Your FairTax Questions. My Responses.

Before I respond to the questions from Thursday, let me get a few things out of the way:

  1. I have a job I love. In fact, I love it a hell of a lot more than I like blogging here, as much fun as this is. I leave for work at 6:45 every morning, and I get back at about 4:30 or 5. People who demand that I “respond now” are probably going to be disaapointed. I would rather be doing Instructional Design and programming than responding to you, no matter if you agree with me or not. I’m not on your schedule. You’re on mine.
  2. Just because Neal Boortz is the public face of the FairTax does not make it batshit crazy. Personally, I don’t listen to Boortz. I work during his broadcast and, again, I would rather be doing my job than listening to him. Having said that, although a constitutional amendment banning marriage equality passed in Georgia, Neal Boortz and his crew regularly spoke out against it. I am thankful to him for that. Because he was against that constitutional amendment, many more people voted against it than would have. I’m guessing a lot of you would have voted for it because if Boortz was against it, it must be worth supporting. To bring up the fact the Neal Boortz supports the FairTax as some attempt to discredit it is lazy.
  3. I’m not going anywhere. I’ve already talked to John about the fact that people don’t seem to like a lot of what I write. I think he actually enjoys seeing me get beat up in the comments. To be honest, I was very surprised about the visceral reaction to some of my posts. I’ve been reading this blog nearly since inception, but I rarely read the comments. Going back through them over the past couple of years, I shouldn’t have been surprised. That’s ok. Here’s the deal: John can ask me to leave at any time, and I will if he askes me to. Otherwise, I am here, and will only leave if John asks me to write something I don’t believe in. I know he won’t do that, so the ball is in his court – not yours. His blog. He gets to decide. Deal.
  4. The biggest mistake I have made while blogging is to tell you guys I am a Republican. To be frank, this is the first time I have ever blogged on a top site. It’s also the first time I have ever blogged at a site where the majority of people are partisan Democrats. I’m cool with that. But I am non-partisan. I happen to support most Democrats this go-round because I want the Republican Party to get the spanking they so richly deserve in the next election. Where I am from – New Brunswick, Canada – we had an election where the Liberal Party won every seat in the legislature because the Conservative party got stupid. I would like to see that happen this time. That being said, to say, “You’re a Republican. You’re stupid.” is a comment I generally laugh at. Again, it’s lazy. I know that because I used to do the same thing to people on the left. I regret it.
  5. I support the FairTax for two reasons. 1.) It’s a great plan for gay people who, under current government policy that denies them marriage, will greatly benefit. Even though gay people don’t generally like to admit it, marriage equality is not only about love. It is about the over 1000 benefits we are denied under current federal tax policy. 2.) I love this country and I think it would be a great plan for everyone – certainly much better than the status quo. I may be wrong. There may be a lot of things I have not considered. I’m open to that. But right now, this seems to be the best idea on the table.
  6. Finally, sometimes when I see a comment that is stupid (for example, that the FairTax will add 30% to the price of good & services without explaining that all the hidden taxes in the product itself will be gone), I tend to get snarky and just type something in the comments without thinking. I kinda want to apologize for some of those comments on Thursday, but I won’t. Some of you deserve them.

So. On to your questions. There were a lot of them, so this is going to be a long post. Click the link for the extended entry.

Seanly: Fair Tax? Ugh. A 30% sales tax on goods & services? Too high & too regressive. I’ll grant that we need sensible tax reform, but Fair Tax is not it.

How much in hidden taxes do you think is already included in those good & services? If nothing else appeals to you about the FairTax, wouldn’t you at least rather be able to see the taxes you are paying on those goods & services?

Fargus: Seanly It’s truly got to be one of the worst ideas I’ve ever heard. I know its supporters claim that the “prebates” make it progressive, but on the other hand, it claims to be revenue-neutral, and there’s no doubt that the rich would be paying less than they are now. Meaning what? If the same amount of government revenue is to be taken from the tax, the middle class is going to get disproportionately squeezed.

From Wikipedia: Households at the lower end of the income scale spend almost all their income, while households at the higher end are more likely to devote a portion of income to saving; households at the extreme high end of consumption often finance their purchases out of savings, not income.[6] These savings would be taxed when they become purchases. Income earned and saved would not be taxed immediately under the proposal. In other words, savings would be spent at some point in the future and taxed according to that consumption. FairTax advocates state that this would improve taxing of wealth. Economist Laurence Kotlikoff of Boston University states that the FairTax could make the tax system much more progressive and generationally equitable.[2] “Their view that taxing sales is regressive is just plain wrong. Taxing consumption is effectively the same as taxing wages plus taxing wealth.”[2] Kotlikoff finds that the FairTax significantly reduces marginal taxes on work and saving, which substantially lowers overall average remaining lifetime tax burdens on current and future workers at all income levels.[9] The Beacon Hill Institute at Suffolk University concluded in a 2007 study on distributional effects that “replacing income and payroll taxes with the FairTax would make the United States federal tax system more progressive than it is now and would benefit the average individual in almost all expenditures deciles.” […]

Economists at Boston University concluded that the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.

Dennis & Doug H.: Smuggling, Barter, Swap Meets, Black Markets, Organized Crime, Mob Wars

Here is a good letter from Dr. Karen Walby, Director of Reasearch, at FairTax.org, explaining how businesses would have a tough time evading taxes. But that wasn’t the question. Dennis & Doug H. were more concerned with personal evasion.

Here is a paper that appears to have been written by a supporter of the FairTax in Arizona. I couldn’t find an author name. The paper is here, and you should read it all. Here is the pertinent portion:

“Some of the problems regarding the underground economy that exist under the income tax would remain under the FairTax, particularly those involving cash transactions made in the illegal economy or with the explicit intent of evading taxation. However, as the costs of compliance shrink and the perceived fairness of the tax system increases, some of the hostility to the tax system will decline. People who are in non-compliance because they perceive the present system as unfair or illegitimate may choose to comply with the FairTax. Most importantly, because of lower marginal tax rates, the benefit from lawful tax avoidance or illegal tax evasion will be much less at the margin relative to either the present system15 or competing alternative tax systems, such as the USA Tax or flat tax16, that have higher marginal tax rates, particularly on wages or self-employment income.17 Research has confirmed the intuitive relationship between higher marginal tax rates and higher rates of evasion.18 Lower rates, all other things being equal, imply lower evasion because the benefits from evasion decline while the costs of evasion remain comparable.”

Doug H: Ah yes, the FairTaxScheme. Created by Scientologists, supported like a religion by Anarcho-Libertarians, and apparently found a sucker in Michael D.

Red herring. The original FairTax proposal was developed by Leo Linbeck and Bob McNair, who served on the Board of the Dallas Fed.

Punchy: For instance, you really think the gov’t can send checks to EVERY FUCKING HOUSEHOLD IN AMERICA, consistently, every month

Yes.

ThymeZone: Clue: I doubt you could get ten votes for it in the House of Representatives.

There are now 68 co-sponsors of the FairTax.

So, if I buy a loaf of bread to feed my family, that’s taxed at 30%. But if Warren Buffet buys Viacom, why that’s tax-free!

If you buy a loaf of bread, all of the hidden taxes in it will be gone away, greatly reducing the price of a loaf of bread.

Shygetz: Incidentally, the Fair Tax would also kill the construction industry, as used construction is not taxed but new construction is taxed at 30%. The housing industry is already hurting due to the sub-prime bust…can you imagine what would happen if the real cost of new home purchases went up 30% relative to pre-owned homes?

The real cost of a new home purchase would not go up 30%. Under the FairTax, the cost of that home would be about the same. Again, all the hidden taxes on the wood, nails, shingles, hardwood flooring, sheetrock, doors, lightbulbs, paint, wiring, etc would be eliminated.

Zifnab: Mike? It’s a massive sales tax in place of income tax. So we tax you for spending money. Who spends a higher proportion of income, rich people or poor people? Ergo, who will be paying the lion’s share of the tax?

As noted above: Economists at Boston University concluded that the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.

grumpyrealist: Michael, anyone with a knowledge of historical tax systems who has looked at the Fair Tax idea can blow five holes in the idea immediately:

1) Regressive
2) High enough to really incent avoidance
3) Doesn’t cover everything (see investment, above)
4) Incredible amount of paperwork required
5) How in the heck are you going to deal with cross-border trade? Either you are going to try making other countries act as your tax collection agents (not gonna happen), or we’re going to see a heck of a lot of boondoggling set up in order to use a loop out of the country as a way to get rid of the tax altogether. Trust me, at 23% level of tax, it WILL happen.

1. I disagree, and so do most economists. See the answer above this one.

2. When people see that the real costs of goods & services will not go up, I don’t think this will be any more of a problem than it is today. In addition, a lot of what goes through the underground economy will end up being taxed. Right now, people who make their livings off, for example, drug dealing, pay no taxes on that income for obvious reasons. Under the FairTax, they cannot avoid paying the taxes. I think this is one of the biggest reasons to support it.

3. I’ll have to read more on this. I don’t know enough to respond right now.

4. Every year, 120,000,000 Americans navigate through the massive amounts of paperwork required to file an income tax return. I would guess that most everyone makes a mistake or two on that paperwork where they don’t recover some of the taxes they are entitled to have returned to them. Of course, that paperwork would be gone. I have no idea how the FairTax would impose an incredible amount of paperwork.

5. When goods and services arrive in the U.S., there are no country of origin taxes included int he price. A simple example is the price for a dozen beer. If you go to Canada and buy 1 dozen Molson Canadians, you will pay about $21-22. In the United States, you’ll pay about $12 (in Georgia anyway.) That’s because all of the Canadian taxes on that dozen beer was stripped away before it arrived in the U.S. When it gets here, it is taxed at the U.S. rate, which is considerably lower. The same would happen for all other goods & services.

TheOtherSteve: Hell, people go to extremes to cheat the state sales tax on RV’s… What do you think they’ll do when the tax on a car is 40%?

Well, first of all, the tax on your car will not be %40. Cars and RV’s will be taxed at the 23% level, and that money willl go to the Federal government. And remember, the price of that car or RV will likely go down once all of the hidden taxes included in the price are eliminated. Not only that, but think about it: The costs of compliance with an impossible tax code are gone, accounting costs are greatly reduced, and employers will no longerbe required to match social security contributions.

Cinderella: How is the fair tax, fair? The fact that the 16th Amendment is not specifically repealed makes me VERY distrustful of those treacherous bastards in Congress. First they implement the “fair tax”, but what is to keep them from re-instituting?

Nothing. I don’t trust them either. I would like to see the 16th amendment repealed.

Ryan: Is there a way to RSS only John Cole’s posts?

For someone who doesn’t want to read my posts, you certainly have taken a considerable amount of time to click through, read what I wrote, and comment on it, when all you had to do was stop reading after you see the words, “Michael D.”

Vladi G.: I can’t tell from this exchange whether Michael is too stupid to understand the difference between an inclusive rate vs. an exclusive rate, or if he thinks the rest of us are too stupid to understand it.

Inclusive: The people who write and explain the FairTax prefer to use the inclusive rate because that’s what we use now. It makes for a more sound comparison. If you spend $100 you have spent $77 on the product and %23 on tax.

Exclusive: People who quote the exclusive rate are generally opponents of the tax who like to quote a higher rate. If you spend $100, you have spent $77 on the product and %23 on tax. Tax exclusive rate, 29.9%.

The difference: In either case, you have spent $23 on taxes, which opponents never mention.

Question: If you make $100,000 a year, and pay 23,000 of that in income taxes, do you tell people you pay 23%, or do you tell them you pay 29.9%?

Funny, when I read everything you people write criticizing the FairTax, you make me laugh, because it is so obvious that you don’t have a fucking clue about what it is – other than what you hear on Air America. You criticize the right for spouting talking points, yet you do all the same shit yourselves. LOL!

Responding to myself: I regret making this comment. It was kinda childish.

Doubting Thomas Says: Hmmmm… 3 hours since Michael D’s last comment

Unlike a lot of you, I don’t spend all day here. I work hard, and I enjoy my job more than I enjoy hanging out here.

Alex: Remember that your car and your house get almost double-taxed under the FairTax. You will be taxed not only on the value of the purchase, but also on the value of the mortgage, since H.R. 25 levies a tax on the purchase of financial services.

H.R. 25 indeed does levy a tax on financial services. Having said that, those financial services will now not be paying property taxes, payroll taxes, etc. There will be no hidden taxes in their services, greatly reducing their costs.

Those are my responses. Make of them what you will. They represent what I know about the FairTax – particularly with respect to how it will bring back business to the U.S. and how it will be great for gay people which, obviously, is very important to me and important to you if you believe people like me are treated unfairly under the current tax code. It won’t solve all my problems (immigration, for example – and I’m much more interested in that discussion). Asking me questions at this point, although I know you may have them, will be redundant. This is what I know and it’s all I can offer – except to say that it’s infinitely better than what we have now.

One last thing, however. Right now, there is over $11 TRILLION in U.S. cash invested in offshore accounts, largely because the cost in complying with the current tax code is so high. If and when the FairTax is implemented, that money will likely come back tot he United States. I completely agree with John Steinberger of Americans for Fair Taxation:

The best feature about the FairTax is that it will make America the most competitive country in which to do business. Businesses on shaky footing will likely keep U.S. plants open if they are liberated from our burdensome tax code, while many foreign industries will choose to set up shop here.

And that will be good for everyone. What will also be good? Eliminating the nearly $11 a year Internal Revenue Service. Now, obviously, there will have to be an agency to collect these taxes, but I don’t think it’ll be anywhere near the size and as bureaucratically messy, as the IRS.

I know I didn’t answer all questions. There was one from TOS that I’ll have to get my head around before just popping off an answer.






158 replies
  1. 1
    chopper says:

    I’ve already talked to John about the fact that people don’t seem to like a lot of what I write. I think he actually enjoys seeing me get beat up in the comments.

    cause it means john gets beat up less. “here, hit him instead”

  2. 2
    null pointer exception says:

    Can you elaborate more on this hidden taxes thingie? Like, what kind of hidden taxes are we paying today on, say, a loaf of bread?

  3. 3
    empty says:

    An answer to your question and a comment.

    Question: If you make $100,000 a year, and pay 23,000 of that in income taxes, do you tell people you pay 23%, or do you tell them you pay 29.9%?

    I tell them I pay taxes at a 29.9% rate. I think you hurt your arguments when you insist on using the “inclusive” rate. I am agnostic on the Fair Tax but when I first noticed that “inclusive” there my first reaction was that someone was trying to pull a fast one.

    The comment: If the Fair Tax is revenue neutral then there is no way that everyone will be paying less. Some will pay less and some will pay more. From FactCheck.org this:

    We found that including all the taxes that the FairTax would replace (income, payroll, corporate and estate taxes), those earning less than $24,156 per year would benefit. AFT’s Burton agreed that those earning more than $200,000 would see their share of the overall tax burden decrease, admitting that “probably those earning between $40[thousand] and $100,000” would see their percentage of the tax burden rise.

    Arguments can be made that through economic efficiency everyone will benefit but I don’t see how without changing the meaning of what is generally understood by progressive taxation you can call the Fair Tax progressive.

    And Michael, ignore the bitching. It’s part of the ambience of Balloon Juice. I mean, it’s balloon juice.

  4. 4
    Jason R says:

    I don’t agree with the fair tax but I have enjoyed reading your blog entries.

    My biggest quibble with the fair tax is that it puts everyone on welfare. I imagine if a system like this was put into place we would see sanctimonious republicans complain about people spending their pre-bate welfare checks on candy, ice cream and pimped out Cadillacs.

    Plus does anyone really believe that states are going to eliminate their sales taxes.

  5. 5
    Michael D. says:

    null: Here is a document I found that talks about this. One example used was the 34 cents of the price of a $1.14 loaf of bread is hidden taxes.

    For example, employers pay payroll taxes. They recover this by adding it to the price.The match your social security contributions and add it to the price of their goods. etc. etc.

