12 Days of Solutions, Day 5: Two Tax Reform Proposals
December 14, 2012 at 5:16 pm in News by Tea Party Patriots 91 Comments
As Washington continues to debate how much more of your money belongs to the federal government, Tea Party Patriots wants you to remind your Senators and Congressmen that instead of raising taxes, our elected officials should look to reform the tax code to make it fair, more efficient, and better designed for economic growth.
Two of the most popular forms of tax reform in today’s politics are the “Fair Tax” and “Flat tax.” Either one is better than the current tax code, yet neither is being considered by the establishment leaders in either party.
Why are they better? Consider:
The flat tax consists of a single flat rate with no or few loopholes. This would eliminate the economically inefficient federal tax code America currently has. The current tax code’s labyrinth of loopholes and credits create a situation where many people pay little or no taxes. It’s a system where the more successful one is, the higher precentage they pay in taxes. This essentially encourages people to work less, which is a bad thing for America. The flat tax eliminates this.
The flat tax suffers from two drawbacks. First, it still allows the federal government to directly tax individual Americans. This bypasses a Constitutional check and balance of the Federal Government, the States. Additionally, any kind of income tax incentivizes dishonest behavior in order to keep more of one’s own money.
The fair tax replaces the IRS with a consumption based collection agency, and specifically prohibits income taxation at the federal legislative level. It institutes a national sales tax on all first-hand items. Critics accuse this of being regressive, so its proponents have included a monthly reimbursement check from the federal government to all households equivalent to assessed poverty rate consumption levels. It also exempts all second-hand items (say, a used car) from the tax.
By replacing the current tax code, the fair tax eliminates loopholes in the current code and targets what people purchase, not what they own. However, there is concern that a black market may gain traction through a fair tax system. Additionally, because legislation cannot repeal Constitutional amendments, there is always the threat that the income tax could return – we would then have double taxation. Which is why it would important to repeal the 16th Amendment before instituting the Fair Tax.
In the end, both the flat and fair tax systems are far better than the existing federal tax code. Yet most of Washington is happy to ignore these plans and discuss how best to take more of your money to fund runaway spending. This must change, if America wishes to remain the world’s most powerful nation.
Jim Demint said today:
“It’s hard to work with someone who is intentionally trying to take us over this cliff.”
“The president’s proposal is not a plan, it’s not a solution.”
“He’s going to get his wish. We’re going to be raising taxes. Not just on the top earners. Everyone’s going to be paying more taxes next year in this country, and I think that’s what the president wants.”
It’s all political football and the media is not helping by refusing to cover ‘spending cuts’ as well as tax increases.
The Obama Administration has already responded of ‘The FairTax’ with misinformation so they have no intention of having a legitimate debate on the issue.
A flat tax will just reset the powerful system they currently have in D.C. to then manipulate again and with 50% paying nothing into the system how long do you think it’ll take for that to start?
If we look at the voters today and what they vote for we can see exactly what will happen so if we just repeat history we’ll just get exactly what we have right now.
The FairTax is the only new system out there that will a) spur economic growth without government ‘help’ and b) return power to we the people to do with as we please.
If we return it to government then what’s the point in fixing the mess to begin with?
Tony L – You left out one important feature of the Fair Tax – written into the Fair Tax Act HR25 is the provision that the 16th Amendment must first be repealed before the FTA takes effect.
Yes, our criminal “progressive” tax system must be replaced but don’t hold your breath.
Taxes are the politicians, on both sides of the aisle, favorite carrot to dangle in front of the unwashed masses.
The Right argues that taxes are too high, the Left responds that they are too low, and the endless tug of war goes on. Regardless of the tax rates, which have ranged from 1% for the lower class to 97% on the upper class, we have historically collected revenues of about 18.1% of GDP. This has about a +/- 2% variance. The politicians know it but they could care less. All they’re concerned with is how much of the “bacon” they can bring home to their constituents and, most importantly, cronies.
