RSS Feed MenuSome days ago, I wrote an article itemizing the strengths and weaknesses of a Mike Huckabee candidacy. I praised the former governor’s intelligence and civility – but worried about his attraction to the bunkum idea of a Fair Tax. Gov Huckabee replied with a full-throated defense of the plan’s merits. Huckabee finished second in the delegate count in the 2008 nomination contest. He has to be considered a front-tier candidate for 2012. The merits (and demerits) of a Fair Tax thus remain unfortunately very relevant.
So we return to the debate with a series of four posts on the Fair Tax plan by a leading student of the tax system, Hirschel Adler. In my opinion, he leaves the concept a smoking ruin. Click here to read the entire series.
-David Frum
* * *
The first problem with the FairTax is the manner in which the purported rate is calculated.
Let’s assume a vendor is going to sell an item for $100.00 before calculating the FairTax to be charged to the buyer.
The FairTax rate is purported to be 23%. In the following example though, readers can judge whether most people would consider the FairTax rate to be 23% as supporters claim or in fact 30%. The reader can then judge whether the credibility of the entire FairTax proposal is lost once one concludes that the 23% rate is not in concert with the way most people would initially believe the FairTax is calculated.
Everyone agrees that the FairTax on the above transaction is $30.00.
To calculate the $30.00 tax, one needs only multiply $100.00 by 30%. Hence, most people would conclude the FairTax rate is 30%.
To calculate the purported FairTax rate at 23%, the vendor must first divide the $100.00 being kept by the seller by .77. This yields the sales price of $130.00. One then need multiply the $130.00 by 23% to determine that the sales tax portion of the $130.00 is $30.00. This is not the way most people however would determine the tax rate.
The FairTax authors tell us that the 23% rate is “tax-inclusive, like the income tax”. I was a tax practitioner for thirty-five years and never once heard the term “tax-inclusive” applied to the income tax. Taxpayers calculate their income tax by determining taxable income and then going to a rate table to see what is owed. No one gives a thought towards making some kind of “tax inclusive” calculation.
States calculate sales taxes (the FairTax is a sales tax) by multiplying the tax rate times the cost of the item without the tax. That is the reality. (30% for the FairTax.)
Why is having the tax rate stated and calculated as most people would understand the rate important? It is important because whether it be the FairTax or Obamacare, the public needs and deserves laws that citizens instantly and easily understand. The FairTax fails the credibility test because of the mental gymnastics required to achieve the purported 23% rate. This is the essence of bad legislation.
Until and unless the FairTax proponents ‘man-up’ to their proposal being a 30% sales tax, the FairTax is a non-starter. While one can debate whether the purported 23% rate is correct based on some linguistic technicality, to most people, using the 23% rate is somewhere between a miscommunication and a misrepresentation.
More to come…
easton // Sep 1, 2010 at 3:03 pm
sinz, sure, and considering how most of the OECD nations have far more government intervention and pay far less than we do, with better outcomes (longer life expectancy, etc.) It should be argued that in fact single payer is, in fact, is a moderate position and what he passed was the Conservative one. (at least as far as OECD nations go) with Britain being the Liberal position. Remember Single payer is not the same as the British health care system, not even close.
Republicans want to foist ultra Conservativism on America.
PrivateSectorist // Sep 1, 2010 at 3:06 pm
Wow! This is a great thread! Great points being made on both sides of this issue! Excellent questions! Great job, Daar! Corwin and Easton are hitting the mainstream questions, too! Excellent! and Buddyglass keeps hitting base hits. This is a great thread!
1) Let a State Implement it First
Personally, I believe that we should have one or more of our states implement a FairTax Tax Replacement (FTTR) system first. Our 50 states make excellent labs where we can test drive public programs in the real world and see what we like and don’t like about them. I frankly think a national FairTax is 10 to 20 years away. MUCH closer at a state level.
In our state FTTR proposal, for example, there is currently is a one-time real estate tax on new homes that is about the same as the FTTR rate, so the FTTR replaces that tax very nicely. With the FTTR, there is no sales tax on used homes, except on the amount of any GAIN in the purchase price. With declining home prices, there is no sales tax. A used home that sold for $150K and then sells for $170K would have a sales tax on the $20K. The next time it sells, the tax basis would be $170K.