  6. 6
    Michael D. says:

    Plus does anyone really believe that states are going to eliminate their sales taxes.

    Jason: That’s something I haven’t quite got my head around yet. In fact, I think it’s the biggest argument against the FairTax. Everyone needs to be on board for it to work, in my opinion.

  7. 7
    smiley says:

    Question #1: Why didn’t the republicans pass meaningful tax reform when they controlled all three branches of government?

    Answer #1: Because then the republicans wouldn’t have taxes to run on as a political issue.

    The Fair tax will never happen because the democrats will say it’s regressive (true or not) and the republicans don’t want to lose one of their most potent political issues. Same with abortion. One reason abortion hasn’t been banned or Roe v. Wade overturned is that it would rob the republicans of another key political issue.

    Question #2: What does the modern republican politician have to run on if not taxes and abortion?

    Answer #2: Not much.

  8. 8
    Michael D. says:

    smiley: Unfortunately you may be right. No matter what plan you implemented, Republicans AND Democrats need to have taxes to complain about.

  9. 9
    Michael D. says:

    BTW: A response to ImJohnGalt:

    ImJohnGalt: Once my bank account is verified, I will make that donation, and I offer an apology. It was a snarky comment that I shouldn’t have made.

    BTW, this is the 4th donation I’ve made to Fisher House. The others were larger. I’ve been donating to them since CNN did that whhole Warrior One thing.

  10. 10
    SpotWeld says:

    I have one question of implementation. The Fair Tax proposal seems to me to be an “all or none” measure. (There is no way to slowly move over to it.) So lets assume the Fair Tax is implemented and it’s announced that 2012 will be the last year federal income taxes are collected, and after that it’ll be collected at the point of purchase. So, if a company pays it’s payroll taxes in 2012, it’ll still need to include those hidden taxes the price of its goods in 2013 as well as add the Fair Tax?

    My question in short is, how do you ensure that the hidden taxes come out at the same time the “Fair Tax” goes in?

    (A large company might be able to keep prices low by spreading that last year of costs over many years, but it will really put a bite on small business.)

  11. 11

    Michael, your first four reasons for the “Fair Tax” were just whiny-ass stuff.

    1. Does your “fair tax” supply the same amount of revenue as the current system? From whom?

    2. How does this tax system help the majority of people in the country?

    3. How does the “Fair Tax” impact the housing/mortgage market?

    Please don’t whine. It’s annoying.

  12. 12
    demimondian says:

    You need to go back and look at the payroll tax issue, Michael; it shows just how shallow your work here is

    [And, yes, it *is* shallow.]

    Hint: the payroll tax has squat to do with the income tax. It won’t be changed by adopting the so-called “Fair tax”.

    The classic problem with a sales tax is that it *is* regressive. You can talk to political economists all you want — and I used to teach at BU, so I know that school’s faculty exceedingly well — but the fact remains that all sales taxes have wound up de facto regressive, no matter what work has ever been done to fix that. You’re asking me who I’m gonna trust — economists with an axe to grind, or my lying eyes…do you really need an answer?

    What you’ve shown is that you have the classic gLibertarian belief that “you’ve got yours.” My answer is simple and straightforward — fuck off.

  13. 13
    numbskull says:

    Often people from the right deride what people from the left say by dismissing it as a utopian quest (whatever the quest du jour may be). Your statement “Everyone needs to be on board for it to work” seems pretty utopian for me.

    My current biggest concern with the “Fair” Tax is that I have yet to see an convincing set of data or a compelling argument that refutes the what Jason R said, to wit, an awful lot of serious number crunchers conclude that, as a group, those making between $25k and $200k per year will be paying more than under the current system.

    This more-or-less leads right back to what can be concluded about the prospects of the “Fair” Tax in light of your statement: “Everyone needs to be on board for it to work”, n’est pas?

    As for people condemning the “Fair” Tax because Boortz supports it, I don’t know that I agree that that is laziness. A long time ago in a galaxy far, far away, Neal Boortz was not a flunky for the GOP. I used to listen to him a lot. But, when he started spouting things that were counter to many of his previous positions, and worse, started laughing off legitimate criticism by telling his audience “I’m just an entertainer”, well, I knew the jig was up.

    He’s spent years and years now earning the mistrust of at least this once-frequent listener. Thus, whatever new shiny bobble he’s selling today is rightfully met with suspicion. That’s not to say that just because, and only because, Boortz is pushing an idea that that idea must be bad. But, if you want an idea to gain traction, it’s usually helpful to have a salesman that doesn’t stink to high heaven.

  14. 14

    About the claim that the Fair Tax is regressive, you wrote “I disagree, and so do most economists.”

    No. The best you can say is “some economists.” You can’t get most economists to even agree on which direction the earth rotates.

    And the complaint about our reaction to Boortz’s support of the Fair Tax is pathetic at best.

  15. 15
    Ted says:

    In other words, savings would be spent at some point in the future and taxed according to that consumption.

    Uh huh. And since an enormous amount of tax revenue currently comes from taxes on gigantic incomes, and I’d bet good money you also favor repealing the Estate Tax, what a wonderful recipe for protecting massive income sums, passed down through generations, never getting spent and taxed at all. You talk about this system as though we’re only dealing with small-time millionaires, completely ignoring the hundreds of thousands of very rich people, the majority of whose wealth will spend decades never getting spent.

    Taxing consumption is effectively the same as taxing wages plus taxing wealth.”

    Again, except for wealth that gets socked away for a century.

    Michael also never deals with what would be inevitable in this silly system: business interests making damn sure that deductions and exemptions are built into the law for business expenses. After all, they’re just spending that money to build more business income, so why tax it? Hence, the valid arguments I’ve seen about how even a damn loaf of bread purchased by a private individual will cost more than it would to a business buying it to feed their employees, simply because it wouldn’t be exempt from the tax.

    If you buy a loaf of bread, all of the hidden taxes in it will be gone away, greatly reducing the price of a loaf of bread.

    He’s talking about the business income taxes and sales taxes built into the price of the loaf, and he’s deluded enough to think their effective price inflation will vanish under this system. He actually thinks the status quo on prices won’t be retained, and has no concept how this will affect the currency one way or the other. We’d all enjoy the look on his face when he gets to the store to find the price has not changed, and the difference will now be enjoyed by the producer, since the market is already willing to bear the current prices of goods. This is libertarian economics: somehow it will all just shake itself out, just you watch.

    Also, his attempts at dealing with the evasion problems are laughable. When it comes to stopping tax evasion, you want to limit the evaders as much as possible. When the evader is a person who can be easily audited, this can be done relatively cheaply. When the evasion is a product, or a product chain, it’s a lot more diffuse and blurred. I don’t think I need to explain why policing this system will be geometrically more complex.

    An important context here to note is just who has been advocating this system for so long; namely, Randroid deluded anarcho-capitalists. I know a few of these very genuine articles, and the rest of their ideas on how to run an economy that keeps 90% of the population generally out of abject poverty are absurd. You think class stratification and the wealth canyon are big now? Give this plan a try. We’ll have 5% of the population controlling 90% of the wealth in this country in no time. Very rich people will be bending over backwards to avoid spending their money in this country, because tax-evasion will be just that simple.

    And Michael? You seem like a nice enough guy, but the reason people don’t seem to like your writing is because it’s banal. You’re not an improvement to this site, just an addition. So I guess you’re not hurting it either (in my book), but Cole might want to consider a substitution should a better one come along. These ideas your blogging about lately are 1) never going to happen in our current system for the foreseeable future anyway, and 2) thus aren’t relevant to the very important issues we face during the next few years. While others are thinking about how to clean up after Bush/GOP ruin, you’re talking about microbes in a petri dish.

  16. 16
    Ted says:

    Everyone needs to be on board for it to work, in my opinion.

    Which is why it will never happen without a very sweeping, federal imposition of it that would stomp on all sorts of states rights. This wouldn’t bother many people, if the system could be shown to work, but wouldn’t you libertarians have to keep your heads from exploding over the contradiction?

  17. 17

    Can you elaborate more on this hidden taxes thingie? Like, what kind of hidden taxes are we paying today on, say, a loaf of bread?

    I believe those hidden taxes would include:

    The income taxes the bread maker is liable for and has to price into the cost of bread
    The income taxes the bread maker’s suppliers are liable for and price into the cost of their goods (and therefore are passed along to the buyer)
    Et cetera.

    Where I start to get uncomfortable with the fair tax idea is when looking through the long list of taxes and fees that theoretically would be replaced in toto by the Fair Tax.

    Which of the transactions that they’re associated with would constitute a Fair Tax-able transaction, I wonder. (E.g., office buys a pencil. Is that taxable (is the office considered an end-consumer), or is it considered part of the manufacturing process for the services the office provides, and therefore isn’t subject to tax?

    I don’t think the Fair Tax would do away with the IRS or the army of accountants and lawyers that exist in support of the current tax system. It might, however, refocus their attentions away from average citizens.

  18. 18
    Michael D. says:

    Ted, we already have a Federal income tax that has been imposed. We’d just be replacing one imposed system with another.

  19. 19

    This whole “fair tax” thing has that magical thinking smell behind it. In a “better world” we’d all be singing and holding hands. In a better world everyone would turn in their handguns, except for those people who want handguns or have a need to use handguns in their profession. In a better world everyone would be loved. In a better world taxes would be “fair.”

    I am looking at the kind of government structure from a government which now reads everyone’s emails and listens in on our phone calls, that will enforce this tax. Will there be a government agent positioned at the door to every store, much like at Costco?

    For those who want simplicity in tax laws, good luck. Don’t think that there won’t immediately be adjustments made to the kinds of taxes that certain constituencies pay. And changing the law on taxes won’t prevent some kind of “national security” oil depletion repayment voucher doohickey thingie, for ex.

    Maybe it’s the pie in the sky that floats other people’s boats. Me, I’m just reclining by my hookah, dreaming of all those virgins waitin’ for me in the Big Upstairs.

  20. 20
    Ted says:

    Ted, we already have a Federal income tax that has been imposed. We’d just be replacing one imposed system with another.

    Sure, and it’s on top of the state income tax in many if not most states. Has the federal constitution or judicial precedent gone and allowed the federal government to ban states from collecting income taxes while I was asleep? If not, how is this a rebuttal to what you said was the biggest argument against the Fair Tax; i.e., states still imposing their own income taxes? If the Fair Tax needs all income taxes abolished, and the federal government can’t force states to do this, then what?

  21. 21

    I haven’t been following these posts, so forgive me if this has been brought up before, but the fatal flaw I see in this scheme is the assumption that big business would pass any savings realized under it on to the consumer, instead of taking it as profits.

    In my considerable years on the planet, I’ve found it to be a rare occurence. In fact, off the top of my head, I can’t think of a single time it’s happened. Seems to me, they’ve sold corporate dereg on the same premise in the past.

    Dereg of the cable industry was supposed to lower our cable bills. Anybody ever get a reduction in rates? Same with electricity. Competition was supposed to lower rates and they were supposed to use their profits to upgrade the grids. Didn’t happen. Why should anyone believe it would happen here?

  22. 22
    OxyCon says:

    You know, I really am surprised that there is such a large number of gays who assosciate themselves with the Republican party. The only reason that gays can come out of the closet in a relatively comfortable manner in these days is soley because of the Liberal nature of this country. If the conservative Republicans were in total control of this country, gays would either have to conceal their sexual orientation or suffer severe consequences. It’s not a stretch to say that conservative Republicans would like to see all gay people dead. I hear that alot of these gays that associate themselves with the Republican party are “fiscal conservatives”. How does that square with this?:
    http://www.lafn.org/politics/g.....Chart.html
    Then there’s the “libertarian gays”. I think these gays have the words “Libertarian” and “Liberal” confused. Libertarians want to be free to do whatever they want, like some fringe right wing groups that want to be able to hunt down and kill gay people. While Liberals want to be accepting of all people because they know that we were all born the color and sex we are and can’t do anything about it.

  23. 23
    jake says:

    I support the FairTax for two reasons. 1.) It’s a great plan for gay people who, under current government policy that denies them marriage, will greatly benefit. Even though gay people don’t generally like to admit it, marriage equality is not only about love. It is about the over 1000 benefits we are denied under current federal tax policy.

    This is really depressing. Hey, the government won’t let us get married, so we’ll settle for a different tax policy that puts everyone on the same (bad) financial footing. Really??? Yep, that will really help you out when your partner is in the ICU and the hospital staff is being twats about the “family members only,” policy. Want to adopt? Oops, too bad. State regs only allow for married couples to adopt. Writing a will? Better make sure it’s extra air-tight or any greedy family members who didn’t approve of your “lifestyle choice” might make off with all the money you and your partner saved under the Fair Tax.

  24. 24
    ThymeZone says:

    Oh lord, where to begin?

    1. Kudos for writing the Fair Tax material. Seriously, although it isn’t convincing (or even close), and although it ignores huge problems with the scheme and tries to use rhetorical device to gloss over them (see below), at least you too the time to write it and support your position.

    2. Don’t get me started on tax fairness for gays. The remedy there is civil unions, and you would have them if gays hadn’t foolishly decided to go for the “marriage” tag that inflames misguided, but effective, religious resistance. One of the worst political moves I’ve ever seen, and so bad that it has taken most of the steam out of my support for the solution.

    3. Your 68 votes and my ten votes both signify the same thing: FairTax is not politically viable. It won’t ever replace the income tax, it just isn’t a good enough scheme and it has too many problems. Attention to futile schemes is a two-sided scheme: One, it provokes thinking on the topic, which is good, but two, it sucks the oxygen out of the politics and when it’s as bad as FairTax, it ends up being a drag on reform. It discourages other reform ideas and efforts.

    4. Your article, unless I missed it, fails to address a huge problem with the scheme: The prebates. Aside from the intellectual absurdity of the prebate scheme, there is the practical matter: It requires the same kind of exchange of paperwork and interaction that the present scheme requires, things like returns, schedules, and checks, and thereby defeats one of it own purposes, which is getting rid of the beaurocracy and hassle of the present scheme. The prebate alone will kill FairTax. You didn’t address it.

    5. Where are the models of revene projection, both during and after the transition period? Without them, the whole thing is in the realm of fantasy.

    6. Last and not least, FairTax is an experiment. Nobody really knows how, or whether, it would work. In order to consign the fate of the country to a grand experiment that has more defects that a chinese christmas toy, you have to prove the case for its’ benefits, viability, and desirability, its fairness, practicality, and durability. All FairTax proponents have done is basically throw down a “wouldn’t it be cool if …..” argument and walk away, as near as I can tell. The deal can’t be closed.

    The idea is an interesting exercise, but will never rise to the level of viable solution.

  25. 25
    Ted says:

    but the fatal flaw I see in this scheme is the assumption that big business would pass any savings realized under it on to the consumer, instead of taking it as profits.

    It’s the fundamental delusion lying at the heart of libertarian economics. It will all just shake itself out. It’s the same underlying delusion behind communism; it requires you to consider the behavior of people as abstract, computer-like beings.

  26. 26
    Michael D. says:

    The idea is an interesting exercise, but will never rise to the level of viable solution.

    But it is worthy of discussion. And thank you for responding to it without telling me to fuck off or bringing up the fact that I am a gay republican, ;-) neither of which does anything to contribute to the discussion.

  27. 27
    ThymeZone says:

    Right now, there is over $11 TRILLION in U.S. cash invested in offshore accounts, largely because the cost in complying with the current tax code is so high.

    That one deserves its own response. The trillions are a big issue, but your reasoning doesn’t hold water.

    The offshore money is there because the more money people or taxable entities have, the more assiduously they will work to avoid paying taxes. They’ll create and then employ every loophole. It wouldn’t matter what the underlying scheme is.

  28. 28
    Michael D. says:

    By the way, I AM willing to have my mind changed on this. I’m not married to it as much as you might think. I just believe it to be a better solution than we have now. But then, there are probably a lot of things out there that are better than we have now. I despise current tax policy, and this seems much better to me.