Both parties have become very adept at giving us their best “Bread and Circuses” with tax debates. They both love to use taxes as a system or rewards and punishments. Usually reward the poor with no taxes and punish the rich with more taxes. This is where the emotional aspects of politics really play out well. The Liberals/Progressives have become especially adroit at pushing this ideology on the illiterate electorate. We have especially seen this under the Barrack Hussein administrations class-warfare/envy platform.
It’s a sad state we have allowed as a great republic to allow a president to declare to the American people that the best they can become is middle-class. Barrack Husseins incessant bloviating about the mean, nasty, rich, fat-cats needing to pay their “fair share” to create some mythical “level playing field”, has borne out quite nicely as the useful idiots who have become ensnared in the welfare state submissively comply. But I digress.
The average American doesn’t know how, or necessarily care why, our tax system works or doesn’t work. The past 100 years of Progressivism has numbed Americans to the realities of a corrupt government. Decades ago when you heard, “crooked as a politician”, it was usually a punch line, today it is reality. Yet no one seems to care. The reason is that Americans have been slowly but very effectively indoctrinated into believing that government can take care of them and their money better than they can. To a significant degree, this is true.
Liberalism/Progressivism knows the simplest way to control the masses is to limit what they know. This has been happening for over 3 decades since the government took over full control of our public education system. With the resultant dumbing down of America, we are on our second generation of illiteracy graduating our K-12 system. The most expensive education system in the world, next to Switzerland, and we graduate Americans that read at an 8th grade level.
Our current system has a 75,000 page tax code, and growing. Between 1986 and 2005 Congress passed over 14,400 amendments to the tax code, this equates to almost 3 changes every day for 19 straight years. There have been about 4,400 tax code changes in the last 10 years. There were approximately 580 changes in 2010 alone. I’ll wager none of you know what most of those 580 changes were for and for whom, but I guarantee they weren’t for you and me.
Oh, by the way, in each of the last 2 years the IRS received 110 million calls from taxpayers and they were unable to answer 25% of the questions. Are you getting more confident about our current tax code?
The only fair tax system is either a Constitutionally amended Fair Tax or Flat Tax. The reason it has to be amended so that Congress cannot manipulate is as easily as we see it can above. Of course the Liberal/Progressive cabal will squeal about the lack of compassion for the lower and middle class and how unfair it will be for them to have to pay any taxes. This is the irrational emotional responses we have been getting from Liberals/Progressives for decades. Of course it’s OK for their favorite bogeyman, the wealthy, to pay more because it’s just the “fair” thing to do.
It’s amusing to listen to the Liberal/Progressive nonsense about “fairness”, the “level playing field” or, my favorite, the “living wage”, none of which they can define or explain who will be the unbiased arbiter of these values. Once again, they govern by emotion rather than policy.
Of course we all know that in order to correct all of our economic, social, moral and cultural problems the most important thing we can do is reform our education system. Poverty consumes our economy with low growth, low productivity and fiscal strain on the rest of the populace. It’s time to reevaluate how we deal with poverty. Obviously the current Liberal/Progressive ideology of just throwing more good money after bad is NOT working. We need to focus less on making poverty more comfortable and more on creating the prosperity that will get people out of poverty.
Expanding our tax base is the only way we can create the growth and prosperity we need, it’s a shame that the left is so resistant to real reforms. We have significant systemic defects in our economy. From irrational trade agreements to obstructive regulations, dysfunctional union intrusions and lack of a significant long term energy policy, we are trying to exist in the 21st century under 20th century principles.
Keynesianism and its growth choking deficit spending must be finally thrown on the economic engineering trash heap. We need to allow the true free-market to create the economy that created the greatest growth and expansion in the history of the world.
We will never please the Liberal/Progressive bobbleheads. They are only concerned with how much you have left after you pay your taxes. If you have more than they do, regardless of income, the system isn’t fair.
Of course John “Tammy Faye” Boehner will crumble under the pressure and hang his white flag of surrender as usual. The symbolic tax rates will be raised on the evil rich fat-cats, it won’t make a difference as far as the economy, debt or growth, but the Libbies will all “feel” better because it’s fairer.