Knowing this is how government gets its money, do you think lawmakers will tend to pass laws that stimulate the private sector economy or laws to choke it? You get to decide.
2) Sales Tax is Imposed on the Consumer, not on the Business
Keep in mind that the FairTax Tax Replacement is really a Sales Tax. Sales Taxes are imposed upon the final end user of the product or service. They are not imposed upon the business – the business, however, is charged with collecting and remitting the taxes they collect from their customers on their customers’ behalf.
2A) Exporters
What does this mean for Exporters? It means U.S. made goods and services will be WAY more competitively priced, because we cannot impose the Sales Tax on a Mexican or Canadian resident AND our U.S. businesses will not have to pay for entity taxes, payroll taxes (other than UI) nor the cost to comply with any of those! For exports: NO Sales Tax and exporting businesses that are not saddled with any business or payroll taxes! Bingo! Exports increase.
Under the FTTR plan, there are NO business-to-business taxes imposed. The FTTR is making our wealth-generating engines (businesses) tax free because the reality is businesses do not pay taxes anyway – PEOPLE pay taxes.
So, if Dick Cheney gives a speech to the Heritage Foundation and gets paid $50K, there would be no sales tax because neither for-profit nor not-for-profit businesses pay sales taxes under the FTTR. Dick Cheney, however, will get nailed when he elects to go out and convert that $50K of his “ill-gotten gain” (depending on your bias, of course!) into something that he wants to use around the house, like a home theater or something. He pays the system when he buys something. If he does NOT spend it, but instead SAVES it or INVESTS it, he earns interest tax-free, but his $50K is now available for investment and re-investment by the market in other Job-creating enterprises.
3) Easton suggests that Corporate Entity Taxes are not gigantic – but they are! Generally, for corporations that earn more than $50,000 per year profits (that might be a company that employs maybe 8 to 10 employees or more … not just huge businesses) the federal tax rate on that profit in excess of $50,000 is 50%! HALF! Today, all businesses (not some – ALL) take that Tax and all other Taxes and the cost to comply and adds that cost into the prices of everything they sell! I once worked in the Treasury Department of a 2,700-employee U.S. manufacturer and the Tax Department on our floor had 37 accountants and about 50 admin staff! I have also owned my accounting and bookkeeping practice … It is expensive.
4) DO Ex-Patriots get a Rebate? My first reaction is “No”, but I’ll go look that up to be sure. The best answer I have is that the FTTR Prebate is issued to each Household for the number of Legal Residents living there as their Primary Residence. If your PRIMARY Residence is in Mexico, Easton, I would guess that you would not be entitled to a Prebate. Again, I’ll try to get documentation on that. A good question, though. Where do you VOTE?
Under the FairTax Tax Replacement plan, every household recieves a Prebate payment monthly that is equal to the Sales Tax Rate on the Federal Poverty Level (FPL). It is based only on household size of Legal residents. One time per year, heads of household would log online securely to the Treasury Department web site and certify the name, address, birthdate and Social Sec numbers of each resident.
The computer checks to make sure they are legitmate and not duplicated and certifies that, “Yes, you have a 4-person household. For the next 12 months, you will receive the 4-person payment.” In 2010, the FPL for a 4-person household is $22,050/year, so the payments are equal to the Sales Tax Rate times $22,050, then divded by 12 for a monthly payment.
With the FTTR, EVERYONE (including Drug Dealers, Illegal Aliens, Car Thieves, Fat Cat CEOs, Hookers and even CONGRESSMEN!) pay the same tax rate at the Cash register; EVERYONE (except ILLEGAL Aliens) receive the same payment amount each month based only on the size of their household. THAT is the entire FTTR mechanism.
- – - anyone who puts forth the argument that setting up and maintaining THAT FTTR system is MORE expensive than the current IRS-based tax system with over 70,000 pages of tax code (and one employee per page!)really is straining the limits of believability! Whatever employment it does take (probably in the hundreds), there will be tens of thousands of former IRS employees available to do the work – though Private Sector employees could probably do the work for 1/3 of the cost.