  29. 29
    Mikkel says:

    I have to say that I’m with Michael in theory (but don’t know enough about all the FairTax implications) even though I have progressive viewpoints because I think one of the biggest problems in this country is excessive consumption and lack of wealth management — that goes for all classes but especially the middle class. . Although if businesses don’t pay taxes on the goods they buy to create things thats complete BS. A consumption tax only works if all entities are taxed when consuming. Just because they are going to turn the steel into something/use pencils for “creating wealth” doesn’t mean that they aren’t consuming resources. Not taxing it gets rid of any incentive to be efficient. The same goes for buying a company, that needs to be taxed too.

    As long as those that don’t make much (I think $25k is a bit too low, I would prefer $30k or so…and it has to be indexed to real [not CPI bullshit] inflation — does the FairTax have this?) don’t pay any more, I say tax those that make more and spend more a bit higher.

    Even though technically the tax is regressive, wealthy people pay jack now. Warren Buffet says he pays about 18% income which is the lowest in his whole office and has offered to donate a million dollars for each CEO that can find anyone in their organization that gets taxed less than they do.

    But really the point that most people seem to miss on this board so far is that they are focused on what people will pay if they maintain the same behaviors, but economists like flat taxes because they change behavior. It is (maybe) a lie that the tax will be revenue neutral, because it should encourage more savings which will decrease spending. I say maybe because I don’t know how the wealthy’s spending habits will change. I do think that it is a stealth way to reduce tax receipts and another way to “drown the federal government in a bathtub” though. I am very uncomfortable with Medicare/SS taxes being taken away unless there is an extreme overhaul in how those programs work.

    Yet ultimately it will enable the middle class to develop a lot more wealth (if the people stop spending as much and have good strategies for investing) and therefore more security and influence. Of course, in order to leverage the wealth some social institutions will have to be created. I think private non-profit groups could have a lot larger role in health care and reduce costs dramatically for instance.

    I definitely disagree that all these hidden taxes will magically go away and be reflected in the final price of the product. When have companies ever reduced prices when they don’t have to? If anything, corporate profits will soar unless people make them reduce the prices by lowering demand.

  30. 30
    Michael D. says:

    Warren Buffet says he pays about 18% income which is the lowest in his whole office and has offered to donate a million dollars for each CEO that can find anyone in their organization that gets taxed less than they do.

    Warren Buffet is comparing apples to oranges. His employees are paying income tax. He is paying Capital Gains.

  31. 31
    ThymeZone says:

    But it is worthy of discussion

    Agreed.

  32. 32
    Mornington Crescent says:

    I won’t be affected by this tax change.

    If my taxes are reduced, I’ll pass the savings along to my employer in the form of reduced wages, because that’s a cost I “add to my price”. On the other hand, if I do have to pay more in tax, then I’ll simply get a raise in wages that my employer will willingly pay once I explain that I’m simply adding that extra cost to my price.

  33. 33
    Ted says:

    Warren Buffet is comparing apples to oranges. His employees are paying income tax. He is paying Capital Gains.

    Ah yes, and this somehow makes sense. Since the man hasn’t earned nearly any “income” in quite a while, it’s right he gets taxed at a much lower rate. Jesus, even HE doesn’t agree with this.

    Here’s one: Johnny Depp lives in France. Presumably, Depp goes to LA to earn a few million every now and then, and does the bulk of his spending back home in France or elsewhere. He says he loves your plan! Also, Nicole Kidman called, she thinks it’s awesome as well. In fact, I think you’ve got on board everyone who earns a lot of money on this country, and goes back home to their own to spend it.

  34. 34
    demimondian says:

    Oh, and Michael? I assume you know this, but just so that everyone understands the sleight-of-hand that goes into the revenue projections which supporters use to justify the “Fair” Tax, let me explain something about the wealthy.

    The savings they spend from? They don’t spend the principal. They hold the savings, and the power which accrues to those savings, and live off the interest. There are no sales to tax.

    For instance, I could retire today. I would take the various assets I’ve accumulated over the years, and take out a loan against them. Assuming that the assets would appreciate over time — which is true with a reasonable basket — I would plan on refinancing each year to cover the interest payments. The result? No asset transfers at any time — but effective income to me, or, better, to a shell corporation which pays me a salary.

    All legal, and, in the current environment, all taxed.

    In “Fair Tax” libertopia, though? Not so much. The payments I make to the broker? Not taxed, as there’s neither a purchase nor a professional service provided. (Well, you can make loan payments taxable — except that would be a tax, falling most heavily on those who have, say, mortgages for assets of significant value relative to their net worth. You know, the cars, houses, etc. owned by the little people.) The sales taxes on my car, and the like? Um, no — they’re business expenses, since I need to be able to travel to see the financial types for my shell company. Um, yeah, and the expenses of those financial types? Yeah, those are corporate expenses, too.

    But, but, but, you say, they’ll have to spend that money, and it will still be taxed!

    You’re right — so I get to transfer my tax burden to those who live on salaries and income from work, rather than from interest. There’s a word for taxation schemes like that; they’re called “unfair”.

  35. 35
    Mikkel says:

    Michael that was my indirect point (that I thought about saying explicitly). A lot of rich people have almost all their income in capital gains and dividends, so they pay less than the FairTax already. Arguing that the plan will tax them less is not necessarily true. Although I have to be honest, I do have a real problem with people building up millions and millions, and a gigantic problem with passing on those estates. I would definitely not be opposed to an “wealth” tax of 15% or so on anything over $10 million, and want a larger estate tax for huge estates.

  36. 36
    Johnny Pez says:

    Michael, you might convince more people if you put this idea to music. You could call it “My Fair Tax”.

  37. 37
    RSA says:

    I despise current tax policy, and this seems much better to me.

    I think “seems” is a relevant issue here. I’m not an economist, and the rosy predictions of the Fair Tax proponents sound good to me too, if they’re accurate. But in scanning through the 84 citations in the Wikipedia article, I find not a single peer-reviewed article. Is this something that’s not done? I appreciate Michael D.’s efforts to answer questions. I have a few more (I think I’ve mentioned them already):

    How well can we expect experience with partial adoption of Fair Tax ideas in some places, like Texas, to generalize to the entire U.S.?

    If you were going to revamp a tax system from the ground up, do you think it would be a good idea to try it out for the first time on the largest economy in the world?

    Is there a way to partially implement Fair Tax ideas, to see if they work well in practice, or is it all or nothing?

  38. 38
    Ted says:

    and a gigantic problem with passing on those estates.

    This is why you don’t even need to get into intricate details when arguing against this stupid plan. The holes in it are big enough already. It does nothing about massive, multi-generational buildup of unspent and never-taxed wealth, and it does nothing about the many, many people who come to this country to earn lots of money, and go back home to spend it in their own country or elsewhere. Where, presumably, they have saner policies involving income taxes and very low sales taxes (if any) to fund their governments. Earn here tax free, go home and spend with little or no sales taxes.

  39. 39
    scarshapedstar says:

    Sorry, I am not letting the current crop of Congressional halfwits rewrite the entire tax code. Not while one fucking lobbyist is still employed. Maybe after we have publicly funded elections for a good 20 years, I’ll have faith that it will be anything but another smash-and-grab by the top .000000001%.

    Call it “poison pill fatigue”.

  40. 40
    ThymeZone says:

    Call it “poison pill fatigue”.

    Good post!

  41. 41
    grumpy realist says:

    Michael, your answers above sound suspiciously like the standard canard of “elect me and we’ll get rid of fraud and waste in the system!” without ever defining exactly HOW it will be done. I’m not going to believe economists who just wave their hands and say “oh, the prices will work out the same way, just trust us.” SHOW US!

    The fact is, you have confused above the effects of payroll and sales taxes on prices with the effects of corporate federal income tax. Um, these are totally different things (as any small business owner would tell you with much profanity.) This doesn’t make me very happy with the rest of your arguments. If you can confuse these two basic issues, what else have you gotten wrong?

    From reading your arguments above, it sounds like the major reason you want the Fair Tax to come into play is because gay couples are treated “much more equally” under it. Rather than working towards a Fair Tax, why don’t you work towards SSM rights? You’re much more likely to get them, you have a much better set of arguments, and you’re not going to be working towards a tax overhaul that won’t take place.

    Aside from everything else, how in the heck are you going to figure out who is eligible for prebates, how are you going to have them prove this, and how are you going to calculate them? The advantages of a progressive income tax is that you can a) tailor the number of tranches as you wish, b) make it as progressive as you wish. The complexity of the present federal income tax comes in with a) exemptions and how they are calculated, and b) definitions as to what is what.

    Now, Michael: tattoo this on your eyeballs: SALES TAXES ARE REGRESSIVE. They hit lower income people harder than higher income people. They’re even WORSE than a flat income tax, because the poor flunky who makes $15K/year pays a much higher percentage out than someone making $150K/year purchasing the same things.

    So what you are saying we should do is move from a system which is inherently progressive to one that is inherently regressive, with some crude rebates to make it not quite so obvious.

    This is a HELL of a way to run a system. It’s inherently unfair. (You can call it “the Fair Tax” as much as you want–saying so does not automatically make it so.) To make it anything along the lines the average American would call “fair”, you are going to have to have so much monitoring, so much reporting, and so much rebating that–well, let’s say businesses caught up in this are going to look longingly back on the says when they only had to worry about income taxes. And who is going to PAY for all of this? Why, this will get back into the prices and increase them even more.

    I also predict many many lawsuits over exactly at what point the Fair Tax should be imposed. I also predict a huge number of business boondoggles.
    And a lot of employment for tax lawyers. Michael–thank you. You’ve just provided me with business for the next 20 years.

  42. 42
    cleek says:

    gotta say, the personal attacks against Michael D are pretty tiresome. just skip his posts, if you don’t like it. i think ‘HatingOnMichaelD.com’ is available, too.

    anyway, on topic…

    yes, the first thing that would happen in a Fair Tax scheme (or any new tax scheme) is that the huge corporations and industry groups would write themselves an encyclopedia of loopholes and exemptions; and these exemptions would accrue, year after year, till the only people paying the “Fair Tax” tax are ordinary working people with no organized political power.

  43. 43
    Davis X. Machina says:

    SALES TAXES ARE REGRESSIVE. They hit lower income people harder than higher income people

    File under ‘it’s a feature, not a bug.

  44. 44
    Ted says:

    gotta say, the personal attacks against Michael D are pretty tiresome.

    Where do you see all these personal attacks?? I haven’t seen anyone attacking anything other than the bad idea…

  45. 45
    Tim F. says:

    The politically charged name still irritates me. More than that, I see no reason why the nation as a whole would benefit from moving from a mildly progressive system to a viciously regressive one that shifts the burden to people who spend the majority of their income on consumption, which is to say the lowest income brackets. Claiming that gay people (VERY indirectly) benefit from this idea seems like an especially egregious case of letting parochial interests obscure the whole.

  46. 46

    Sorry, I am not letting the current crop of Congressional halfwits rewrite the entire tax code. Not while one fucking lobbyist is still employed. Maybe after we have publicly funded elections for a good 20 years, I’ll have faith that it will be anything but another smash-and-grab by the top .000000001%.

    Call it “poison pill fatigue”.

    Agreed. Brilliant point.

  47. 47
    FDRLincoln says:

    Michael, I think you’re trying to be honest here and I respect that, but please, tell me. What makes you think that businesses would pass ANY of the “price reductions from fewer built-in taxes” to the customers? Most businesses would just keep prices the same now and pocket the money as more profit. It’s human nature. That, to me, is the thing that kills any Fair Tax proposal in my mind.

  48. 48
    Kirk Spencer says:

    Michael D. I’ve spent a lot of time and electronic ink on the other side of FairTax in a lot of places. I’m not (dear god no) going to dump it all here. Instead, let me pick on some high points.

    1) A consistent major reason given by the FairTax organization is the elimination of the IRS. This is at best a shell game. Quite simply, some organization must determine whether the US government is receiving the amount it should be receiving and, if necessary, enforce those receipts. In supplement, please note that according to the FairTax principles, if you trade in your car (as but one example), you owe taxes on the value of the car you traded in, while the business that sold you your new car (and took part of the deal in goods – the trade-in) owes taxes for the full value of the vehicle. The point being individuals will not be exempt, but will have to pay taxes.

    Except they need to be monthly instead of annually. Bets, if this were applied, on how long it would be till we could pay an estimated monthly amount to be balanced on an annual basis?

    This, of course, ignores the need to task an agency (or create a new one) with the mandate to locate and mail to every household their monthly stipend – ensuring they get only what they’re supposed to get based on residents that may change due to marriage, divorce, birth, death…

    2) The cost of goods would not decline NEAR as much as you might think. In fact, the heavier the employee base of a company, the less it will be able to reduce the cost of its goods. The money going to the payroll taxes STILL GETS PAID. Additionally, all long-term debts are paid at the same rates.

    3) I alluded to this in the first point, but I’ll reiterate it bluntly. It will not be simpler despite the claim of the FairTax proponents. Let me give a few examples – far from comprehensive – which will quite possibly explain. Are gifts taxable – if not, how do we stop ‘cheating’ through this avenue? What about investments – stocks and bonds, and what about investments in comic books? What about loans — If I loan to X, do either of us pay taxes? What if I am charging interest on the loan? What if I buy goods from overseas?

    And on the other side of the same line, that monthly stipend – is a legal immigrant eligible? What about those foreigners who reside and work in the US under a temporary employment visa? And if they’re not eligible to receive, are they required to pay? (Fair?)

    NOTE: I am not saying these are irresolvable, I’m saying the solutions to these and many more issues make the idea the FairTax would be simpler is false on its face.

    4) The claim is that FairTax would close “all the loopholes”. I point again at item 3 of my list. Complexity begets exception and limit in the interest of “fair”. Exception and limit are, by definition, loopholes.

    5) My penultimate for this passage is a gutcheck. According to the FairTax site and book, FairTax will be revenue neutral. According to the same sources, the poor will pay fewer taxes. Mathematically, even if the extremely wealthy spent 100% of their income instead of saving it, they would pay a lower tax burden than they do at present. (Yes, even with income tax loopholes.) So if all the above are true, then the middle class is going to have to pay MORE federal taxes. Yes, I know the FT people claim that what will pick up the slack are the gains from the ‘underground economy’. Unfortunately for them I’m anal enough to follow their links and read the sources. Which means I know they cherrypick from the articles stated, AND it’s pretty apparent the FT proposal won’t catch most (if any) of the problem. For this, I need to give an example.

    According to the current US Income Tax system, if I mow my neighbor’s lawn, my neighbor has received income. And when that neighbor watches my kids and brings me some baked pies in exchange or just because, I have received income. (Basically, it costs $X, and if w didn’t receive money then the amount needed to balance the books is ‘income’ to the recipient). This income goes into the pile to be taxed. Under FT, if I mow the neighbor’s lawn the neighbor no longer owes income tax. I, however, owe sales taxes based on the value of the service provided. The reverse is true, of course, on my neighbor’s acts.

    A HUGE amount of the underground economy (according to the sources FT itself cites) is this sort of thing – barter and neighborly services.

    6) My final reason for resisting the FairTax is implied in several places above. Cherry-picked supporting data. Misrepresentation, bad numbers, false (or ‘if you ignore this reality it’s true’) claims… A changeover of this sort would cause massive disruption for at least two and as many as ten years. I’m willing to pay the disruption price if the results are worth it. But when the salesman is obviously hiding KNOWN CURRENT data, why should I trust his predictions of the END RESULTS?

  49. 49
    demimondian says:

    What makes you think that businesses would pass ANY of the “price reductions from fewer built-in taxes” to the customers? Most businesses would just keep prices the same now and pocket the money as more profit. It’s human nature.

    Well, no. The argument behind that is that there is competition in the market, and consumers are price-sensitive. There might indeed be a period when business would be able to hold the line on those price increases, but, over time, they would work themselves out.

