Before I respond to the questions from Thursday, let me get a few things out of the way:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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. 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. “Their view that taxing sales is regressive is just plain wrong. Taxing consumption is effectively the same as taxing wages plus taxing wealth.” 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. 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
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:
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.