BTW, for those of you requiring that the Fair or Flat Tax have some “notable” economist support them it really doesn’t matter. Out of the thousands of “economists” or even Nobel Laureate’s, how many of them accurately predicted the economic collapse of 2008? I can only think of a few, Dean Baker, Med Jones, Peter Schiff, Nouriel Roubini are the most notable.
But I guess for that typical American “symbolism over substance” anyone will do.
Gun Control
Looks like discussion of gun control is comming up again.
I’d like to share for comments how they do it in Iceland. I live there a few months a year. They are very independent citizens like many of us. They haven’t had a death due to guns in over 15 years. They average 2 murders a year in the entire country. Most of the these are due to love triangles and are done with knives or poison.
Anyone over 21 can own a long gun in Iceland. They have to take a gun saftey class and pass a marksmanship test. They have to get two citizens in their community to vouch for their mental health and pass an interview with the police.
People can own handguns as well as long as they are members of a gun club. When not in use at the gun club the handgun has to remain locked up at the gun club.
Any thoughts?
I’m all for making significant changes in the way we tax Americans but i have to say i’m a bit baffled by the statement in the article that reads… “In the end, both the flat and fair tax systems are far better than the existing federal tax code.” when earlier on in the article we read concerning the “Flat Tax”… “The flat tax suffers from two drawbacks. First, it still allows the federal government to directly tax individual Americans. This bypasses a Constitutional check and balance of the Federal Government, the States.” How is a tax bypassing a “Constitutional check” one that’s really worthwhile ? Not to say it’s not better on some level but for us who are Constitutionalists this seems more than odd.
Regardless of the few potential problems we might face under the Fair Tax, it is the ONLY way to eliminate the controls over our behavior, the fraud, favoritism, selective penalties, enormous costs of compliance and the socialist ambitions associated with ALL forms of income taxation. Twenty years ago, I researched this subject for two years and published a book. I was convinced then, and remain convinced that ANY form of income taxation will be abused and is essentially corrupt. If enacted, and if the 16th Ammendment was repealed, we would create an economic environment that would be beyond our wildest dreams!
Something that is always ignored when discussing a tax system is the effect it will have on the type of people in elected offices. Congress is a dismal failure because it has all the wrong people running it. The people running it are chosen by the majority membership. Therefore, in general, there is something very, very wrong with the people elected to Congress. How can we change that?
The biggest concern is (to any sane person attached to reality) the looming disaster coming due to the fiscal irresponsibility of our government, in particular Congress. Therefore, if every voter had a direct interest in the fiscal sanity of Congress, then they would vote in accordance with their primary concern. The problem is the government cannot control itself, with regard to both spending and a lust for power and authority.
If the type of person in Congress can be changed from fiscal irresponsibility to fiscal responsibility, the effect may be a lessening of the lust for (unconstitutional) power and authority.
If EVERYONE had to pay for the government, then we would get a different type of person in Congress. We would get fiscally responsible people because every voter would pay the price for fiscal irresponsibility.
To change the irresponsibility in Congress, we need a flat tax where EVERYONE pays for the cost of government.
Let’s see how everyone votes when everyone has to pay for the government they vote to create.
A national sales tax only taxes income disposed of. If a person has acquired all or most of what they need or want in the previous year, and do not need to procure anything in the current year, then they would pay no taxes. It’s that simple. And, wait until Congress starts exempting things.
A condition of the flat tax is there are NO exemptions or exceptions. EVERYONE pays the same percentage of their income.
If you look at it from that perspective then you have to ask….what will change under a flat tax?
We already have a flat tax in the payroll taxes and its raised and lowered as a political pawn all the time. If we use that on a flat tax the rates will still change to benefit one group over another and thus people will vote for lower tax rates at the expense of those who would receive a higher tax rate.
This last election where one was trying to say ‘sorry we cannot afford that program’ against ‘we just need to tax the rich more’….you can see why one lost and the other won.