You know, when you argue against the FairTax Tax Replacement plan and you do not propose a sound alternative, you are saying that the current tax system is just fine. (Yikes!) That is OK if you really believe that everything is working fine the way it is and I understand if YOUR income would be jeopardized by the FTTR, but HOLY SOCKS … !!!
wiseoldowl // Sep 1, 2010 at 3:10 pm
Easton let’s assume for a moment that the FairTax is our current tax system. Let’s assume there is a new FairerTax bill in congress that would replace the FairTax.
(1)Would you support this bill if you were now required to fill an income tax return by April 15th of each year?
(2) Would you support this bill if you were now subject to an IRS audit?
(3) Would you support this bill if it replaced the consumption tax with an income tax, payroll taxes, a corporate tax, a capital gains tax, and it cost twice as much to monitor this new means of taxation?
(4) Would you support this bill if you were now required to keep track of all financial transactions, and failure to do so could be subject to fines, interest or even imprisonment?
(5) Would you support this bill if only certain people will be able to take advantage of certain loopholes; mainly wealthy Americans?
(6) Would you support this bill knowing you may need to hire a tax accountant because of the complexity of the new 60,000 page tax code that includes over 1200 different tax forms?
(7) Would you support this bill if it created a withholding and payroll tax that would reduce you take home pay by as much as 30 or 40 percent?
(8) Would you support this bill if taking on a second job to fill your family needs would result in a greater up-front percentage being deducted from their paycheck?
(9) Would you support this bill if you would no longer receive their monthly prebate check?
(10) Would you support this bill if it resulted in prices of goods and services to increase by 10 to 15 percent as a result of corporations passing on the new taxes and the cost to comply with these taxes?
(11) Would you support this bill if the earnings from you investments were now taxed?
(12) Would you support this bill if you now needed to save for you child’s college education with after tax dollars?
(13) Would you support this bill knowing that trillions of dollars of investments will move offshore resulting in a huge number of lost jobs?
(14) Would you support this bill because it would give more power back to government where it belongs?
(15) Would you support this bill knowing that lobbyists will now be able to offer favors to congressmen if they vote a certain way to alter this new code?
(16) Would you support this bill knowing it will be easier for the Federal Government to raise taxes by manipulate the code?
(17) Here is the best one. Would you support this bill if illegal aliens, and those profiting from the underground economy would no longer be paying taxes.
It really wouldn’t matter if you supported it or not. It would never pass anyway.
PrivateSectorist // Sep 1, 2010 at 3:26 pm
“Wiseoldowl is at the plate with the bases loaded and a 2-2 count. His average has jumped a LOT this season since he started working with batting coach Dave Ramsey.
Here’s the pitch! A fastball up the middle!
CRACK! It’s going deep into Left Center field! Schmagaggie is back on the warning track!
This one is GONE! A Grand Slam Home Run – the 4th for Wiseoldowl this season!”
whecht // Sep 1, 2010 at 3:38 pm
There is a reason why the definition of “taxable income” is complicated. It is complicated because people pay MONEY based on “taxable income”.
Adjusted Gross Income “AGI” is easier to define because far less MONEY is involved when determining AGI.
I submit that you can not define “taxable income” in less than 10,000 words. Actually, I don’t think you can do it in less than 1,000,000 words.
I have worked for 15 years helping companies finance big ticket purchases by avoiding the corporate income tax.
Just a silly example about the Fair Tax.
I work as a plumber and you need your sink fixed. We decide you should pay $500 for the repair. You would assume that I should pay 23% or 30% on the income. But what if I decide to lend you $870,000 for one day at 21% interest. Now, I don’t really trust you to borrow that much money so I hold the money for you. So, you pay me $500 interest for borrowing the money for the day and I fix your sink for free. I get $500 tax free.
Right now, the federal income tax is absurdly simple for most people. I get a W-2. I get a bunch of 1099’s for income. I get reports that show how much I paid in property tax, state income tax, and mortgage interest. I even get a lot of forms for charitable donations. It isn’t hard at all to figure out my “taxable income” because I lead a very simple life. I honestly don’t understand why the IRS doesn’t complete my tax return for me. There isn’t a single item on last year’s tax return that they don’t already get.
