income because that is what normal people are going to think about. Yes, with my accounting degree I know the difference between the FairTax and an income tax. However, the problem with the current proposal is that it is too intellectual for the general population. One way I suggest getting around that is to drop it to 15%. Why change from the current proposal of 23% and keeping revenue neutral? Well, what is the point of refoming government for the everyday person when they are merely substituting collection methods? What is in it for people to go through the hassle of changing the method?

    So, here is ultimately where I am coming from. The people are who truly in favor of reform (and I am most certainly one of them) are not fighting to change from 6 of one to half dozen of the other, as the saying goes. Rather, the debate should be 6 of one and 5 of the other. Put in an incentive to change. Also, the idea that somehow 23% is okay because I am used to income is misleading. 23% is high; compare it with any state’s similar sales tax and it is still high. Sure, it may be what we are paying now, but ordinary people don’t see that. They only know income. They understand some of today’s basic rates, but truth be told, the income tax when it was first implemented had two levels. Everybody making below $300,000 if I am remembering correctly paid no tax, from 300,000 to a million it was 1%, and after that it was 7%. Now I know we probably won’t make it back to those levels, but wouldn’t that make the argument stronger? Wouldn’t that get people’s attention and make them go, “Hmm…now I could live with that kind of tax.” No, the FairTax won’t reduce government directly, but it sure can cut the purse strings a bit. So why not do that? Why not appeal to the people who don’t like paying high taxes, but who ultimately end up going to an H&R Block or something in order to not actually spend a large sum of money to find every single deduction? Also, by combining the smaller government argument with the FairTax, the two groups can end up working together to change minds.

    That is my main critique of the FairTax. Why should anyone put forth a large amount of effort to change collection methods? What is the incentive? Maybe I think too much like an economist, but regular, everyday, non-political people need to have a reason to get on board with this idea. Thus, my 15% suggestion is merely an attempt to recognize that revenue neutral will get the same reaction as my discussing whether a corporation should have a capital vs. an operating lease; both will lead to a look of confusion and non-caring.

    Comment by trumpetbob15 — May 22, 2007 @ 9:54 pm
  33. OK, so I am now going to trust you have run the same equations on the same tests as the designers of the FairTax, and have concluded that 15% will fund the government, not 23%. I hope that your test cost you at least a buck three eighty nine so that I can have more faith that you are correct. I hope you are right for the sake of the future of America. I don’t believe your numbers though. I think ‘normal’ people will consider that the number derived by the FairTax study is the one they will consider.

    you say — what is the point of refoming government for the everyday person when they are merely substituting collection methods? What is in it for people to go through the hassle of changing the method? —

    Because of the benefits to all of America and Americans with the plan. And you keep insisting that this is “government reform.” Call it what it is – TAX REFORM. Frankly, I DO NOT believe you have read the book or you would not continue to ask these basic questions about the concepts. Please, DO read it. If you HAVE read it, then I am at a loss for what you are getting from it.

    Why must you insist on having the government meddle in your income?

    Why must you insist that instead of passing just ONE very complicated revolutionary bill, that you also solve all the problems of big government at the same time? While you are at it, please go ahead and throw in the fix on how to end the war victoriously, how to end immigration ills, and how to solve the impending demise of social security (oh wait, the FairTAx may just do that)! Can you not take one step at a time? Must you jump to every third lilly pad before you realize that there are two in between that will make the path less precipitous?

    you say — That is my main critique of the FairTax. Why should anyone put forth a large amount of effort to change collection methods? What is the incentive? —

    I have told you several time now, get the government out of my filing cabinet. Make them accountable for how much they ‘charge’ us to live here. Make America prosper for a change. If you can’t understand this, I know not what else to say, other than the other 50 good reasons that you will argue on other unfounded points.

    My suggestion to you is this: Continue to fight for government intervention and the INCOME tax. I just hope that you don’t win with ill-information.

    Please, read the book again.

    Comment by Hadley Lamar — May 23, 2007 @ 3:23 am
  34. And Tarran, I appreciate your devils advocate views, but you could twist the lemon outta lemon juice if you tried hard enough. Your logic leaves much to be desired, with all due respect.

    Having reviewed that post, I reluctantly have to agree. I shouldn’t attempt economic analysis at 2AM.