    Of course, it’s more likely that they would work themselves out through inflation of the currency that anything else…but they would work themselves out.

  50. 50
    Andrew says:

    From Wikipedia:

    In addition, Boortz and Linder have organized several FairTax rallies to publicize support for the plan. Other media personalities have also assisted in growing grassroots support including radio and former TV talk show host Larry Elder, radio host and former Senatorial candidate Herman Cain, Fox News and radio host Sean Hannity, and ABC News co-anchor John Stossel.

    LOL!

    Yeah, we should really take this idea seriously!

    Sorry, when an idea is supported by half-wits, insane ideologues, rich business interests, and gullible fools (it’s good for gays? LOL!), that really is a good reason to dismiss it immediately without any consideration of the technical details.

    Just as the opposition to the estate tax is almost entirely funded by a group of billionaire families, the wealthy interests who have driven the FairTax silliness are looking out for RICH PEOPLE, not America, not the middle class, not the poor. The question is not why they do so; it’s entirely logical for them. The question is why non-rich folks like Michael buy into their B.S.

  51. 51
    demimondian says:

    Just to make something clear: like grumpy realist…I would do better (in my case, far, far better) under the fair tax system.

    You see, my employer doesn’t produce anything for sale. We charge a transaction fee for acting as an intermediary between a willing buyer and seller; we’re a market maker. Our net value lies only in the fact that we can create that market very efficiently. What you’re proposing is a huge boon for companies like mine, since it would make us effectively tax free. W00t!

    And more than that, a large chunk of my net worth is held in financial instruments in that company. Guess what? You just made it that much easier and cheaper for me to pay the fees charged me by an equivalent of g.r. To that, I say, in my best Mr. Burns voice, “Ex-cellent!”

    Money for nothing, and my kicks for free!

  52. 52
    Robert Johnston says:

    The fairtax is just plain silly, and no one proposing it actually both understands it and believes it to be a good idea.

    If you actually believed in and understood the Fairtax, there’s something else you’d also believe in that’s uniformly superior: eliminate all taxes and just have the government print money. The Fairtax devalues the purchasing power of the dollar by adding a flat percentage tax to transactions involving cash assets. Printing money similarly gives the government purchasing power by uniformly devaluing cash assets. The end effects are one and the same–uniform diminishment of the purchase power of cash assets across all classes of people. The difference lies in enforcement; the cost of enforcing the Fairtax is vastly higher than the cost of printing money.

    Of course, if you called for a policy of ending all taxes and inflating our way to government solvency through cranking the printing press you’d be justly laughed at. All the Fairtax is is an effort to take a simple and laughable idea and turn it into an idea complex enough that people don’t know to laugh at it.

  53. 53
    John Cole says:

    Why are we even talking about tax cuts (which is what I figure this will amount to if it is not simply shifting tax burden) right now? Don;t we have a lot of debt and a lot of things to pay for?

    Talking about tax cuts right now is like me talking about what I am going to do after I win the Boston Marathon and Mr. Olympia.

  54. 54
    Andrew says:

    RJ: Isn’t a VAT closer to seigniorage than the retail tax in that it’s devaluing all transactions, rather than just endpoint sales?

    (
    Here’s the most complete explanation of replacing all taxes with seigniorage that I’ve seen.
    )

  55. 55
    Andrew says:

    Why are we even talking about tax cuts right now?

    Because Republicans are morally corrupt?

  56. 56
    grumpy realist says:

    Could someone who thinks this is a good idea please go look at the economies of countries that charge very high sales taxes. Look at what percentage of the economy is estimated to be “off-the-records”.

    (BTW, how is this expected to segue together with present-day sales taxes, which are much more local?)

    So lessee….any B-to-C transaction will require a)the collection of a local sales tax, b) the collection of the Fair Tax, and c) reporting of all the data? This of course will be paid for by the local B-to-C provider, who will do this out of the pure joy of his own heart and he would never, ever increase the prices of what he’s selling in order to cover his effort and paperwork costs, right?

    And as pointed out, we’re STILL going to have to go through all the tracking of income to figure out whether people are eligible for rebates or not.

    So you’ve just added an extra amount of complexity, as far as I can tell.

    Anyone who thinks that this will get rid of the IRS is nuts. Either that, or he doesn’t realize the US has something called “international trade.”

    Sheesh, if you guys want to encourage further investment, why don’t you just slap a mandated high rate on savings bank accounts? You’ll get the same effect and you won’t trash the economy as nearly as much.

  57. 57
    demimondian says:

    Um, g.r.? The people promoting this don’t want to encourage “more investment”. They want to make more business for people like you from people like me. That means we should *both* support it, so that you can pay more of my tax burden!

  58. 58

    First of all: Fucking Great post! Bravo! I am very glad you are here. Just think of how much fun we are going to have when the Democrats start fucking up. And after reading about the destroyed CIA tapes–with Jay Rockefeller and Jane Harman sitting on their hands when they knew all about it–the fun will soon begin! Weeeeeee! But, I digress. Back to the Taxing issue before us… lame. What’s wrong with me?

    OK. I fixed it with my Sunday morning margaritas. Bring it on!

    Nothing. I don’t trust them either. I would like to see the 16th amendment repealed.

    The real issue is total spending by government, not tax reform. (Jesus! Am I turning into a Paulette?)

    The Fair Tax, or as I prefer to call it the consumption tax, can only be regarded as a payment for permission-to-live. It implies that you will not be allowed to advance or even sustain your own life, unless you pay, off the top, a fee to the State for permission to do so. The consumption tax does not strike me, in its philosophical implications, as one whit more noble, or less presumptuous, than the income tax.

  59. 59
    empty says:

    Talking about tax cuts right now is like me talking about what I am going to do after I win the Boston Marathon and Mr. Olympia.

    So, next year then.

  60. 60
    ThymeZone says:

    there’s something else you’d also believe in that’s uniformly superior: eliminate all taxes on my rich group and just have the government print money and fuck over the middle class.

    With a slight fix, it’s the Republican scheme, isn’t it?

  61. 61
    KCinDC says:

    the top .000000001%

    The revision would benefit the top 0.003 Americans? What is this — a bill to benefit Bill Gates’s scalp?

  62. 62
    numbskull says:

    Well this is a bummer. I’ve known many of the arguments against “Fair” Tax for some time. I was assuming that Michael D. had some insight to counter these arguments.

  63. 63
    grumpy realist says:

    Oh, and by the way, you’re also going to have to redo quite a horde of double-taxation treaties.

    One thing the Fair Tax could do, as far as I could tell, is attract a lot of money in investment into the US from abroad. Reason why: foreigner invests in the US, buys stock, whatever. Stock purchases not taxed, gains from stock not taxed, neither are dividends. So as long as the investors immediately take their gains out abroad and never purchase anything in the US that is considered a “consumable”, they’re home scott free.

    Reason for this is because unlike the US, most other countries in the world have drifted a source tax system for its citizens. Which means that you are taxed on money you make inside the country you live in, but not abroad, because they assume that the other countries are taxing you on stuff you make inside their countries and it all sort of washes out (all done via some international taxation treaty.) Otherwise, yes, you CAN get clobbered having to pay taxes three times on the same amount: a) where the money is earned b) where the person lives, and c) where the person is a citizen of.

    So….you’re going to probably end up forcing changes in other countries’ tax systems. Either that, or they leave it alone and you increase the demand for US securities/investment opportunities while allowing all the money generated from such demand to flow back out of the country without any taxation done by the US.

    Yeah, THAT’s really going to sell well to Congress. Especially since the increased demand will price securities higher and make them harder for Americans to purchase.

    So you will end up turning the US business sector into a cash cow for foreigners who will be able to take advantage of all the benefits of the US system (securities regulation, legal system, patent system, etc. etc. and so forth) while not paying a penny for any of it. (Note that even if the other countries decide to start taxing gains from the US, this still doesn’t add a penny to US tax coffers.)

    (And how the Fair Tax idea fits in together with taxation of corporations is totally beyond me. How in the heck do you decide what a taxable event is?)

    Michael, you don’t know much about how international taxation works, do you?

  64. 64
    Kynn says:

    And thank you for responding to it without telling me to fuck off or bringing up the fact that I am a gay republican…

    Didn’t have to do the latter, you mentioned it in your post here as the main reason you support the FAIR TAX.

  65. 65
    KCinDC says:

    If the tax applies only to business-to-consumer sales and not to business-to-business sales, then won’t we just have even more of the bogus conversion of various lavish living expenses of corporate executives into business expenses? There’s no tax on the CEO’s caviar because that’s part of his employee food plan. The bologna sandwich in the line worker’s lunchbox? That’s a different story.

  66. 66
    grumpy realist says:

    Oh, and by the way–every other sufficiently large technologically advanced country in the world has something like the income tax. (Some, like the EU, have VAT on top of it, but they definitely have income taxes.) Places that don’t have income tax are extremely small places who advertise themselves as tax havens and raise the necessary money by charging for financial transactions.

    Just something to keep in mind….

  67. 67
    Ted says:

    If the tax applies only to business-to-consumer sales and not to business-to-business sales, then won’t we just have even more of the bogus conversion of various lavish living expenses of corporate executives into business expenses?

    That’s the funniest part about the ‘Fair Tax’. Its supporters think it would dramatically simplify the tax code. I agree that the current tax code has way too many exemptions, loopholes, and is generally a nightmare. But in order to truly make the ‘Fair Tax’ actually fair, it would make the current system look like a simple flow chart.

  68. 68
    chopper says:

    well i’m amenable to the idea on paper of wholesale changing the tax system in this country, but i doubt the veracity of any system supported mostly by the Right.

    don’t trust it right outta the gate.

  69. 69
    Punchy says:

    I’m guessing a lot of you would have voted for it because if Boortz was against it, it must be worth supporting.

    I’m guessing that’s an ad hominem attack on the intelligence and reasoning ability of most of the commenters here. Which makes me surmise you’re a jackass and a…well, let’s be nice and stick with jackass.

  70. 70
    jcricket says:

    More than that, I see no reason why the nation as a whole would benefit from moving from a mildly progressive system to a viciously regressive one that shifts the burden to people who spend the majority of their income on consumption, which is to say the lowest income brackets.

    And, as many people have pointed out and the current tax code proves, it’s quite easy for the rich and powerful to shift the tax burden onto the poor and middle class through effective lobbying. Corporations and rich people pay a lower share now of the tax burden than they ever have. I believe corporations used to pay in around 40-50% of the tax revenue, now it’s like 17%. And the rich pay ever decreasing amounts (and percentages) of the taxes despite having an ever increasing share of the wealth.

    Unless you cut services, you need tax revenue, and because of inflation (and other factors, like aging infrastructure, wars, debt payments) we need more of tax revenue. Pretending otherwise (revenue neutral isn’t really good enough) is being blind to the reality of the needs of this country – the “Laffer curve to infinity” is not sound tax policy.

    The flat sales tax (let’s call it what it is, “fair” is like “clear skies”) would just codify the tax revenue share disparity and make it permanent. And, owing to the flattening of their incomes, the poor and middle class get hit harder (as many point out) whenever their taxes are raised (whether sales or income tax).

    If you think taxation is unfair to gay people because they can’t get married, lobby for gay marriage; or to childless people, lobby to eliminate the dependent deductions; or to married people (in some states), eliminate the “marriage penalty” and so on.

    If you think deductions, exemptions, loopholes and other breaks distort behavior, ask to have them eliminated, but this also doesn’t require a flat tax.

    If you are complaining the tax code is too complex, don’t just throw up your hands and say “a flat sales tax is the only solution”, because it’s not. With as much political will as it would take to pass a flat sales tax (which is to say a lot), you could eliminate a hole host of deductions and loopholes, and also raise the progressivism of the current tax system.

    My recipe: Eliminate AMT; eliminate most deductions/loopholes in the current tax system (especially for corporations), lower the tax rates on everyone who makes less than $250k/year (index this to inflation), raise the tax rates 5-10% on everyone who makes more (that would be 35-40%, a far cry from the 90% of 30 years ago).

    Tax revenue goes up, those that can afford it pay more, those that can’t pay less. No regressivism introduced. Sure, this would be really hard to do, because it requires an honest conversation about what services cost, the political strength to admit that there’s no such thing as a free lunch (and sell that to your constituents), and acknowledging the
    idea that income inequality is real, and while turning to communistic redistribution isn’t the right answer, neither is pretending everyone should pay the same rate on taxes.

  71. 71
    grumpy realist says:

    It’s also going to get hysterical because we’re either going to have to have every store be monitoring whether a purchase is a B-to-C event (taxable) or a B-to-B event (non-taxable), or start limiting the types of purchases made in any one store. A nail can either be used by a construction firm in order to make a house, or by a do-it-yourselfer. Why one of these is considered “consumption” but the other is not makes absolutely no sense to me.

    I’m sure that stores will be delighted to take on the extra policing responsibility.

  72. 72
    skyler says:

    The FairTax will both decrease everyone’s tax burde, raise more money, and be more progressive.

    Can it kill all the terrorists and send the Mexicans home too?

  73. 73
    Krista says:

    SALES TAXES ARE REGRESSIVE. They hit lower income people harder than higher income people

    My beef with sales taxes (and Michael, you would remember this from ’91 when the GST was implemented) is that as many other people have said here, poor people spend a larger percentage of their income. Not only that, but they spend it on necessities. I know food isn’t taxed under the GST, but things like home heating oil, non-prescription meds, and clothing are. Rich people spend a lower percentage of their income, and more of it tends to be on luxury items — items that they can wait to buy until there’s a sale, or that they can even buy in another country, if they so choose. Rich people have the luxury of time and mobility to be able to pay as little sales tax as they can. Poor people don’t have that option.

    And no, I also don’t trust businesses to pass on any savings to the consumers. It’s like when Darrell used to argue with me about our medical system, and he was firmly convinced that the Glorious Free Market(tm) would sort everything out, due to competition, conveniently ignoring the fact that people are going bankrupt due to their medical bills.

  74. 74
    ThymeZone says:

    It’s my opinion, and I am not being facetious, that the main driver for support of FairTax is that it pretends to eliminate the income tax and the IRS, and gives the CATO types the chance to say, see, we TOLD you that the income tax wouldn’t work!

    Whether the new scheme works or not, or whether the country goes in the toilet or not, not their concern.

    Observe the right, and tell me if you don’t think they’d gladly sink the nation to win their points and get their way, as long as they can crow? Truly, do you think the right proceeds in the interests of this country, that that is their motive? If it is, then why has the history of the last 100 years in this country been the history of progressive policy?

    Look at your standard of living, and look at the rest of the world, and tell me that progressive policy is not a common descriptor, a marker of nations and societies that are going forward, taking care of their citizens, and prospering, as compared to …. the others?

    Do you think the modern middle class fell from the ideas of the right? If so, explain, please. I don’t see it.

  75. 75
    Doug H. says:

    Since I get mentioned by name, might as well respond:

    However, as the costs of compliance shrink and the perceived fairness of the tax system increases, some of the hostility to the tax system will decline. People who are in non-compliance because they perceive the present system as unfair or illegitimate may choose to comply with the FairTax. Most importantly, because of lower marginal tax rates, the benefit from lawful tax avoidance or illegal tax evasion will be much less at the margin relative to either the present system15 or competing alternative tax systems, such as the USA Tax or flat tax16, that have higher marginal tax rates, particularly on wages or self-employment income.

    In other words, “If they believe everything we tell them, they’ll comply.” Meanwhile, significantly high VATs have been such a success elsewhere that people are either fleeing the country (Denmark) or are getting their black market on (Brazil). Given how America reacted to alcohol ‘revenuers’ or how Gary has become the Cigarette Capital of Illinois, its not hard to imagine how we would react to a national 30% – or likely higher – VAT.

    Americans don’t like taxes. If you give them an easier way out of paying them, they will take it.

    Red herring. The original FairTax proposal was developed by Leo Linbeck and Bob McNair, who served on the Board of the Dallas Fed.

    I don’t think so, Tim.