We don’t need a “Fair Tax”. The people, like me, who lead simple lives have an easy time calculating taxes. The people who want to work really hard to save a couple of bucks, like some of my corporate customers, will figure out the loopholes.
Daar // Sep 1, 2010 at 3:44 pm
easton, I’ve noticed that you’re continually referring to how the FairTax hasn’t a chance of any success. Why don’t you go have a beer, and turn on a football game, smugly assured that the best this country can do is tax productivity and render us all as slave accountants for the government.
PrivateSectorist // Sep 1, 2010 at 3:56 pm
Under the FairTax Tax replacement plan, Whecht, there is no longer any need for the terms “AGI” or “Taxable Income” because there is none. It’s no longer any of the government’s business WHAT our incomes are (for taxing purposes)!
You and I and our families ARE paying for not having a FairTax right now – with Higher Prices for everything we buy, with the cost of filing tax returns, with higher-than-needed income tax rates to fill in the “Tax Gap” and with our JOBS as America becomes less and less profitable for Job Providers to do business in.
You have a 15-year career helping companies finance large purchases by avoiding corporate income taxes. If corporate taxes were so terrific, why would they need to be avoided? If corporate taxes didn’t enter in to any business purchasing decisions, why wouldn’t we want to tax our corporations even MORE?
Do you believe that EVERY business avoids corporate income taxes? They don’t. Many try. Some succeed. Most pay corporate income taxes.
So, in your professional estimation and based on your 15 years experience of doing the work, would the number of large purchases by America’s corporations go UP would they go DOWN if their corporate income taxes were permanently reduced to ZERO?
What impact would THAT have on the U.S. economy?
I didn’t get your plumber thing at all. Under the FairTax Tax Replacement plan, you would STILL get your $500 tax free. I, on the other hand, would have also paid you Sales Tax, which you will have to send to the government for me every month.
Now, NEXT month, when my other sink backs up and there are now THREE MORE PLUMBERS in town because it is much, much more profitable to be a plumber under the FTTR, how much do you think I will be charged for that same repair job? MY guess is it would be a lot closer to $350 or $400 than it would be to your $500 last month!
… just sayin’!
whecht // Sep 1, 2010 at 4:12 pm
Dear PrivateSectorist:
Don’t get hung up on the idea that reducing corporate taxes to zero would really change anything. Corporations don’t pay taxes. People pay taxes. If you don’t have a corporation pay any taxes just means that people will have to pay more taxes directly rather than indirectly via a corporate income tax.
I never said corporate taxes are terrific. BTW, corporate taxes are completely voluntary. If your corporation doesn’t want to pay any income taxes then all it has to do is change its corporate structure to a Subchapter S corporation and corporate income taxes disappear.
Why do so few corporations do that? Because they think the benefits of being a C corporation outweigh the costs of being a C corp.
In any event, define “taxable income” in less than 10,000 words and I will drive a truck through the loopholes. Then you can patch the holes in your definition and I will drive the truck through other loopholes.
Rabiner // Sep 1, 2010 at 4:15 pm
The Fair Tax is inferior to a VAT which would have even lower compliance costs since that seems to be a huge issue with the supporters of the Fair Tax. It also treats all transactions equally regardless of who purchases them. It’s a superior system and one that I support over this consumer only VAT tax also called the Fair Tax. However I do not support the elimination of income taxes to replace such a consumption tax because I’d prefer taxes be progressive in nature due to a few reasons:
1. Wealthy individuals can afford to pay a higher proportion of taxes than poorer people
2. Marginal Utility of Money would render the taxed income of an individual earning 1 million dollars as having less utility value than that of a person earning 20,000 dollars.
3. We don’t need a revenue neutral system, we need a revenue positive system considering our deficits and national debt.
The Fair Tax fails on all 3 of these points since it is designed to be revenue neutral, taxes people who earn less at a higher proportion of their income, and those taxes affect the utility of the consumer more than if we taxed higher income individuals more. If I want to get around paying the Fair Tax I simply can incorporate myself into a LLC and purchase things through that and try to get purchases classified as ‘business expenses’. A VAT doesn’t give that option as it treats all transactions equally.