    On the other hand, though, I think any system that is “revenue neutral” is going to not really improve things. It’ll just shift the burden around, and as you can guess, it’s the size that I think is the problem. To use an inflamatory analogy, the problem with the mob is not that they charge different shop-owners different amounts of protection money, it’s that they are taking protection money at all.

    Comment by tarran — May 23, 2007 @ 8:39 am
  35. From the fair tax website:

    The FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed.

    What mechanism does it have to prevent businesses from establishing a partner business, selling the good to the business for a dollar, which in turn sells it to the consumer for full price?

    If I run a business and I set up another business within its perimeter, any time a customer walks up to the register, the clerk first sells it for $1 to the in-house corporation. This corporation in turn sells it to the consumer at full price – in that way, there are no taxes ever paid. When the good is ‘new’, it is sold to the business, but when sold to the consumer it is now ‘used’ and no taxes are paid, regardless of the secondary price because used goods are non-taxable

    How does the fair tax address this loophole?

    Comment by David T — May 23, 2007 @ 10:21 am
  36. David,

    Now there’s a really good and valid question for which I know no answer. It’s been a while since I read the actual bill, and I don’t know/remember any addressment of that. I would suggest and hope that you might post that question to the fairtax@yahoogroups.com – someone there may have an answer, and I would like to know as well. Seems though, a pretty obvious loophole. Rep. Linder and Boortz are writing a new book to answer many of the questions that have been raised, and perhaps it is one they have addressed.

    Tarran,

    Thanks you for your honest and rational viewpoint on when not to ‘cipher economics. :-)

    Comment by Hadley Lamar — May 23, 2007 @ 11:55 am
  37. David T.

    “All goods under the fair tax have a 23% premium. How then do they ‘pay no taxes’ if the tax is built into the price a gallon of milk?”

    It is true that at the register everyone would pay the tax but the tax is reimbursed monthly.

    “How do you distinguish those who crossed the poverty line and those that have not for the year? If you lose your job in October and you were on track to cross the poverty line – but now you won’t – do you get a refund in the taxes you’ve paid? (…I smell a tax return coming up…)”

    The Fair Tax website, http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#3 explains how the prebate works as follows:

    “All valid Social Security cardholders who are U.S. residents receive a monthly rebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The rebate is paid in advance, in equal installments each month. The size of the rebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc.”

    If you follow the link, you will see a chart that answers your question for when you cross the poverty line (based on where it is set now). For a 2 adult household with 3 children, this family would cross the poverty line at $30,860 and would receive $7,098 in prebates per year which breaks down to $591 per month.

    If these numbers are accurate, how could you argue that the Fair Tax “crushes the poor”?
    I’ll deal with some of your other objections in another post.

    Comment by Stephen Littau — May 23, 2007 @ 1:25 pm
  38. David T.

    “What mechanism does it have to prevent businesses from establishing a partner business, selling the good to the business for a dollar, which in turn sells it to the consumer for full price?”

    You are correct in saying that the end customer pays the tax; business is untaxed (as they should be). Competition will ultimately dictate what everything costs. If retailers want to “overcharge” for goods or services, it only takes one competitor to lower his prices for everyone else to follow suit. It’s called the free market David.

    “If I run a business and I set up another business within its perimeter, any time a customer walks up to the register, the clerk first sells it for $1 to the in-house corporation. This corporation in turn sells it to the consumer at full price – in that way, there are no taxes ever paid. When the good is ‘new’, it is sold to the business, but when sold to the consumer it is now ‘used’ and no taxes are paid, regardless of the secondary price because used goods are non-taxable”

    The Fair Tax does account for this. Because the retailers are acting as tax collectors for the federal government, the federal government will pay retailers a fee for their services. If the retailer is paid for collecting the taxes, what incentive does he have for pulling such a scam as you describe?

    There is always the possibility of fraud and the Fair Tax is no different. But you tell me which system is more likely to have more fraud: a system which collects income taxes from nearly 300 million individuals or fraud by several million businesses? (sorry, I don’t know how many businesses operate in the U.S. but I’m sure it’s a whole lot less than 300 million).

    Comment by Stephen Littau — May 23, 2007 @ 1:46 pm
  39. I think you misunderstand what I am driving at, Stephen.