    “As Starobin told the story, CATS wooed the Texas political elite, including Robert A. Mosbacher Jr., the son of George H.W. Bush’s secretary of Commerce. Mosbacher urged Hayes to reach out to Jack T. Trotter, an attorney close to Texas Representative Bill Archer, the ranking Republican on the tax-writing House Ways and Means Committee. Although Trotter and Hayes held several meetings, nothing came of it. According to Starobin, Trotter feared that the Scientology connection would turn off too many potential supporters. (Hayes, for his part, has always denied that the church played any role in his group after helping found it.) But Trotter was hooked by the sales tax idea and wanted it expanded to include the payroll tax as well. He formed Americans for Fair Taxation (AFT) in 1995 to promote the CATS proposal, but without the taint of Scientologist involvement. AFT promoted the FairTax for a decade, elevating the plan to its current popularity.”

  76. 76
    The Other Steve says:

    I know I didn’t answer all questions. There was one from TOS that I’ll have to get my head around before just popping off an answer.

    Yeah, the question about how right now some 30% of income goes to taxes, and somehow this is all going to be replaced with a 23% tax on purchases. The only way those two numbers are going to add up, is if I spen more money than I earn.

    Actually it’s worse than that, because even though I pay 30% in income tax… I also pay other taxes through purchases, the income taxes paid by corporations and such. In your dream world all of that is going to go away as well.

    And yet somehow this is going to be replaced by a 23% sales tax.

    Again, I really think you need to read Adam Smith. He was right in advocating for an income tax, because said tax had lless of an emotional effect on the person paying the tax, and as such had a reduced impact on their economic decisions.

    I’ve always found the notion that someone is going to turn down making more money because they have to pay tax juvenile and moronic, at best. Whether the marginal rate is 25 or 35%, you still end up with more money than you had before. Yet, it’s obvious to anybody about the 1st grade reading level, that purchases with a large tax associated with them are avoided.

    Furthermore, if I can go to Canada or Mexico and get something for 10% less, that is what I am going to do. If it’s 20% less, I’m definately going. I think the fact that the 23% numbers don’t add up, and this sales tax would need to be 40% or more makes this possibility all the more likely.

  77. 77
    grumpy realist says:

    Michael, you should also note that tax evasion is sparked by two discrepancies:

    1) when there is a large amount of money involved
    2) when the difference between the taxed and non-taxed amount gets to be sizeable.

    Talking about whether people would pay the same as now under the new Fair Tax system when purchasing, say, a loaf of bread, is addressing only one hurdle. What you also have to do is address the difference under the new system for a *business* purchasing a loaf of bread and an *individual* purchasing a loaf of bread.

    Right now, we already have problems with people trying to remake themselves over to LLCs/S-corps/whatever and trying to “expense” off personal stuff.

    This problem will not go away under the new system. If I can save 23% on any purchase by pretending to be a corporation and claiming somehow that the purchase will be incorporated into another product and sold further down the line, how long do you think it before everyone will be claiming to be making a B-to-B purchase? (5 nanoseconds, IMO.) OK, so we have to have each purchaser PROVE that it’s a B-to-B purchase. How are you going to do that? He’s a business? Not enough. It’s possible for a business to be purchasing stuff for itself (in which case it’s a consumer) or purchasing stuff for inclusion in a product (in which case it’s a B-to-B purchase.) So you have put the seller in the position of having to police, monitor, judge, and prove that what he thinks is the correct assessment.

    I bet a huge number of stores are simply going to start charging B-to-B prices on anything that might have dual use and not assessing the tax at all because they don’t want to get into arguments or lawsuits.

    (Put this together with global production systems, outsourcing, and the fact that all other countries have business income taxed, and this is going to get really hilarious.)

    This is why VAT is a seigneurage system: a little bite gets added at each step. It’s the only way to avoid a huge pickle of complexities.

  78. 78
    Dreggas says:

    It has been mentioned but cannot be repeated enough. No corporation is going to reduce the price to pass their savings on to a consumer. Also watch as corporations tell their employee’s “well you’ve lived on your net earnings so that must be good enough, we’ll just keep the rest and your wage/salary is now X”. Don’t think it will happen? Watch.

    This also falls into the same problems the tax cigarettes to fund healthcare crowd falls into in their arguments. You start raising the price of something with taxes and people start to abstain from buying it. The end result is a loss in tax revenue and stupid laws and measures brought up for a vote to raise the tax again to make up for the shortfall from the last time the tax was raised and people stopped consuming product X. Revenue, which will now be directly tied to consumption, will drop a lot because people will start saving.

    This will also hurt companies and workers because, if the companies do end up having to reduce prices to adjust to a new tax will end up unable to keep employees or will have to cut employees salaries leaving employees less likely to buy anyway. As this happens the government is losing money and unable to continue meeting it’s own bills while people will still be demanding the same services. Thus the government will drown in red ink in grover’s bathtub and the country will more than likely go with it.

  79. 79
    Zifnab says:

    I still don’t see the FairTax getting by the wealth accumulation dilemma. If I make $50k and you make $100k, we both set aside 10% of our money in savings (money that will never be taxed) and spend the rest, at the end of the day you will have more money socked away than me. That money will accrue interest. And the end result will be that you will accrue untaxed dollars faster than I ever can.

    Now, I could see a version of the FairTax system in which we put a “capital gains” sales tax on investment. However, we would have to declare every investment a commodity and tax it appropriately. Gods only know what that would do to Wall Street, when every (IPO?) stock transaction has 30% tax overhead on it and every Bank Bond or Treasury Note has a 30% fee attached.

    Just out of curiosity, Mike, how would you take that? A 30% tax on purchasing investments, that is?

  80. 80
    The Other Steve says:

    Just out of curiosity, Mike, how would you take that? A 30% tax on purchasing investments, that is?

    Does this FairTax apply to services?

    If I bill you $250,000 to write a piece of custom software, must I also charge you 23% in taxes?

    If so, I really do not see the difference with a stock broker. They’re providing a service as well.

  81. 81
    dcgaffer says:

    Michael, I won’t the repeat the wholly correct arguments that the “Fair ax” is a massively regressive Trojan Horse.

    I will reemphasize that f you don’t take into account the interconnected worldwide financial system, any tax reform is destined to fail.

    Moving along let me comment on capital gains. When I was 20 years old, I like many thought capital gains should be taxed at a lower rate (at least indexed for inflation). Today, after 25 years in corporate finance, mergers & acquisition and appraisal, I learned all too well that this is crap.

    The simple fact that is that in ANY capital investment scenario, taxes on profit at the end of the forecast term are taken into account by the prospective buyer. Those taxes, whatever their level, impact what the buyer or builder is willing to pay based upon their risk profile.

    When you change the cap gains tax – up all down – you have a ONE TIME windfall to those people who are buying or selling existing assets. (Sellers get the windfall in terms of a higher price for their assets; buyers cannot pass along any of the savings because if they did they wouldn’t earn their required rate of return.) For new capital projects, yes the rate does affect the Internal Rate of Return but only to a modest degree – at low risk roughly equal to the rate differential (say the difference between 13% or 11% IRR or a 20% change between say 15% and 35% tax rate), at higher risk less so (28% to 24% or a 16% change from a 15-35% cap gains rate). However, regardless of the capital gains rate, if one taxes the profits at regular income rate then you are “double dipping” – which is all over our tax code.

    Finally you have to deal with where the profits go – and whether those profits are being reinvested at home, reinvested abroad, or parked. Trust me, billions are spent by business to game the code – heck it is one’s fiduciary duty to do so – but what is good and right for a business is not necessarily GOOD PUBLIC POLICY.

    Fundamentally, and this should be a powerful argument for a a libertarian or a conservative – having differing tax rates for Capital Gains versus regular income DISTORTS the free market operation of financial decisions – if you tax income at all. Here’s a good Marxist phrase for you: it favors capital to the detriment of labor. (and I’m a capitalist).

    Cash is cash and income and income, and when you have differing rates for the source of the cash, you are picking winners and losers and favoring one citizen over another.

  82. 82
    jrg says:

    As someone who does fundraising for non profits on occasion, the “Fair Tax” sounds detrimental to me. Removing write-offs for charitable giving would cripple a lot of community and civic organizations.

    I know the talking point is “you would not be taxed on gifts to charities, because you would not be buying anything with that money”, but that creates no incentive over just squirreling the money away in a bank account.

    Our existing tax system is Byzantine, but at least it encourages good civic behavior.

  83. 83
    DR says:

    Correction here:

    Boortz doesn’t “support” the FairTax: he LITERALLY wrote the book on it… It’s HIS baby… get used to it. It’s also, independent from the fact that Boortz is the primary pusher for it, batshit crazy in every possible way…

    BTW, bravo to dcgaffer for making a point so-called Capitalists often forget: the biggest crime in a free-market economy is gaming the markets, creating an unfair advantage through social or economic policy. A Chamber of Commerce is just as much a crime against the markets as a Union is. Which just goes to show that there is simply no one who truly believes in the free market, and that everyone is out to game the system in his or her favour.

  84. 84
    little bird says:

    Furthermore, if I can go to Canada or Mexico and get something for 10% less, that is what I am going to do. If it’s 20% less, I’m definately going. I think the fact that the 23% numbers don’t add up, and this sales tax would need to be 40% or more makes this possibility all the more likely.

    The Other Steve makes a very good point. Moreover, it’s not a hypothetical, it’s already happening. There is the very good example of Canadian pharmaceuticals. And to flip that around, much of the economy of border towns in the Northeastern US is built around Canadians heading south to shop. Sales tax in Montreal was up around 15% last time I checked, and droves of shoppers head south to New York to clean out the malls, destroy the receipts and sneak the stuff back over the border. Hell, back in ’95 they’d come in RVs and literally camp in the mall parking lot. So not only would the Fair Tax reverse that trend, it would rip the economic rug out from under a bunch of economically disadvantaged border towns.

    I guess they always have drug smuggling to fall back on.

  85. 85
    Emma Anne says:

    I have a area of confusion of points I haven’t seen addressed yet:

    I am not seeing these “hidden taxes” you brought up several times. I have to assume that you were in error when you implied that payroll taxes would no longer exist. You aren’t really proposing doing away with the income stream for Social Security and Medicare are you?

    So what are those hidden taxes? I run a business. I write off stuff I buy for the business. I am just not seeing these hidden taxes in my product. In fact, I presume that under FT, I would not be able to write off expenses, but would have to pay the 23/30% FT, correct? That would *raise* my prices. If I would *not* have to pay the FT on my expenses, we’ll definitely still need the IRS to decide what is a business expense, and I see a huge area of tax evasion. *Everyone* will have a personal business that buys all *sorts* of stuff.

    Please provide an example of how this hidden tax thing works, because I am just not seeing it.

  86. 86
    Splitting Image says:

    Criticisms of the “Fair Tax”

    1. You can’t call payroll taxes and the like “hidden taxes” that affect the sticker price of a given item without doing the same for the tax you are proposing.

    If I’m doing some contracting work for a company, my bill will factor in the cost of the materials I use, including the sales taxes on the printer paper I buy. That will still be true if the “Fair Tax” is implemented. It will also factor into the cost of whatever the company is producing, because of the sales taxes they have to pay on the materials they use. All of those taxes will be reflected in the final cost of the product. Therefore, the “hidden taxes” you’ve spoken of will still be there.

    2. The biggest problem I have with sales taxes in Canada is that they forced the entire commercial industry to be tax collectors for the government. This was especially true of the GST. Ordinary people might like the idea of eliminating income taxes because it makes them one step removed from the taxman, but the reverse will be true for small retail stores and businesses. The IRS will change from being a bureaucracy that shakes down ordinary people to being a bureaucracy that shakes down businesses. That will not necessarily be a help to the economy.

    More to the point, with the GST at only 7%, many businesses did everything they could to avoid collecting the tax and turning it over to the government, doing business in cash so the money could not be traced. Or doing business by barter. Either of these would cause billions of dollars in lost revenue if the “Fair Tax” were implemented at 23% or higher. As others have said, people with means will avoid it completely by shopping outside the country.

    3. “The biggest mistake I have made while blogging is to tell you guys I am a Republican.”

    No, the biggest mistake you made here is admitting you came from New Brunswick, which implies that you know about the problems the federal government had implementing its sales tax, and more importantly, harmonizing it with the provincial version. Plus, coming from Canada, you ought to know the right way to deal with the gay marriage issue. I can understand threatening the Republicans with the “Fair Tax” system to force them to cave in on civil marriages, but I don’t understand how you can actually prefer the system Huckabee is proposing to fixing the obvious unfairnesses of the current system.

  87. 87
    grumpy realist says:

    Michael, rather than listening to economists with axes to grind associated with fairtax.org, you’d do better talking to some tax professors and accountants.

    What we usually TRY to do with tax policy is to come up with something that is “tax-neutral”. In other words, the company/individual/whatever is indifferent as to the different ways of obtaining taxes and there’s no advantage to game to system.

    Yeah, I know we suck at doing that, but for the most part, people seem to feel the present tax system is pretty fair.

    One other problem with the “Fair Tax” is that it isn’t. A billion-dollar miser who makes millions of dollars a year in interest but who spends $10K to support himself is paying the exact same amount in taxes as the poor slob who only gets $10K a year in income. This is in spite of the fact that the miser is taking advantage of much more of the financial infrastructure…

    OK–I’ll go along with the Fair Tax on the following conditions:

    Every financial transaction (dealing with dividends, purchase of stock, whatever) ALSO has the same 23% tax. When dividends get paid out, 23%. Purchase of stock or bonds, 23% (either of face value or market value.) Money transfer between corporations: 23%.

  88. 88
    wasabi gasp says:

    I’m guessing the Fair Tax wouldn’t be so hot for homeless folks. Even, if they’re gay.

  89. 89
    RSA says:

    A billion-dollar miser who makes millions of dollars a year in interest but who spends $10K to support himself is paying the exact same amount in taxes as the poor slob who only gets $10K a year in income. This is in spite of the fact that the miser is taking advantage of much more of the financial infrastructure…

    I think that some Fair Tax proponents are making a moral argument, that such a miser shouldn’t pay more in taxes than the pauper, if they both have about the same living standard. (This ignores issues of accumulated wealth in the form of houses and so forth.) But maybe that’s what you mean by taking advantage of the infrastructure.

  90. 90
    wasabi gasp says:

    I favor the Air Tax. A tax based on the cubic space of air inside all your possessions that have accommodations for your ass.

  91. 91
    The Other Steve says:

    The Other Steve makes a very good point. Moreover, it’s not a hypothetical, it’s already happening. There is the very good example of Canadian pharmaceuticals. And to flip that around, much of the economy of border towns in the Northeastern US is built around Canadians heading south to shop. Sales tax in Montreal was up around 15% last time I checked, and droves of shoppers head south to New York to clean out the malls, destroy the receipts and sneak the stuff back over the border. Hell, back in ‘95 they’d come in RVs and literally camp in the mall parking lot. So not only would the Fair Tax reverse that trend, it would rip the economic rug out from under a bunch of economically disadvantaged border towns.

    It happens right here in America.

    Montana doesn’t charge sales tax on RV purchases. There are companies in Montana who will broker the purchase of an RV for you for a small fee. The RV is even licensed out of Montana, so your state never knows about it.

    For $1,000 they will help you to save 7-9% off the cost of a $300,000 RV. You do the math.

  92. 92
    grumpy realist says:

    Yeah, they’re making a moral argument which I’m shooting holes in. The ability to create such large amounts of money depended heavily on things like the US having having a damn good legal system, the SEC has regulations so that financial instruments ARE able to be used as collateral, the guy doesn’t have to pay bribes under the table to persons X, Y, and Z; if something goes wrong the FBI will be pulled in, etc. etc. and so forth.

    It would exactly the same as pouring your money into large builtings in a place that didn’t have any property tax. You’re claiming you’re getting the same use out of the fire department (who now have to protect more of your stuff) and the police (who have to worry about you being more of a target than the proverbial “unemployed black man in a string vest.”