To those who advocate the FairTax, would you support a VAT as an alternative in addition to a simplified lower level progressive income tax with no deductibles?
easton // Sep 1, 2010 at 5:29 pm
Personally, I believe that we should have one or more of our states implement a FairTax Tax Replacement (FTTR) system first.
Look, I actually agree with that 100%. Now you people can concentrate on getting one state to do it and see how it goes.
And Daar, you have to show me the numbers of Democratic and Republican politicians on line for this. As I said, Democrats screamed and argued for Single Payer and it didn’t matter if I agreed with them or not, it wasn’t going to happen (and it didn’t). Then you try to do the next best thing, or the next, next best thing if you can’t do that. PrivateSectorist at least has the sense to know that doing it at the state level is the best viable option.
I have no problem if you prove me wrong. I honestly don’t see it happening since this whole pre-bate thing is likely the first thing that will get cut when recessions hit, but as I said, prove me wrong first not with speculation but with real world evidence.
PrivateSectorist, by the way, it is ex-patriate and not ex-patriot. Big, big difference. (I know you mean well though and I can see how the spelling can get confusing)
sinz54 // Sep 1, 2010 at 6:42 pm
easton:
Single-payer is basically Medicare for all. In fact, that’s what some of its liberal advocates called it.
But providers can’t make a living off Medicare. They exist by cost-shifting; they charge higher fees on those of us with private insurance to compensate for the low reimbursement rates they get from Medicare.
If everybody is put on a Medicare-like single-payer system, providers will no longer be able to do that.
America is not Canada. We have various social pathologies that cause our health care bills to be higher, plus a culture that wants the absolute very very state-of-the-art best health care that medical science can provide, cost be damned.
Now there are some European systems, like the Swiss and French systems, that still have substantial private-sector involvement. But I notice that no liberals wanted to look at the Swiss system.
In any event, if Obama would have pushed single-payer if he had the votes in Congress, the mind boggles at what other things he would have pushed through too. At “The Nation,” a hard-left journal, they are saying openly that their goal is to turn America into something like Sweden, with 40-50% of U.S. GDP going to the Federal government, mostly for various social engineering schemes. Is that what Obama would have pushed through, if he had the votes.
PrivateSectorist // Sep 1, 2010 at 6:46 pm
Thanks, Easton! I appreciate the correction! I learned something new today!
You certainly don’t have to live in-country to be a Patriot!! Coolidge said it best: “Patriotism is easy to understand in America. It means looking out for yourself by looking out for your country.”
One of the tough things with “doing the next best thing” with the FTTR is that you only come away with “FairTax Lite” and in reality that only means an ADDITIONAL tax for the Governing Class to get wealthier from. There really is no such thing as “FairTax Lite” – it’s the whole enchilada or it’s nothing at all. “Doing the next best thing” means allowing the Governing Class to keep their other taxes (MAYBE they drop a rate here or there in their infinite wisdom to placate us voters) and making sure that THEY get to stay in full control of handing out tax favors.
The U.S. needs the FTTR plan! Today, a gigantic portion of government revenue is buried and hidden in the prices of everything we buy. The Governing Class ingeniously gets us to blame businesses and NOT the government! When we, the people, look at the Sales Tax we will pay on the receipt of everything we purchase, we’ll scream and say “You GOTTA be KIDDING me! … our government costs THAT much!!?”
Until that day happens for enough Americans, there is no stopping the American Governing Class until the country implodes. Preventing THAT implosion, for me, is the ultimate, ultimate goal and benefit of the FairTax Tax Replacement plan.
easton // Sep 1, 2010 at 7:05 pm
“Now there are some European systems, like the Swiss and French systems, that still have substantial private-sector involvement. But I notice that no liberals wanted to look at the Swiss system.”
Not true, obviously you do not read TNR. Read up on Jonathan Cohn and what he said about the Swiss. And by the way, TNR is what is read in the White House.