    You are correct in saying that the end customer pays the tax; business is untaxed (as they should be). Competition will ultimately dictate what everything costs. If retailers want to “overcharge” for goods or services, it only takes one competitor to lower his prices for everyone else to follow suit. It’s called the free market David.

    You misunderstand what I am saying – that selling the ‘new’ good to a shell company makes it a ‘used’ good, meaning that the shell can now sell it with no tax…

    …and thus the death knell for the fair tax. Business A sets up shell A-prime, sells the ‘new’ good to A-prime, who in turns sells to the consumer as a ‘used good’.

    There is zero tax on the used good or the B-to-B transaction, so Business A can lower his prices or keep prices the same and enjoy an increased 23% margin on the same good. Business A can now afford to lower their prices if they want and undercut business B, who has no shell.

    The free-market approach will, in fact, force businesses into shell companies if they wish to compete with their neighbor. This in turn means no taxes will actually be paid because no tax liabilty is ever incurred – the new good becomes a used good, and used goods require no tax.

    The Fair Tax does account for this. Because the retailers are acting as tax collectors for the federal government, the federal government will pay retailers a fee for their services. If the retailer is paid for collecting the taxes, what incentive does he have for pulling such a scam as you describe?

    The amount of the money received by the government will have to exceed the 23% margin on sales, or else this will happen exactly as stated.

    If ComputerCorp has $40 million in revenue from new sales with a 23% premium on prices, it’s taken in $49.2 million in revenue with a $9.2 million tax liability.

    That $9.2 million difference is what the government will have to give ComputerCorp to make it worthwhile ComputerCorp to collect the tax.
    Otherwise, ComputerCorp establishes ComputerCorpPrime, sells the ‘new’ good to the them, who in turn sells the ‘used’ good to the consumer – bringing in $49.2 million in revenue but with no tax liability.

    Receiving a $50,000 payment from the government to collect taxes on their behalf is going to pale in comparison to what a business can get by establishing a shell company.

    There is always the possibility of fraud and the Fair Tax is no different. But you tell me which system is more likely to have more fraud: a system which collects income taxes from nearly 300 million individuals or fraud by several million businesses? (sorry, I don’t know how many businesses operate in the U.S. but I’m sure it’s a whole lot less than 300 million).

    The income tax paid by individuals will have less fraud. You cannot put a business in jail, but you can put a person in prison for tax evasion, and that type of enforcement can be an excellent incentive to follow the law.

    Finally, why wouldn’t individuals just establish themselves as sole-propietorships and avoid taxes on any services or goods whatsoever, since there are no taxes on business-to-business transactions?

    Comment by David T — May 23, 2007 @ 2:59 pm
  40. >> You misunderstand what I am saying – that selling the ‘new’ good to a shell company makes it a ‘used’ good

    David, this is where you are wrong. The situation you describe is only an example of fraud, nothing more. Only use by an end user makes a ‘good’ used. Or put more precisely, only paying the fed sales tax makes the good ‘used’.

    >> Finally, why wouldn’t individuals just establish themselves as sole-propietorships and avoid taxes on any services or goods whatsoever, since there are no taxes on business-to-business transactions?

    I’m not sure which tax scheme I support, and I haven’t actually looked at the details of the fair tax, but this seems like another completely invalid objection. It wouldn’t be that all bsn to bsn transactions are tax free, it would be that all purchases of ‘goods’ as components for resale would be tax free. In other words, a grocery store would not pay tax for food. But if the grocery store bought a computer to run their business, that would be taxed, since the business is the end user.

    Comment by Gunnar — May 23, 2007 @ 3:40 pm
  41. “You cannot put a business in jail, but you can put a person in prison for tax evasion, and that type of enforcement can be an excellent incentive to follow the law.”

    Wow. David, you’ve just pointed out one of the biggest objections to the income tax. Government theft of personal property under penalty of imprisonment and without consent isn’t the hallmark of a free society. It isn’t even worthy of the term “tax system”, it is more appropriately termed “slavery”. What else would you call uncompensated labor under the full force of the state?

    The fair-tax is more than just a system, it’s a way to be out from under the thumb of government tyranny. Don’t want to pay tax? By as little as possible. Everybody would have that choice: rich, poor, young, old, and that’s why “progressives” hate the idea so much.