    I guess you could get around it providing that you charged for every instance of use of the infrastructure, both financial and otherwise, said cost proportional to the amount of material under protection.

    Hmm…I think I’m reinventing a capital tax.

    Now THAT might work–a copital tax coupled with a sales tax. (Hmm, look at the numbers–gee, looks strikingly like an income tax, don’t it? Oops. )

    This is why I firmly believe that even if we were to move to a “Fair Tax”, after 5 years of tweaking and fixing and doing tax engineering as people discover the “unfair parts”, the problems, or someone wants to put some nice little encouragement into the tax code……we’d end up with a system which looks very much like the one we have now.

  93. 93
    jcricket says:

    But maybe that’s what you mean by taking advantage of the infrastructure.

    I think in infra. he’s including all the roads, police, firefighters, food safety standards, building codes, military, etc.

    It’s pretty simple, sales taxes are regressive. Always have been, always will be. Any argument otherwise is magical hand-waving. A large national sales tax designed to replace most or all other taxes, will therefore be, by nature, massively regressive. Doesn’t matter that everyone gets charged “the same percentage”. Based on real world spending patterns (what percent of people’s income it takes to buy stuff), the difference in tax treatment for income/cap. gains/inherited wealth, and wealthy people’s excellent ability to find any and all ways around paying taxes, the poor and middle class will easily pay an even large share of the tax pool even while they make ever less income.

    To me this poorly thought out but neat sounding idea is illustrivite of all libertarian policies in that it fails to account for human nature. And I quote:

    “The difference between theory and practice, is that in theory, there is no difference”.

  94. 94
    jcricket says:

    The ability to create such large amounts of money depended heavily on things like the US having having a damn good legal system, the SEC has regulations so that financial instruments ARE able to be used as collateral, the guy doesn’t have to pay bribes under the table to persons X, Y, and Z; if something goes wrong the FBI will be pulled in, etc. etc. and so forth.

    There’s actually a great example of this if you compare the NASDAQ or NYSE vs. AMEX (not the credit card people). The worse the regulations are, the less transparency there is, and it has resulted in far less money being made on the less regulated/controlled exchange.

    Sure, there are regulations that are too heavy handed, but libertarians never cite those. They want to say all regulations screw corporations and that everything will just “work out” in the free market. Trust us.

  95. 95
    The Other Steve says:

    This all being said, there is an argument to be made for encouraging more savings here in the US.

    The problem is, our entire economy is based upon the opposite principle.

    So whatever changes we do make, need to be such that they take place over time. Bush made a case back several years ago for Individual Savings Accounts. I totally supported that idea. I think interest on passbook savings accounts should be tax-free.

    But like any time Bush actually has a good idea, he kills it by wasting his time on a dumb idea.

  96. 96
    cpl says:

    Michael, I note that you didn’t respond to the point of the buying bread question which is this: Buying a corporation is tax free, buying bread is not.

    The net effect, I fear, would be to create a super-wealthy group of people who, like Buffett, own more corporations than loaves of bread (or homes, or planes, or whatever) and therefore put themselves in the tax-free position to determine what we know about the world. Imagine if Rupert Murdoch (a man who changed his national affiliation in order to own more corporations) owned 75% of all media in America…or if George Soros did.

    The goal of removing all tax on passive income, while retaining taxes on those who sweat to earn their bread, seems to have found an underhanded way to get itself sold…Fair Tax may be better than income tax, but so long as purchasing corporations is untaxed, its effect (intended or not) is likely pernicious.

  97. 97
    jcricket says:

    I favor the Air Tax. A tax based on the cubic space of air inside all your possessions that have accommodations for your ass.

    But the problem here is that a lot of rich people are also fat, very fat. So that reduces the tax. Or maybe people like Limbaugh would start buying smaller cars because of this?

  98. 98
    liberal says:

    Cindrella Ferret wrote,

    And after reading about the destroyed CIA tapes—with Jay Rockefeller and Jane Harman sitting on their hands when they knew all about it—the fun will soon begin!

    LOL!

    It’s widely known that Harman is a hawk.

    And as for Rockefeller, anyone who’s actually read about his performance as committee chair knows he’s a total pussy.

  99. 99
    wasabi gasp says:

    But the problem here is that a lot of rich people are also fat, very fat.

    The measurement isn’t taken with your ass in it, silly. That would be a fat ass loophole.

  100. 100
    Ted says:

    Thank you folks, thank you. Michael blew out of here many hours ago, and will not be answering any more of your questions. Feel free to fill out the survey card on your way out. Please make your way to the exits, be careful when getting out of the parking lot, and thank you for coming!

    Good night.

  101. 101
    smiley says:

    I really don’t understand why you all are expending so much energy on this. IT’S NOT GOING TO HAPPEN IN ANY OF OUR LIFETIMES!!! I suggest debating something that might actually have a chance of happening, like impeachment. Oh, wait, never mind…

  102. 102
    smiley says:

    It’s widely known that Harman is a hawk.

    Maybe so but it turns out that Harman was the only one who objected via a letter to the CIA. The congress people on those intelligence committees are very constrained about what they can do/say. No excuse, but still…

  103. 103
    smiley says:

    I don’t get the blockquote feature. I inserted block quotes around the quote of the other person (Harman) but my comment is blockquoted. WTF?

  104. 104
    Zifnab says:

    Maybe so but it turns out that Harman was the only one who objected via a letter to the CIA. The congress people on those intelligence committees are very constrained about what they can do/say. No excuse, but still…

    Ooo. Sternly worded letter. The hallmark of Democratic oversight.

  105. 105
    Brian says:

    It is possible to make sales tax progressive, incidentally … every person at the cashier shows their class card, and the cashier adds in the appropriate sales tax for that class. (You can improve on this scheme in various ways to deal with fraud and happenstance, but the basic notion is that the ultra-rich pay 50% sales tax and the homeless pay 0% sales tax).

  106. 106
    jrg says:

    Money transfer between corporations: 23%.

    Money transfer between currencies: 23% of proceeds? What if the transaction was outside of the U.S.? If the fair tax was applied to financial transactions, could you buy shares in an overseas fund that’s not subject to this 23%, and evade the tax by proxy? Talk about begging for financial shenanigans…

  107. 107
    smiley says:

    Response to Zifnab — Grow up.

  108. 108
    Seanly says:

    I stand by original feelings about the Fair Tax: ugh

  109. 109
    Fargus says:

    It is possible to make sales tax progressive, incidentally … every person at the cashier shows their class card, and the cashier adds in the appropriate sales tax for that class. (You can improve on this scheme in various ways to deal with fraud and happenstance, but the basic notion is that the ultra-rich pay 50% sales tax and the homeless pay 0% sales tax).

    Brian: Do you mean 50% inclusive or 50% exclusive? A 50% inclusive tax is actually a 100% exclusive tax.

  110. 110
    Conservatively Liberal says:

    I am having fun cutting new inlays for my guitar fretboard, but I will take the time to toss in my two dollars worth (inflation, $2.00 = .02¢ now). BTW, the mother of pearl was purchased tax free from Australia. I needed the coloration from that region, thus why. ;)

    Michael D., one of the reasons I like Balloon Juice is that it is not a one-sided echo chamber. Some individuals who are not inclined to listen to what ‘the other side’ has to say would like BJ to be more like Daily Kos or Redstate. I used to be a member of DK, but I quit the place when I got sick of being troll rated for just expressing my opinion in a polite manner. The fact that something you say can be troll rated into invisibility just sits wrong with me. It did not happen to me, but I saw it happen so often to others that I just got sick of it. The idea almost seems Orwellian to me, and that is odd considering that the left says that they are all for open discussion. I guess they get to define ‘open discussion’. Screw that.

    Some people only want to listen to what they think is right, I want to listen to anyone who has something that they want to talk about, whether or not I agree with them. Keep plugging away at it Michael, and ignore those who toss out what they consider a witty line, like ‘fuck you’, when they see someone post something that they don’t agree with. They are not interested in discussion, they are only willing to listen to the echo chamber. Let them go to Redstate or Daily Kos, they will find the company they desire there. I like BJ as it is.

    On the Fair Tax, I will not address it directly. Instead, I will put forth my thoughts on what I would view as the perfect tax system (IMO only!). I think that will be sufficient for me.

    When I was in high school, I learned about American government and world affairs. Back when they actually taught us to not only look at ourselves, but at others too. I learned about the ‘great men’ who started out with nothing and made millions/billions putting their ideas to work. I also noticed that there are others who make very little, like laborers.

    Who is more important? The rich guy who employs the laborers to make his wealth, or the laborers who actually go out and make things with their hands or support those who do by providing services for them? IMO, the rich guy would not exist if not for the laborers. But the laborers could exist fine without the rich guys, as they can provide for themselves using their hands AND their brain. So who needs who more?

    I like to think of an America where what you pay in taxes is proportionate to the wealth you create for yourself. The wealth that the rich generate for themselves is a direct benefit of our society, and they should have to pay a higher proportion of their income for the opportunity our country gave them. As I define it, income is any money you have at the end of the year that is greater than the amount you started the year with. No loopholes, no escape clauses, business and individual alike.

    Simple, yes. Perfect? No. But it would beat the crap out of the rigged system of taxation we now have. Tax policy is basically written for the rich, not the average Joe. There should be no cap on income that can be taxed. Every penny you earn for the year should be taxed. Another thought is why is there a cap on social security income? What makes them so special? They may not actually qualify for social security, but some day they may lose it all from some misfortune of one type or another. Then they would be drawing on the ‘backup’ system. This has happened, and it will happen. The once rich can become the now poor. Call it an insurance policy.

    I could go on, but I think I would rather get back to my inlay work as nothing I say online actually accomplishes anything, so it is something that I do in my spare time. Like you Michael, there are better things for me to do. Blogging is at the bottom of my list, it is a spare time hobby and nothing more than that.

  111. 111
    jake says:

    I favor the Air Tax. A tax based on the cubic space of air inside all your possessions that have accommodations for your ass.

    Damn. At first I thought you meant a tax on how much air a person uses over the course of a year. Bloviating blowhards could continue to do their thing, they’d just have to pay for the privilege. Politicians would have an incentive to act more and yap less to protect their stock portfolios.
    I guess there should be an exemption for people who exercise even if the damn joggers staggering around my ‘hood make me feel like a lazy ass.

  112. 112
    JR says:

    The idea that costs will decrease because “hidden taxes” will be removed is probably fallacious. It rests on an assumption of elasticity that I just don’t think is realistic. If people are used to paying a certain price for a loaf of bread, it’s illogical to think that the end-user cost is going to decrease simply because the production costs go down a few cents. More likely, it’ll just feed the profit margin of the producer, further reinforcing the regressive nature of the tax.

  113. 113
    jeb says:

    Sorry if somebody has already mentioned this:

    As long as we’re talking about Pie-in-the-Sky schemes that could never actually get past congress…how about a REAL Progressive National Income Tax!

    NO sales tax on unprepared food!
    NO sales tax on crappy-bad-for-you just-nuke-it food!
    LOW sales tax on restaurant food.

    NO sales tax on gasoline! (at least until electric cars are affordable and practical)
    Speaking of electricity: NO federal tax on gas/electric/phone utilites!

    NO sales tax on clothes under $50! (as of today…adjust for inflation in the future)

    NO sales tax on cars under $20,000!

    NO sales tax on houses under $150,000 (possibly varied by region)

    Etc, etc, etc (you get the picture)

    Q. How do we compensate for lost revenue for all these untaxed things?

    A. Progressively (pun intended) higher tax rates for increasingly expensive items in these categories. A $19,995 car has 0% federal sales tax, but a $29,995 car has, say, a 10% federal sales tax, and so forth, until a nice new Ferrari has a 200% federal sales tax. (If you can really afford a $200,000 car, you can afford a $600,000 car.)

    Okay, I said it was Pie-in-the-Sky and unimplementable…but as long as we’re dreaming, let’s dream BIG!

  114. 114
    Zifnab says:

    Meh. If you really want a progressive tax, I say we just tax savings. 30% tax on all money that goes unspent. “Money” is defined as anything with a resale value about $1000 adjusted for inflation.

    Think about it, we’ll expand consumption and send the market through the roof. Everybody will be buying.

  115. 115
    TexasMike says:

    Generally lurked here for many years. Haven’t cared enough to respond much. Most of you do a good job of that already.

    Michael.

    I enjoy your fresh opinions. Its why I keep reading here. Just like mentioned before, Not a right or left echo chamber.

    Here goes

    Keynes 101. Most if not all of those built in taxes you claim will offset the Fairtax will not happen. Its called Sticky Prices (or more importantly sticky wages) Employers wont be able to cut wages to offset the Fairtax completely. Yes the individual income tax will be gone but prices will stay at or near pre Fairtax levels because business tax cuts will not be able to be passed down to workers in the form of lower wages. Workers will not accept a percieved pay cut. Furthermore, businesses will try to capture those profits ( by not lowering prices and keeping wages constant) in the short run. Any long run consumption will be governed by the Savings/consumption function which shows that some of that money will be saved and therefore a leak on GDP growth.

    Finally a 23% sales tax will be profoundly regressive in nature when it comes to implementation.

    Ultimately, looks good on paper but people don’t respond like an excel spreadsheet.

  116. 116
    Conservatively Liberal says:

    Zifnab, along my line of thought. In addition to what I said, a tax on unspent wealth would be the icing on the cake.

    Hey, if I am going to dream, I might as well have a good one!

  117. 117
    jcricket says:

    I know this sounds snarky, but I really with we could just cut and paste the following two responses at the beginning of any discussion about libertarian “ideas” and then go on to doing something more productive:

    I really don’t understand why you all are expending so much energy on this. IT’S NOT GOING TO HAPPEN IN ANY OF OUR LIFETIMES …

    And

    Ultimately, looks good on paper but people don’t respond like an excel spreadsheet.

    Basically all Libertarian (big L) ideas fail to account for human nature (many are also factually wrong in other ways, like the Fair tax) and have about zero chance of happening, yet they take up an inordinate about of blogospheric discourse that could better be spent making fun of the wingers.

  118. 118
    grumpy realist says:

    Taxes on “unspent wealth” have actually been tried–they’re called capital taxes. France back in the 1930s had yearly taxes on sumptuary goods, so a woman who owned a choker of top-quality pearls had to pay a percentage of the value ad infinitem. Colette has a good essay on this–I think it was an article she wrote for Vogue.

    (Sumptuary taxes have a long history in Europe, BTW.)

  119. 119
    The Other Steve says:

    What Conservatively Liberal said… all of it. Right down to the complaints about dailyKos.

    Michael has a thin skin. We were arguing for the sake of arguing, not for the sake of shutting him up. I’m more than willing to hear how the Fair Tax idea is going to be implemented in a fair way. But my gut, and human nature says, forgetaboutit.

  120. 120
    TenguPhule says:

    Punchy: For instance, you really think the gov’t can send checks to EVERY FUCKING HOUSEHOLD IN AMERICA, consistently, every month

    Yes.

    The IRS can’t even do that with refund checks.

    If you buy a loaf of bread, all of the hidden taxes in it will be gone away, greatly reducing the price of a loaf of bread.

    False assumption. There is no incentive for any producer of goods to lower prices. Indeed, there is every incentive to RAISE maintain or raise prices to account for the NEW hidden costs generated by the Unfair tax.

    Instead of profits over costs being taxed, transaction costs are being taxed. This is death for business startups, who operate in the red for a number of years before finally paying off their costs. Under the current tax system, they aren’t taxed on profits they don’t have. Under the Unfair tax, they will be.

    As for the claim ‘this isn’t regressive’, that’s bullshit.
    By disconnecting taxes and the amount of income earned, you invite a system where those with wealth continue to keep getting richer while everyone else winds up paying for it to keep food on the table.

  121. 121
    TenguPhule says:

    Meh. If you really want a progressive tax, I say we just tax savings. 30% tax on all money that goes unspent. “Money” is defined as anything with a resale value about $1000 adjusted for inflation.