Here is one selected example: http://www.tnr.com/blog/the-treatment/the-left-playing-fire
The Netherlands and Switzerland require their residents to purchase health insurance from private carriers. Residents who do not are subject to fines. Yet most knowledgeable followers of health care policy have only good things to say about the Dutch system and mostly (though not always) good things to say about the Swiss counterpart.
The Dutch system, in particular, is widely considered among the world’s best and achieves most of the goals liberals in this country want: The insurance is universal and comprehensive, access to care is convenient and easy, the quality of medicine is high.
Now, the reforms moving through Congress won’t produce a system as comprehensive as what the Netherlands or Switzerland has. But that’s not because of the individual mandate, which actually makes a lot of sense. (Read here if you want chapter and verse on that.) That’s because the subsidies and regulation in these bills aren’t as generous and strong as they could be.
Or this: http://www.cbsnews.com/stories/2007/07/27/opinion/main3105523.shtml
Yes, CBS News.
If you really want to know how universal health insurance per se affects the diffusion of cancer drugs, a much more logical comparison would be between the U.S. and some of the countries that more closely resemble us in terms of economic development — and that don’t spend quite so little money on their own medical care systems. And guess what happens if you do that? A very different picture emerges: We may be atop the world when it comes to getting new cancer drugs to our patients, but we’re hardly alone on that perch. Three other countries — Austria, France and Switzerland — are right there with us.
I’m still looking into the details of Austria’s system, but if you know anything about the health care systems of France and Switzerland, it’s easy to see why this might be the case. Although those two countries have markedly different insurance systems — France’s is much closer to a government-run, single-payer system than Switzerland’s, which relies more on private insurance — both spend more than their European counterparts (but still less than the U.S.) to guarantee patient convenience and access to cutting-edge care. France, in particular, has an abundance of cancer radiation equipment — more even than the U.S., according to Victor Rodwin of New York University.
Or this: http://healthaffairs.org/blog/2010/08/13/health-affairs-interview-understanding-the-swiss-health-system/
by Chris Fleming
Switzerland has been “rediscovered” as a source of inspiration for the American health care system – which is somewhat ironic, since, as former Swiss health minister Thomas Zeltner tells Tsung-Mei Cheng in an August 2010 Health Affairs interview, Switzerland’s model of “managed competition” among private health insurance plans is rooted in the work of longtime Health Affairs contributor Allan Enthoven.
As Health Affairs Editor-in-Chief Susan Dentzer notes in her introduction to the journal’s August issue, titled Lessons From Around The World, “it’s not sensible to reduce another country’s complicated health system to just one or two bullet points.” As the Zeltner interview makes clear, Dentzer says, the Swiss system has been governed by laws and regulations that place the emphasis on “management” as much as on “competition.” Specifically, Zeltner points to his nation’s requirement that health plans and providers negotiate with each other over prices—with the Swiss government watching over the negotiators’ shoulders and determining prices if negotiations fail.
I could go on and on and reference hundreds of prominent Liberals who discussed, seriously, the Swiss model of Health care. It is a hell of a lot more than no one. Just because you don’t read Liberal blogs doesn’t mean that they don’t discuss these issues.
PrivateSectorist // Sep 1, 2010 at 7:25 pm
Rabiner – I’ll never support a VAT as a taxation method for three primary reasons:
1) A VAT continues to HIDE the Cost of Government from Voters, which is exactly what the Governing Class wants
2) A VAT is applied at EVERY business entity across the board and becomes a tax on a tax on a tax on a tax by the time it gets to me on the retail shelf. It results in MORE tax compliance cost for our businesses and not less and it does nothing to help our competitiveness in the world
3) VAT Taxes are supremely easy to increase over time. Look at Europe and everywhere else in the world they are used. Just 30 or 40 years ago, they were at, like 1% added to every single step of the business delivery or mfg process to start out and today they are, like 30% or 40%. Just bump them a quarter or half point each year. (Businesses can’t afford to complain about higher tax rates because they don’t want to look “unpatriotic” to half of their customers. The Governing Class knows that and that’s what makes businesses a soft target for them.
VAT Tax = Hides Cost of Government, is an Added Tax and is Super Easy to Raise the Rate
The FairTax Tax Replacement plan = REPLACES taxes and makes the Cost of Government truly visible to taxpayers; Very hard to increase the rate.