    Comment by Bret — May 23, 2007 @ 4:16 pm
  42. Hadley,

    Yes, I have read the book. I don’t agree with the 23% because I don’t think people will like that number. Remember, you don’t need to convince the rich or the poor; you need to convince the middle class. I am willing to agree to disagree about how likely they will be to accept 23%. I still see reforming the tax system to be too much work for a non-accounting middle-class citizen.

    Like tarran, I would rather have no tax. And while I personally don’t like the income tax (even if it was the Forbes Flat Tax), I like to have realism and get an idea into how it would really work. I just don’t see the FairTax proposal generating enough support without some sort of incentive to get the middle class to go for it. Sure, it will save time and energy. But if someone uses an H&R Block and doesn’t ever have to go through a major hassle (e.g. they just have a W-2 and don’t have “unusual” income or deductions), will they want to put forth an effort in passing the FairTax amendment? I could be wrong, but I just don’t see that happening. People know an income tax, but the FairTax is new and scary to people.

    Saying that, the FairTax is awesome. If only we were able to get it implemented, everything would be better. My only concern is that it will be very hard to get in place.

    Comment by trumpetbob15 — May 23, 2007 @ 8:59 pm
  43. TBob,

    you are right —-> >

    Please, join the positive team and help convince others of its awesomeness; let go of the income tax, focus on tax reform and help implement the FairTax. It is a hard battle, but will be worth every effort.

    “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”
    –Margaret Mead

    Comment by Hadley Lamar — May 24, 2007 @ 12:30 am
  44. I’ll respond to this:
    2) Politicians won’t bring back the income tax. It will be easier simply to raise the consumption tax rates

    Ah yes, but what if we have another depression? When the economy is contracting (and the current monetary system ensures that we will continue having booms and busts into the forseeable future), people curtail their spending, either by buying used goods, or by doing without. Guess what that would do to government revenues? ;)

    My response as follows. You can “what if” till the cows come home. What if the earth end June 23 at 6:03 p.m.? What if alien life forms descover Earth? What if there is never anouther depression in this country? What if there is a prolonged depression that last 20 years?
    Your “what if” argument needs to be thrown out the window. We can play that game all day long with NO viable outcome. And anyone who engages in such dribble is starting from a position of weakness to start with.

    Comment by steven lee — May 26, 2007 @ 9:59 pm
  45. Steven lee, the likelihood of those other things is quite low. Given that one of the arguments advanced in the 1890′s for having an income tax was that it would be relatively “recession proof,” my concern is a high probability one.

    If your policy is going to get rid of the income tax, it had better have a good answer to all of the reasons why an income tax was originally imposed. Otherwise, like the thief in the night, it will be snuck back in. Just as someone advocated fr it in the 1890′s, someone will be advocating for it in the 2020′s. And it will be convincing then too.

    I am getting really irritated at the unwillingness of Fair Tax advocates to face-up to this issue. If you guys have an answer, spit it out. If you don’t, that’s fine. Admit it and move on. But denying the concern exists while spewing vitriol about “defeatism” ain’t going to convert me. To the contrary, it’s driving me away. You don’t have to have a perfect system. But denying that flaws exist is childish.

    Comment by tarran — May 27, 2007 @ 8:55 am
  46. I’ve just been setting back reading for a while but it has become time to comment again.

    To David T…
    The prebate is provided to each household as an offset to the tax collected. It is provided monthly based on the poverty level as established by HHS. For 2007 the poverty level for a family of 4 is $25,660 which equates to a monthly payment of $525. This means that the first $525 of monthly tax paid is offset by the prebate. The amount earned or spent doesn’t matter. Every married household of 4 receives the same amount.

    To Trumpetbob15…
    You keep commenting on 15%. You realize of course that you are not paying 15% today. To that 15% you must add the 7.65% for social security and Medicare and the 7.65% paid by the employer in matching funds. That looks a lot like 30% today…
    All of a sudden the 23% of the FairTax doesn’t look so bad especially since it includes those payroll taxes. How can it do that and only be 23%? By broadening the tax base. Adding more taxpayers means that each taxpayer pays less to achieve the same total amount.

    Comment by Duane Neighbors — June 8, 2007 @ 12:25 am
  47. I made an error. $25,660 should have been $27,380.

    Comment by Duane Neighbors — June 8, 2007 @ 12:56 am

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