    Don’t take this the wrong way, Zifnab, but screw you and your stupid idea.

    I scrimped and saved that after-tax money the hard way through honest work. I’ll be damned if that money is getting taxed again because I’m thrifty while others are buying what they can’t afford.

  122. 122
    Kewalo says:

    This has been one of the most interesting discussions ever held here.

    I’ve been particularily impressed with how everyone treated this as a serious issue even though (in my opinion) it’s just another RW fantasy and easily the most regressive tax we could have.

    But I seriously thank all of you for your fine answers. This might be a RW fantasy but we need to answer it or the right will just keep on keeping on and driving us all nuts with their fantasy.

    I keep telling those folks on my right that I am waiting for all taxes to be abolished so that the money can flow in and pay off the debt and finance all the programs.

  123. 123
    grumpy realist says:

    TenguPhule, I think the idea is that your “savings” wouldn’t be “after-tax” savings.

    Although you have raised a good point: how in the heck would we shift from one system to another, when you have both pre-tax-paid and post-tax-paid capital mingled together?

    That was one thing that I found interesting about the example of French sumptuary taxes–they were ad infinitem. I guess the closest we have to this is property taxes.

    (I lived in Omaha for a while and kept freaking out. Omaha has 8% property taxes (probably because Nebraska doesn’t have that much else to raise state taxes on) and I could not get over the fact that the people owning the McMansion next door were paying as much, yearly, in property tax, as I was for the rent of my rather nice townhouse. One thing that soured me on purchasing large chunks of property.)

  124. 124
    Punchy says:

    Workers will not accept a percieved pay cut.

    FINALLY somebody said it. In theory, a biz could lower wages by claiming their employees, by not paying an income tax, would be in effect making more than they deserve. But a cut in their wage only works if the cost of goods likewise declines, which we all know won’t happen, at least not by the same percentage.

    And pyschologically, an across-the-board pay cuts for 100+ million workers would be have a catastrophic effect on company morale, consumer confidence, and the like.

  125. 125
    AnonE.Mouse says:

    I would like to second what Kewalo wrote and thank all of you who know so much more about this than I do for the entertaining education you’ve provided.In fact,for the first time ever I’m going to print a thread so I can do a little more studying in preparation for a Christmas ass kicking of my brother and cousin(who are both vocal advocates of a fair tax,because,well,it’s ‘fair’-incidentally,like myself,neither of them is particularly well versed in economics,finance,accounting,etc.)
    It occurs to me that gay Republicans are somewhat like parents who refuse to get their children vaccinated.It’s relatively safe,until too many parents refuse.Gays in the GOP conveniently overlook the 30% of the party who,if they had their way,would have homosexuals look at the world from the other side of razor wire.They depend on most of us who aren’t Republican to keep the hatred from reaching epidemic proportions.

  126. 126

    Economist Dale Jorgensen, Harvard University, was commissioned to find out what portion of current prices were represented by costs for complying with the federal income tax code (i.e., embedded tax costs). He concluded that 22% (average) of every retail dollar, spent by consumers, constituted an price-embedded tax. Thus, in addition to individual income tax and FICA withholding, individuals are unwittingly paying these unseen, embedded business tax costs with every purchase of a new product, or service.

    Under FairTax ( http://snipr.com/irsgone ), pre-tax prices would fall, due to removal of embedded tax costs. For FairTax to constitute 23% of the transaction cost (not including state or local sales taxes), a mark-up of 29.9% on the new “market-adjusted” price is necessary.

    (For comparison, the following TAX INCLUSIVE income tax rates convert to TAX EXCLUSIVE, TER = ITRate/(100%-Rate): 15% = 17.6%, 25% = 33.3%, 28% = 38.9%, and 35% = 53.8%)

    Concurrently, wages may rise due to a mix of factors, including reversion of withheld pay (or some portion thereof) to employees, advancement opportunities due to business expansion resulting from retained earnings, and/or increased demand for labor accompanying increased competition (from that expansion). Where profits (or wages) appear lucrative, competition will move into the market space, driving out excesses (that will be present immediately after FairTax is enacted), to arrive at new “market-adjusted” price.

    In order to make FairTax a PROGRESSIVE consumption tax (such as that called for, recently, by Warren Buffett), a legal U.S. family is simply sent a “monthly consumption [tax] allowance,” called a “prebate.” This prebate is intended to reimburse taxes on necessities without need for record-keeping or reporting. Moreover, the direct payment bypasses the creation of a tax code specifying exempted products and services around which a lobbyist industry could grow. The amount is variable, based on family size, and is equal to the FairTax rate on poverty-level spending, as defined by the Dept. of Commerce. At present, a family of one would receive ~$200/month, a family of four, ~$500/month. Thus, the “effective” FairTax rate paid by citizens, will *never* equal the full 23%. Of course, U.S. visitors (legal, and illegal) will pay the full FairTax when they purchase anything new, at retail (used are not taxed again). Under FairTax, working families will have their whole paychecks (minus any state or local income tax withholding) plus their monthly family prebate.

    Additionally, citizens will no longer have to spend the average 50 hours per year preparing their federal tax returns. Having more monthly income may result in using credit less, and saving more. Larger savings will make it easier to purchase a home, at a lower interest rate and monthly payment. (Thus, mortgage deductions are no longer applicable when income is not the basis for taxation).

    But is FairTax “fairer”? To provide substantive answers, Prof.’s Kotlikoff and Rapson (10/06) have concluded ( from http://snipurl.com/kotcomparetaxrates ),

    “…the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

    “Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax.”

    Further, per Jokischa and Kotlikoff (circa 2006? http://snipurl.com/kotftmacromicro ),

    “…once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there’s a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent.”

    The current income-based tax system is also more expensive to run, because of the manner in which the tax code is gamed by politicians and lobbyists. Politicians realize great power, and attract constituencies for support, by granting tax favors (i.e., credits, deductions, exemptions) through lobbyists. Fully, fifty-three percent (that’s 53%!) of Washington lobbyists are there because of the tax code! The tax code is continually changing, making it more complex and more difficult to understand. And, the salaries and costs of tax lawyers and lobbyists end up in the prices of the products and services we buy. Additionally, the time and money required to keep records, file returns, report for audits, retain accounting and legal help, pay IRS penalties and interest, is time and money lost for other productive, or recreational, activities. Depriving us of the use of withheld wages increases our expenses through zero-interest withholding, inflation, return preparation time, and interest paid on credit cards and loans that otherwise may not have been necessary. Summed up, the cost of tax compliance, nationally, has been estimated to range anywhere from $265 billion to twice that amount, depending on the extent to which tax-avoidance consultation is sought and utilized. These expenses constitute a substantial “hidden tax” which is incomprehensible to the average working American. And the FairTax gets rid of all of it for most Americans, and most of it for business owners.

    It is our belief that government should serve We, the People, with a fair tax system that will not enable politicians to pit poor against rich (creating barriers to achieve wealth, adding tax penalty to the sacrifices made for personal success). Nor do we want politicians to continue using business as a tool to hide taxes from consumers, often villifying business, which discourages entrepreneuship, personal achievement, economic growth. Liberty and happiness depends on restoring the fruits of labor to those who produce them. We believe that the tax function should align with economic growth, not against it, that government should be paid for in the same manner as working Americans – when, and because, something is sold.

    As things stand at present, Americans labor under nothing less than “tax slavery,” having our wages confiscated every working hour, as reflected in our paychecks every two weeks.

    Many of us have joined FairTax.org ( http://snipr.com/becomeamember ) in order to build a national movement to free ourselves, our family pocketbooks, and our businesses from confiscation of income, and punishment of productivity. And this we say to our federal representatives, “Either scrap the code ( http://snipr.com/scrapthecode ) and enact the FairTax, or we intend on replacing you with someone who will.”

    (Permission is granted to reproduce in whole or part. – Ian)

  127. 127
    cokane says:

    unbelievable:

    “As noted above: Economists at Boston University concluded that the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.”

    Well it certainly seems you’re giving 110% effort in defending this thing. Tee hee

    Seriously though, every income bracket has more purchasing power? How does that add up at all? The only way I can figure it, is that the government–under FairTax–will have less “purchasing power”. I.e. less revenues from taxes. And while this may really be secret glibertarian dream behind this tax scheme, I think it would be foolish. Essentially your saying we would have to cut current spending drastically or we would have to do even more deficit spending?

    It seems to me, you are preaching fiscal irresponsibility. What’s troubling is that you don’t address this upfront.

  128. 128
    Pooh says:

    Are ponies taxed, or do we get a prebate for them?

  129. 129
    mclaren says:

    It’s not obvious that a “fair tax” however you structure it is a strictly right-wing talking point. Everybody pretty much realizes that the current tax system has some serious problems with fairness. The red flag is Warren Buffet’s repeated point that his secretary pays a much higher tax rate on her income than Buffet does on his. That’s obviously unfair, and everybody recognizes it. There’s no obvious reason why income from, say, stock options should be treated so wildly differently than income from a regular paycheck that the stock option income gets taxes at around half the effective rate or less. If you hold an investment for mroe than 5 years nowadays I think the capital gains tax rate drops to 15%. Compare that with a typical state tax rate of between 10% and 15% plus a maximum federal tax rate of around 33%.

    Two issues that get left out of all these discussions, though, involve fees and consumptino taxes.

    Europe has had a VAT tax for a long long time and everyone there just accepts it. A VAT tax is less regressive than an income tax because as we see in America income taxes can be dodged and finessed by structuring investment income, whereas a VAT tax hits whenever people spend their money, however they get it. So a VAT tax is fairer. The market for luxuy goods doesn’t seem to have collapsed in Europe, so it’s not obvious why VAT taxes shouldn’t be introduced in America. It would certainly be fairer than the current system.

    However, the larger issue involves offseting tax revnue drops with fees and other pernicious taxes, especially those like property taxes and sales taxes and vehicle registration fees where people with fixed incomes have no choice but to pay ’em. Moving out of one’s home isn’t an option for most people. Deciding not to drive your car is not typically a viable alternative. The problem is that here in America, local gov’ts tend to jack up fees to compesnate for loss of state income revenue, and increasingly the federal government is doing the same kind of thing, which renders any “fair tax” initiative fairly toothless.

  130. 130
    DR says:

    About the 30% added:

    It WILL add 30%+ to the price of goods and services. I have yet to find a business person who does not see a switch from a corporate to a VAT as a means to increase profits. We had this kind of switch in Canada with the introduction of the GST; it was a replacement for a manufacturing tax. Well guess what? Because the GST was visible, and the manufacturing tax wasn’t, nearly ALL manufacturers and retailers simply took the occasion to pocket the old manufacturer’s tax directly. They simply slapped the GST right on top of the old prices…

    The result: inflation. The VAT tax is not an adequate replacement for other taxes; it’s simply another tax, added on top of the existing tax structure. It does nothing but add money to the Government’s coffers. So if your goal is to be revenue neutral, I’ve got news for you, it won’t ever happen.

    The idea that a VAT tax is “fairer” than income tax is completely ridiculous; only people who have never been poor could even remotely make such an assertion. The VAT is overwhelmingly regressive, being a far heavier burden on poor people than on the rich. The VAT is a FLAT tax. And all flat taxes are regressive, however you might want to put lipstick on that pig.

  131. 131
    Zifnab says:

    Don’t take this the wrong way, Zifnab, but screw you and your stupid idea.

    I scrimped and saved that after-tax money the hard way through honest work. I’ll be damned if that money is getting taxed again because I’m thrifty while others are buying what they can’t afford.

    Indeed. It’s a stupid idea. But taxing “savings” exclusively is no less ridiculous than taxing “consumption”. That said, Mike’s FairTax basically disincentivizes people to go shopping, while my tax almost demands that you do. Sure, people will be buying what they can’t afford, but they’ll be stimulating the economy when they do. Just look at the Subprime Mortgages and massive credit card debts. They’ve done wonders for the economy, right? :p

    Ultimately, the government needs money to operate. It will take that money from the public at large. You can tax people on their income or their expenditure or their capital gains or their property or their basic citizenship, but you still have to tax them to reap the money.

    A “FairTax” that doesn’t reap as much money as the existing system is unacceptable. Period. Our government is already running in the red. A “FairTax” that leaves wealth accumulation out of the equation is unacceptable. Period. Because it allows individuals to accrue wealth indefinitely and sucks all the money out of an otherwise functional economy, its a long-term bad idea that will devalue the traded currency.

    Most importantly of all, in this debate, I haven’t seen one single reason why we should abandon the existing income tax. Arguments that a massive sales tax is “good” seem to fall short when you can’t show why the existing income tax is “bad”. Voodoo economics claiming a sales tax is more progressive not withstanding, both systems tax you and the income tax system has been running as smoothly and successfully as can be expected. Why change?

  132. 132
    Punchy says:

    for the first time ever I’m going to print a thread so I can do a little more studying in preparation for a Christmas ass kicking of my brother and cousin(who are both vocal advocates of a fair tax,because,well,it’s ‘fair’-incidentally,like myself,neither of them is particularly well versed in economics,finance,accounting,etc.)

    It’s always more fun tellin your relatives where to shove it when they hold these dumb-ass ideas. I do the same with my Jesus Bro-in-Law vis-a-vis his dislike of IVF and stem cell research.

    Ah….Christmas…the time for glazed ham, presents, and “Hey bro, are still that fucking fair tax idiot like before?”…./sigh…

  133. 133
    Shygetz says:

    I have yet to see a cogent attempt at an argument why purchases for “investment purposes” should remain tax-free, while purchases for personal consumption (including the proverbial loaf of bread) are taxed at the 30% rate (and quit bitching about using the exclusive rate; all sales taxes are quoted at the exclusive rate now, and it’s just slight of hand to insist on the inclusive rate for your pet project). What about dual-use items? If I work out of my home, how much of my rent and utilities are tax free? Who enforces that, since there is no IRS? Why can I buy a company tax-free but not food?

    Your scheme is nothing but a method for institutionalizing wealth by completely eliminating all taxes on investment and business profit. If it is revenue neutral and all investment purchases are excluded, it means that the entire tax burden will be shifted to personal purchases. The result is a hugely regressive tax system, with a national welfare bone thrown in to make it more palatable to the saps.

    Add on top of this the black market. You talk about hostility and perceived unfairness decreasing, but completely ignore the purely monetary gain that the black markets allow. We don’t need to rely upon psychological ploys; the profit alone will sustain the black market just fine.

    The new housing market will collapse, as it must compete with the prices of old housing, which are now wholly tax free. The transition itself will kill you, where builders have built the house under the old system, and now must sell it with 30% sales tax while pre-owned homes are tax-free. I can see the dodge now; a builder builds a home and uses it as a model sales home for a month, claiming tax exemption as the home was built for advertisement purposes. He then moves his model home to the next house he built, selling the current model as pre-owned construction (and therefore tax-free). Repeat ad nauseum.

    In fact, I can see a burgeoning market for businesses whose only function is to buy stuff for business reasons, “use” it for a month, then sell it “used” without the 30% sales tax.

    It’s interesting how a “fair” tax taxes everything fairly except capital and all business purchases, which are conveniently excluded. Why not turn it around; 30% tax on all investments (business purchases, capital, bonds, etc.), no tax on all personal expenditures. Consumption would go through the roof, driving up business and encouraging foreign purchasing of our goods! How’s that, Michael?

  134. 134
    Mark says:

    Michael,

    Interesting post, but you ignore the inevitable creation of a Black Market for consumer goods in the wake of the development of such a tax.

    Such a black market would benefit the elites at the expense of the overwhelming balance of America. We’d be asking businesses (think the guys and gals that brought us Enron, deregulated natural gas, dot.com, telecoms, and reality television) to accurately report sales. Not going to happen, Michael, and one must believe that you know such to be true.

    Or did you forget about the myriad of banking operations in the British Channel Isles, Cayman Isles, Dutch Antilles, Bermuda, and the Bahamas?