Daar // Sep 1, 2010 at 7:58 pm
Rabiner: See my “Mastromarco” post, above, re: VAT – moves us in the wrong direction (hidden taxes in prices).
easton: Yep, that’s right: Corporations don’t pay taxes, just pass them through to us (hidden) in higher prices (or reduced dividends, or employee pink slips). The FairTax Tax Replacement (FTTR – I like it!) moves that to visibility. BTW, we here in Michigan – and several other states – are working on it (mifairtax.org).
Rabiner // Sep 1, 2010 at 8:53 pm
Sinz54:
“Now there are some European systems, like the Swiss and French systems, that still have substantial private-sector involvement. But I notice that no liberals wanted to look at the Swiss system.”
I had nothing wrong with looking at the Swiss system, it was conservatives that continuously try to compare ’single payer’ to Britain and only Britain. The Swiss have a very intriguing model which incorporates the majority of what was eventually passed (universal coverage, subsidies for poor to purchase coverage, insurance reforms, ect.).
Private Sectorist:
The VAT hides the cost of government? Because when a VAT is 5% of all transactions we don’t know that government costs 5% to run effectively? (I just pulled a number out of my arse) Your issue of transparency is not a problem if you think the Fair Tax is fine.
Tax compliance is easy and cheap with a VAT. There is no exclusions on transactions, no preferential treatment given to particular types of spending like there is with the Fair Tax and it treats business the same as consumers in that whenever each makes a purchase it is taxed the same.
“A VAT is applied at EVERY business entity across the board and becomes a tax on a tax on a tax on a tax by the time it gets to me on the retail shelf. It results in MORE tax compliance cost for our businesses and not less and it does nothing to help our competitiveness in the world”
That’s incorrect. A VAT would be cheaper for compliance than the current model. A VAT is extremely easy to compute for your business as it only requires you to look a gross recipes and tax out the % the VAT is or it’s computed just as Sales Tax currently is which is not difficult at all.
Also I don’t see how a VAT is any harder to increase than the ‘Fair Tax’ rate. They are both very similar mechanisms except one puts all of the burden on individuals and makes it easier to lead to arbitrage whereas the VAT doesn’t since the tax is occurred at every stage of production. And no, the VATs aren’t 30-40% but rather between 15-25%.
“Businesses can’t afford to complain about higher tax rates because they don’t want to look “unpatriotic” to half of their customers. The Governing Class knows that and that’s what makes businesses a soft target for them.”
You’re kidding right about business? Businesses are always trying to reduce their taxation burdens and don’t care if they look ‘unpatriotic’ since their motives are profit solely. Why else would they be more than fine with transferring jobs overseas if ‘looking unpatriotic’ is such a concern? Or that they have offshore tax shelters? A VAT is superior since it prevents such mechanisms such as offshore tax shelters from being effective in hiding tax liabilities.
wnettles // Sep 6, 2010 at 1:35 pm
Taxing income is just plain wrong. Even taxing consumption should be quite well constrained, as tax is a necessary evil, not a virtue. Less tax + less government = more freedom. Simple math.
The FairTax shifts the power to tax from the special interest purchased legislators back to the people to a great extent. It would be the single most significant shift of power in our nations history.
We can and we must take our government back from the leeches that have infested it. The politicians (we used to have statesmen running the place) must be responsive to the people, not the people to the will of the politicians.
The FairTax, if it does nothing else, gives the power back to the people of the United States. The people allow the government to manage certain enumerated functions. Government has long ago grown into a fearful master, not a submissive servant, of the people. It is time to shake it back down to the Constitutional basics of it’s existance. Government should serve the people, not the other way around.
The taxpayers of this country should not have to live in fear of an IRS audit or tax court, or imprisonment for trying to make a living for their family and to provide defense for our nation.
I am as mad as heck and I am not going to take it any more. We, the people, need to take our country back. Won’t you join your fellow citizens in securing our nation’s revenue collection system so as to insure national defense, and, a sound economy for our children and grandchildren’s future? Join me in putting a end to income taxation and replace it with the FairTax.