Under The FairTax everyone pays the same rate (no tiered system) yet everyone is treated the same via the prebate and not paying up to the poverty level.
So you still have a progressive system and people will still vote for a lower rate…but with everyone paying the same rate spending must be cut.
Now of course politicians can still ‘tinker’ with the system but that all comes down to we the people holding them accountable for screwing with the system.
It took us 100 years to get where we are…..they know what they can do and I’m sure they’ll try to do it all over again.
We need to learn from our mistakes and what we gave them in the past….and a flat tax will just give them back the football to kick over the fence again.
I have a question: what makes you think that, just because the rate is flat, everyone will pay it? Many millions of illegals, pimps, pushers, prostitutes and underground businesses don’t pay now, and they won’t start just by flattening the rate. If they are taxed on what they spend, however, they WILL pay – and that is the principle behind the Fair Tax. With more people paying (broader base), everybody pays less. Why is that so hard to understand?
Well, Like we learned in DC while attending the Freshmen Orientation. There are some very inside DC people who revealed that they are certain that the Obama administration, along with some key Democratic and Republican Leadership, have already agreed upon a plan on how to deal with the Fiscal Cliff issue.
The GOP and Dems agree to continue to attack each other for the benefit of the media and the Nation, and then blame the Tea Party, which has already begun.
This administration is obviously not wanting to agree to anything but what they feel will help achieve their goals. Which one appears to be the destruction of the USA as we know it. The Sal Alinsky solution.
DB – Your flat tax idea is very intriguing. Do you know of any top economists who support a flat tax? Not some nitwit bought and paid for by the Koch Brothers but preferably a tenured ivy league economist or maybe even a Noble Laureate.
The fickle American public will demand backing of a Flat Tax from several top economist with immense credibility. Unless we can find someone this will never gain any traction to move forward.
However, I like the out of the box thinking….
You mean a Keynesian economist Mr. Fire? Like all of the economists our government has been relying on for most of the last 60 years?
How are Keynesian theories working out? They aren’t. They fail. They failed the first time they were tried, by Hoover and FDR, and they helped bring us the Great Depression.
Now, they helped bring us our current Great Recession.
What do you call a theory that fails to correctly predict reality? Wrong.
There are Noble Laureates in economics with theories that actually and correctly predict reality, and they aren’t Keynesians, they are from the Austrian School.
Who might or might not be paying for their research is of no importance. What’s important is, do their theories correctly predict reality.
In the case of the Austrians, the answer is, yes.
Craig,
I hate to burst you bubble, but I will:
1) Hoover reduced spending after his policy created the Great Depression. Roosevelt expanded it. Hoover was not Keynesian. FDR did end the depression and got elected 4 times as a result.
2) Name one country using the Austrian School. You can’t because there are none….except Somalia and it is doing really GREAT! For such a “smart” idea that has been around for 80 years how come nobody wants it.
3) The Austrian School if full of crackpot ideas. Let’s take a couple:
A) Return to the Gold Standard. At this point about 132,000 tons of gold exist on the planet. That is $4.6 trillion. The value of currency in circulation in the US is over $10 trillion
There is not enough gold to go around, so we would have to use silver, platinum, nickel, zinc, diamonds and probably sea shells. Imagine going shopping with 50 pounds of nickel.
B) Spontaneous Order. One of their big theories. It says just take away all laws and everything will sort itself out. The even have a book out that advocates doing away with stop lights and public highways. Let private companies maintain he roads….some really silly lame brained stuff
4) They don’t believe in statistics. They say it can’t predict human economic behavior.
So the only validation for their ideas is in their head as opposed to actual testing in the real world. I work in predictive analytics for some of the largest companies in the world. All I do is model and predict human consumer economic behavior using statistics. Please don’t tell them it can’t be done as they waste a ton of money doing it. LOL
5) They fail to address classic problems like the public commons, free rider, etc.
Like I said which countries use this nonsense, or even a State? …no, how about a county…a village? how about an old coot raising goats in Redding?