    Or the glaring lack of SEC enforcement that now exists for the wealthiest of the wealthy?

    One can see a myriad of Don Rickles-like “Crap Game” characters (“Kelly’s Heroes”) and/or Henry Paulsons, America’s CEO-in-wanting, emerging to game the system for the wealthy at the expense of the nation.

  135. 135
    Mark says:

    Michael,

    Almost forgot to mention: Be sure to remove only the sentence or half-sentence of my above full 9:43 a.m. Dec. 10 post to which you can make the snarkiest, most deceitful reply.

    One would expect nothing less from you. Full analysis ain’t exactly your strong suit.

  136. 136
    Vladi G says:

    Just because Neal Boortz is the public face of the FairTax does not make it batshit crazy.

    No, the fact that it’s batshit crazy is what makes it batshit crazy.

    Inclusive: The people who write and explain the FairTax prefer to use the inclusive rate because that’s what we use now.

    This is simply a lie. Nobody goes to Home Depot and gets an invoice that says “you spent $100, and 6.3% of that was sales taxes.” You get an invoice that takes what you bought and multiplies it by the 8.25% sales tax rate (to pick a number). People understand the sales tax rate as something they pay on top of the listed price.

    “Fair” tax liars understand this, which is why they try to sell the 23% rate instead of the 30% rate. It’s not about the math, it’s about the perception. They’re banking on people being too stupid to understand the difference.

  137. 137
    Nannergrrl says:

    Gay marriage (or its civil equivalent) will also confer many many important legal rights and authority. To say a large component behind the push for civil unions/gay marriage is the tax benefit is pretty much untrue.

  138. 138
    Zifnab says:

    “Fair” tax liars understand this, which is why they try to sell the 23% rate instead of the 30% rate. It’s not about the math, it’s about the perception. They’re banking on people being too stupid to understand the difference.

    Also keep in mind that 23% and 30% are somewhat magic numbers. At a 23% rate, I’m 2% under the 25% income tax rate. At 30% I’m “rich”, sitting in the $80k+ tax bracket.

    Someone with marginal knowledge of the existing tax code could conclude that a 23% tax is a 2% discount while a 30% tax would be a 5% price hike.

    But at the end of the day this still assumes a great deal of sleight-of-hand because it both tries to suggest to the average joe that the system will be “revenue neutral” – thus having no impact on social services – and yet will still be a “progressive tax” that will save them money. It’s a very round-about way of suggesting that the FairTax will tax the rich more than the poor, or at least people-that-aren’t-you.

    The FairTax is an attempted sell at a Tax Cut. And, honestly, no one needs a tax cut right now.

  139. 139
    Tim F. says:

    Based on what I understand now, I plan to start calling this idea the PoorTax. Because that’s who it will punish the most.

  140. 140
    Tony says:

    Let me say first that I am generally suspicious of any proposal advocated or supported by the Left; however I don’t feel much better with those advanced by the Right these days. My visceral reaction is to want to achieve a few things with the tax code:

    1: defund the Feds in an effort to begin taking a meataxe to various programs and services that not the purview of Federal Government.

    2: Make everyone a contributor to the system regardless of income level since most everyone is a recipient of government largess to one extent or another.

    3: raise the maximum funds possible for those programs deemed Constitutional and necessary functions for government to perform.

    4: end the use of the tax code to redistribute wealth, and to stop using it to encourage or discourage certain behaviors and activities based on certain desire able outcomes

    the tax system should be nothing more that a means to generate revenue for the government to afford to operate..

  141. 141
    jcricket says:

    Most importantly of all, in this debate, I haven’t seen one single reason why we should abandon the existing income tax.

    Nope, all the arguments presented for the flat sales tax are basically arguments for just simplifying the system we have now into something easy to handle but also progressive.

    People incented to cheat? Too many loopholes making it easy for the rich to pay far less than their marginal tax rate? Gays/Childless/Married people pay more/less?

    Just eliminate things like the AMT, breaks and credits that have complicated the code/distort company/individual behavior, eliminate the distinction between capital gains/salary, etc. If anything, you could figure out what people’s “effective” tax rates are, set the lower tax brackets to that number, and raise the upper tax brackets. Maybe the Blue States could get their act together and stop doing the massive corporate giveaways, or shooting themselves in the foot with all the tax caps they keep going along with (I know the voters somewhat like these, but if Dems offered a progressive taxation alternative that protected the poor and middle class, the voters might see differently).

    Problems solved, without introducing regressivity or any of the other “fair tax” problems.

    Why the Libertarians don’t propose this comes down to is a combination of two things:

    1) Dishonesty on the part of people selling the Fair Tax as “fair” in terms of their motives. I’m not arguing the Fair Tax is racist, but it’s a lot like the dishonesty of the people who pretend all the race/IQ science is just “honest scientific inquiry”, when what’s behind it is clearly a pre-supposed conclusion that black people are inferior to whites. So Libertarian/Fair Taxers pre-suppose a hatred and natural desire to see all taxes eliminated and the government defunded (government is never the solution, right?)

    2) Fair taxers have an aversion to the idea that really rich people can, indeed, afford to pay a higher percentage of their incomes than the middle-class and poor people. Owing to the facts about interest, ability to tolerate risk, starting capital, access to opportunities, etc. – rich people are in a much better place to afford another 5-10% tax hike with zero change in their behavior. This would generate the tax revenue we need just fine, thank you.

    The rest is sophistry (stuff shouldn’t be taxes twice, revenue neutral, inclusive rate) and diversionary tactics (prebates).

  142. 142
    Brian says:

    Fargus,

    it doesn’t matter. The point is you have different sales taxes for different classes of consumers — the numbers can be tweaked to be revenue neutral, or revenue gaining if you’d prefer. There’s nothing about the sales tax that makes it irredeemably regressive.

    Now, there are some drawbacks to such a system. Number 1: it could be bypassed by the rich hiring some poor person to do their shopping for them. Still, at least that person would have a job/income that they wouldn’t have had. Number 2: everybody would have an unforgeable way of establishing their class, so you could have class-based distinctions rise. (Right now the rich can isolate themselves in country clubs by having high fees, but with this, they could simply sell people at the front door a pack of gum and look at the sales tax). Number 3: probably some other things.

    I don’t actually advocate it, but it could be done.

  143. 143
    jcricket says:

    Based on what I understand now, I plan to start calling this idea the PoorTax. Because that’s who it will punish the most.

    Call it the “make more people poor” tax, because that’s what it does (the poor would be just as poor).

    Or the “further shift the tax burden onto the average joe” tax.

    The Donald Trump Welfare Giveaway.

    and so on.

  144. 144

    Tim F. Says:

    Based on what I understand now, I plan to start calling this idea the PoorTax. Because that’s who it will punish the most.

    December 10th, 2007 at 10:39 am

    That’s who it’s supposed to punish. Every tax scheme dreamed up by someone on the Right is designed to separate the rich from everyone else.

  145. 145
    mclaren says:

    The point that a VAT tax is regressive is entirely correct. I should’ve added that if we want to import a VAT tax, we should have some cutoff point — say, purchases of $50K or less are exempt, something like that.

    Mind you, I’m not necessarily advocating a VAT tax — and it is indeed just another tax on top of all the others. It would eliminate some of the unfairness of the effectively undertaxed invetment income on the rich, or on people who structure their income through non-profits foundations, revocable trusts, etc., so that they get taxed at the much lower rate.

    A VAT tax isn’t a substitute for other taxes. It is an added tax. Beyond some cutoff point the regressive nature doesn’t matter, but the same point applies to state sales taxes, taxes on liquor and tobacco, and gasoline taxes. These are all regressive taxes since the billionaire who flies to work in his helicopter ain’t payin’ the gaoline tax you and I are.

    The fact remains that Americans are taxed a whole lot less than most other countries not run by overtly criminal organizations. Meaning, places like some Eastern European countries where the local mafia literally operates the phone company and the water works. Things work differently in Serbia than in non-kleptocracies. American tax rates are not only well below European rates, they’re significantly below Japanese rates and Australian rates and Canadian rates. America’s way at the bottom of the list of countries for tax bite per capita.

    Canada ranks much higher than us, yet their citizenry report much higher satisfaction with their quality of life than ours does. So American whingeing about tax rates seems cultural, not financially based.

    One other consideration inovlves how you compute total tax rates. The OECD 2005 report breaks it up into consumption taxes (which in the U.S. gets rolled into excise taxes + state sales tax), labor taxes, and tax on capital. The labor tax has to include FICA, which ever the Great Tax Raiser Reagan has skyrocketed and now runs around 9%. I can remember when FICA was less than 3%. What happened during the 80s was that federal income taxes were slashed and FICA taxes hugely increased to compensate — a hugely regressive tax, since millionaires who make their money by stock options don’t even pay FICA tax on that income.

    The OECD data doesn’t include property taxes, though, which should be counted, especially in places like Massachusetts.

    If we define “fair tax” rate relative to other countries America clearly needs to increase its overall taxes, especially on the top end. As a country we’re paying too little tax to sustain our infrastructure…and the rotting roads and collapsing bridges and detonating steam pipes under our streets prove it.

  146. 146
    Ta-Da says:

    You said that just because Neil Boortz (whoever that is) likes FairTax, it’s not a bad idea outright. I agree that using his support of FairTax as a way to discredit it is “lazy.” There are much better reasons to oppose FairTax.

    But your support of FairTax because it helps gays reach some semblance of faux-equality is not just intellectually lazy, it’s offensive. Gay couples in the United States should not have to jump through tax loopholes and support brand new tax systems just to achieve the same economic rights and benefits as married people enjoy.

  147. 147
    grumpy realist says:

    I notice that Ian above simply cuts and pastes into this thread a paen to the Fair Tax which addresses absolutely none of the questions we have raised.

    This is the equivalent of sticking your fingers in your ears, singing “LA-LA-LAAA trust us it’ll all work out!”

    Numbers, Ian, numbers. Prove to me that the bureaucracy of implementing the Fair Tax won’t be as arcane, horrible, and overwhelming as the present day income tax. Prove to me that we won’t have to have as least as invasive a system to figure out who is eligible for prebates. Prove to me that businesses aren’t going to get saddled with a huge load of responsibilities and effort a) collecting the tax b) reporting receipts, c) proving that stuff that was sold as a B-to-B transaction was in fact deserved. (This is why we at present have sales taxes on everything and then businesses get to write those off as expenses/cost of product/whatever.

    Heck, if the US ever DID implement the Fair Tax, I predict that within the next week 99% of businesses in the US would rise in revolt and lynch any politician who had voted for it.

  148. 148
    Illuminancer says:

    Every year, 120,000,000 Americans navigate through the massive amounts of paperwork required to file an income tax return.

    I’ve been filing taxes for years, and this argument puzzles me. Even the year I had both investment income returns for two states, and multiple W-2s, it took me about two hours with TaxCut to fill in the blanks and file electronically. Most years, I could do the 1040EZ in about half an hour, and then another 20 minutes for the state return.

    I know that some people, like my 70-year-old retired widowed mother with all of the medical deductions and the house, have more complicated returns. But are they the majority? What’s the actual percentage of people who really do have “massive amounts of paperwork”, and is that really a legitimate reason to overhaul the entire system?

    It’s a great plan for gay people who, under current government policy that denies them marriage, will greatly benefit. Even though gay people don’t generally like to admit it, marriage equality is not only about love. It is about the over 1000 benefits we are denied under current federal tax policy.

    I don’t know which gay folks you’re talking about, but most of us are well aware that marriage equality is about taxes. It’s not all about that, though: a Fair Tax wouldn’t make it automatic for my partner and I to have hospital visitation rights for one another, or to be able to get one another’s Social Security benefits if the other dies. How’s the Fair Tax going to help me there?

  149. 149
    Vlad says:

    I had not heard of this until now, and after looking at it, I must confess that it seems like a horrible idea.

  150. 150
    HyperIon says:

    Do you think the modern middle class fell from the ideas of the right? If so, explain, please. I don’t see it.

    it is absolutely mind-blowing to me that this is NEVER explained. it seems a contradiction to the “even a stopped clock is correct once/twice a day” observation.

    what right-wing idea has produced a substantive & positive contribution to middle-class quality of life in the past 100 years? help me out here!

  151. 151
    Jamey says:

    If you think that admitting that you’re a Republican is the biggest mistake you’ve made on this blog, then you’re an even stupider c*nt than I previously taken you for, Michael.

    Speaking for myself, I WANT you to remain a part of the BJ crew. Try as I might, I could never discredit Republican/Glibertarian ideas as thoroughly as you do.

  152. 152
    Jamey says:

    But it is worthy of discussion. And thank you for responding to it without telling me to fuck off or bringing up the fact that I am a gay republican, ;-) neither of which does anything to contribute to the discussion.
    December 9th, 2007 at 11:21 am

    So why do you bring up the topics of your being gay and Republican so often?

  153. 153
    Zifnab says:

    Dude. Jamey. Crank it down about half a dozen notches.

  154. 154
    Crust says:

    What, 149 comments and no one has yet brought up Huckabee’s comment that “When the FairTax becomes law, it will be like waving a magic wand…”

  155. 155
    Grumpy Code Monkey says:

    Correct me if I’m wrong, but eliminating income taxes won’t eliminate the IRS; they’d still be responsible for collecting revenue from other sources, wouldn’t they? Or would all revenue come from the Fair Tax?

    And like everyone else has said:

    Businesses won’t cut prices to offset the FT completely;
    Workers won’t accept any sort of pay cut;
    Consumers will bear all of the tax burden that business won’t (i.e., I pay 30% tax on a ream of paper for my printer, but the company I work for pays 0% on the thousands of reams for the company’s printers);
    We still have to pay other taxes (property, state and local taxes, etc.);
    Everyone who can incorporate will do so and try to write off everything they buy as a business expense and therefore not taxable;

    “Fair Tax.” “Clear Skies.” “Consumer-Driven Health Care.” Just all code words for “How can we screw people over today?”

  156. 156
    flyerhawk says:

    The real cost of a new home purchase would not go up 30%. Under the FairTax, the cost of that home would be about the same. Again, all the hidden taxes on the wood, nails, shingles, hardwood flooring, sheetrock, doors, lightbulbs, paint, wiring, etc would be eliminated.

    This is pure fantasy. That the “hidden” taxes you mention are state sales taxes that will not be going away. So the tax on wood, nails, shingles, hardwood flooring, sheetrock, doors, lightbulbs, paint, wiring, etc would most certainly still be there.

    And the truth is that the real tax rate would need to be much higher because FairTax calculations are based on taxation all new goods and services. Your landscaper will now be required to pay a sales tax. Your kid’s piano teacher will need to pay it. If they don’t, which they won’t, we will quickly discover that the tax rate is too low to pay the bills.

    And let’s not forget that government purchases will be taxed as well. That’s a cute little way for the FairTaxers to show a much projected revenue stream than actually exists.

    The only thing the FairTax CAN do is shift the tax burden from one group of people to another. Guess which group would be the beneficiary and which would be getting it up pooper?

  157. 157

    Rat Farts!!! I missed the “Fair Tax” Turkey Shoot.

    Would someone please e-mail me if Michael writes a post about how tax cuts pay for themselves?

  158. 158
    jcricket says:

    If they don’t, which they won’t, we will quickly discover that the tax rate is too low to pay the bills.

    You realize that’s a feature, not a bug. Nearly all Libertarian tax policy is designed, in part, to defund the government. Or at least make it work badly enough that people hate it (which also serves their eliminate the government ends).

    It’s like ignoring the racist background/leanings/publications of all the race/IQ scientists.

    I’d actually generalize this to all Republican/Conservative tax policy as well. Sell people on the idea of a free lunch, and then leave the mess for someone else (read: Democrats) to clean up. If the American public ever realizes that Dems are the party of fiscal sanity (tax + spend = sanity; borrow/cut + spend = nutso) Republicans will never win anything outside of the fundie/racist/xenophobe vote.

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