What do the Austrians predict for the US, UK and China in 2013 and 2014?
Craig, good points however the American people are very fickle. When they read “winner of the Noble Prize in economics”, they say” wow this guy must know his stuff…”
That’s how we getting the flat tax moving. Not just writing about on a some Tea Party message board.
One person’s “top economist” is another person’s idiot. You have to be your own economist.
When considering the effect on the voting propensity of the population a flat tax will have, Nash comes to mind. Everyone will vote in their own interest. If pliticians in Washington cause them to pay more taxes than they think are necessary, they will vote for people who cause them to pay less taxes. A flat tax will have this direct effect on who is elected to go to Washington.
As far as economic theory goes, I’ve learned a lot from people who’ve devoted their lives to the study of economics. Something I’m not willing to do.
I will read what they write, and choose what makes sense to me.
The root of Keynes theory is that “experts” with the power to control the value of money, and the amount of money in our national economy, can do a better job of regulating employment and prices than can be done by allowing the free market to work.
As with all central planning fantasies, it fails totally.
Craig,
So where is the Austrian school implemented nationally? How is that working?
Craig – We gotta get these people who have devoted their lives to studying economies out to the American people. What are their names? Are they teaching in academia? Are they published?
This way we do things their way and change America.
I’m trying to make things happen rather than just doing talk, talk, talk and complain, complain, complain.
Craig, I find Malthus very helpful. He writes about the effect of fluctuations in economic activity and its effect on the average living standard. In particular, something that is known as the “Malthusian Effect” has been ignored, yet it is evident everywhere.
We created a living standard where a population boom occurred in the Malthusian society relying upon the government for subsistence. Naturally, when the government runs out of money, like it has today, there will be a very detrimental effect on that society’s living standard.
Unless some ideology such as Marxist communism is put into effect.
The Malthusian Effect is real. We are at the point where the Malthusian society is on the verge of felling the impact of the government exhausting the money supply.
Coincidentally, we are seeing obviously Marxist proposals from the Democrats, and being agreed to by the RINOs.
Somebody has to stand up and stop this. It won’t be Boehner. He’s proved he will negotiate away the Constitution and capitalist economy. We need a new Speaker.
We are the only sane voice in government. We have to stop the insanity.
No more debt. Not for any reason. Make the government grow up and act responsibly. They have to live within their means. We created our own problems by allowing Marxist principles to infect our government and society. We need eliminate that infection.
We should be concentrating on who we want to replace Boehner. That should be a constant topic here. We need to vet the candidates to replace Boehner.
Here’s a letter from a group of economists who support the FairTax: http://www.fairtax.org/PDF/Open_Letter.pdf
What do all these economists have in common? They all favor the FairTax:
Donald L. Alexander
Professor of Economics
Western Michigan University
Wayne Angell
Angell Economics
Jim Araji
Professor of Agricultural
Economics
University of Idaho
Ray Ball
Graduate School of Business
University of Chicago
Roger J. Beck
Professor Emeritus
Southern Illinois University,
Carbondale
John J. Bethune
Kennedy Chair of Free
Enterprise
Barton College
David M. Brasington
Louisiana State University
Jack A. Chambless
Professor of Economics
Valencia College
Christopher K. Coombs
Louisiana State University
William J. Corcoran, Ph.D.
University of Nebraska at
Omaha
Eleanor D. Craig
Economics Department
University of Delaware
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Henry Demmert
Santa Clara University
Arthur De Vany
Professor Emeritus
Economics and Mathematical
Behavioral Sciences
University of California, Irvine
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Demissew Diro Ejara
William Paterson University of
New Jersey
Patricia J. Euzent
Department of Economics
University of Central Florida
John A. Flanders
Professor of Business and
Economics
Central Methodist University
Richard H. Fosberg, Ph.D.
William Paterson University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Professor James Frew
Economics Department
Willamette University
K. K. Fung
University of Memphis
Satya J. Gabriel, Ph.D.
Professor of Economics and
Finance
Mount Holyoke College
Dave Garthoff
Summit College
The University of Akron
Ronald D. Gilbert
Associate Professor of
Economics
Texas Tech University
Philip E. Graves
Department of Economics
University of Colorado
Bettina Bien Greaves, Retired
Foundation for Economic
Education
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management
and Leadership
Arizona State University
Darrin V. Gulla
Dept. of Economics
University of Georgia
Jon Halvorson
Assistant Professor of
Economics
Indiana University of
Pennsylvania
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
James M. Hvidding
Professor of Economics
Kutztown University
F. Jerry Ingram, Ph.D.
Professor of Economics and
Finance
The University of Louisiana-
Monroe
Drew Johnson
Fellow
Davenport Institute for Public
Policy
Pepperdine University
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Richard E. Just
University of Maryland
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
David L. Kendall
Professor of Economics and
Finance
University of Virginia’s College
at Wise
Peter M. Kerr
Professor of Economics
Southeast Missouri State
University
Miles Spencer Kimball
Professor of Economics
University of Michigan
James V. Koch
Department of Economics
Old Dominion University
Laurence J. Kotlikoff
Professor of Economics
Boston University
Edward J. López
Assistant Professor
University of North Texas
Franklin Lopez
Tulane University
Salvador Lopez
University of West Georgia
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
Glenn MacDonald
John M. Olin Distinguished
Professor of Economics and
Strategy
Washington University in St.
Louis
Dr. John Merrifield,
Professor of Economics
University of Texas-San
Antonio
Dr. Matt Metzgar
Mount Union College
Carlisle Moody
Department of Economics
College of William and Mary
Andrew P. Morriss
Galen J. Roush Professor of
Business Law & Regulation
Case Western Reserve
University School of Law
Timothy Perri
Department of Economics
Appalachian State University
Mark J. Perry
School of Management and
Department of Economics
University of Michigan-Flint
Timothy Peterson
Assistant Professor
Economics and Management
Department
Gustavus Adolphus College
Ben Pierce
Central Missouri State
University
Michael K. Pippenger, Ph.D.
Associate Professor of
Economics
University of Alaska
Robert Piron
Professor of Economics
Oberlin College
Mattias Polborn
Department of Economics
University of Illinois
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
Barry Popkin
University of North Carolina-
Chapel Hill
Steven W. Rick
Lecturer, University of
Wisconsin
Senior Economist, Credit Union
National Association
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory Univeristy
John Ruggiero
University of Dayton
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina at
Chapel Hill
Dr. Carole E. Scott
Richards College of Business
State University of West
Georgia
Carlos Seiglie
Dept. of Economics
Rutgers University
John Semmens
Economist
Phoenix College
Arizona
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and
Finance
Marshall School of Business
University of Southern
California
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
James F. Smith
University of North Carolina-
Chapel Hill
Vernon L. Smith
Economist
W. James Smith
Dean of Liberal Arts and
Sciences and Professor of
Economics
University of Colorado at
Denver
John C. Soper
Boler School of Business
John Carroll University
Roger Spencer
Professor of Economics
Trinity University
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and
Resource Economics,
University of California, Davis
Curtis R. Taylor
Professor of Economics and
Business
Duke University
Robert Vigil
Analysis Group, Inc.
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
F. Scott Wilson, Ph.D.
Canisius College
Mokhlis Y. Zaki
Professor of Economics
Emeritus
Northern Michigan University
You will never find a reputable economist who endorses “the flat tax” because there is no such thing. A flat INCOME tax is a form of taxation, just as a VAT (Value Added Tax), a sales tax and a progressive income tax are. If you ask 3 different flat taxers what version of “The Flat Tax” they support, you are very likely to get 3 different answers. This is in contrast to the FairTax, which is a specific proposal with extensive economic studies, as well as the endorsements of a number of professional economists, including one nobel laureate. The FairTax also has a bill in congress (both houses) with more co-sponsors than all of the other tax reform proposals combined.
99 year Anniversary
HEADS UP EVERYONE . “At this time back in 1913 when most of congress was home for Christmas is when they got together to pass the Federal Reserve act” So if they want to pass either gun laws or some debt limit increase without Congress this is when they will do it.
Does anyone know which countries use the Fair and the Flat tax? How long have they used is and what is the result.
Suggestion if nobody has used it then we have to ask why. Do we want to be the first? Perhaps we could pressure some small country to try it first so we aren’t left with a huge mess if it does not work.
Our States have a variety of tax plans. Which works best?
I still favor taxes that are confined within the limits of the Constitution.
Why the heck would we want another country to reap the benefits of The FairTax?
No other country has tried it because a) The FairTax was researched and put together specifically for the US and b) if they did all the business and funds would move there making those catching up with nothing to offer.
When you create a tax free economy for businesses the first one will benefit while the others cannot improve on that other than paying money TO those businesses…which won’t happen.
The US is an innovative country…why can we not be on this?
$20 million of research can’t be wrong. Neither can the economists who’ve been asking for this for years. Government does not want this….that’s the biggest motivation to pass it in my opinion.
Many countries use a flat system, usually in concert with VAT taxes and other taxes, resulting in gross tax oppression. Here in the USA, we do not wait for other countries to set the example. It is our providence to lead, not follow. The nation adopting the Fair Tax first will reap the benefits of the world’s businesses coming to their shores, along with the money and the jobs.
The Flat Tax would ultimately solve nothing because the IRS would still be in place and exemptions from the tax would begin anew. The Fair Tax is the only way to go but the IRS must be removed first (A savings of 10 Billion a year). With Prebate checks covering the Fair Tax up to the poverty level, it essentially levels the playing field. Thise who buy more will pay more tax. You see, taxing Capital and Labor is nonproductive because all that it does is drive away Capital and reduce the need for Labor. With Offshore Financial Corporations (A legal means of cheating), the rich will keep their moeny and no one wins. Why should they pay a Capital Gains tax that is higher than what they pay from OFC earnings?
There are nine US States that practice a version of the Fair Tax. (AK, WA, NV, WY, TX. SD, NH, TN, FL). THese states do NOT have a State Income Tax but instead gain needed government revenue through other various means. (Note: NH and TN have a 2 percent tax on Capital Gains). One means that they use is a sales tax. Those who buy the most will pay the most in sales tax….sound familiar? I seriously doubt that much of a black market will emerge in the wake of the Fair Tax because only new goods and services would be taxed. In exchange for a 23% consumption tax on new goods and services, we would be free of more than one injustice of our current tax code. (The current cost of compliance with that is also 23%, so this tax would be instead of versus in addition to what we already pay.
When I see the collection of hacks in Congress, should I be disgusted at them or the people who keep voting them into office? The President wasd term limited, why isn’t Congress? If a Senator had only one 6 year term and a House Rep only one 2 Year term, something just might get done! (The President limited to one 6 year term would also be good.) Politics was never meant to be a career but we have these hacks doing just that. John Boenher and Mitch McConnell are the problem…they will never be part of any soultion…
As far as the Koch brothers being behind the Tea Party….get a clue….
Only enough Government to Govern and only enough Regulation to Regulate
If we allow a central nervous system depressant which is a systemic toxin (Alcohol) and a central nervous system stimulant as addictave as heroin (Tobacco) to be legally consumed, why not LTR other drugs too?
Mexico uses the Vat (Value Added Tax and their GNP was up to 3.6% for 2012 a hell of alot better
then the good old USA. we live down here for 6 months and you cant believe how things are
going all the stores are busy their is no unemployment beacuse they have to work or starve.
I did some research. Many countries use a flat tax and have for years. Nobody uses he fair tax and Forbes has concluded to will never work.
Forbes is a flat tax guy so of course he’ll say it will never work.
But if you look at other (many) economists and the $20 million of privately funded research that was done you’ll see that it can work.
No other country has returned the power of taxation back to its people for a reason….power.
Don’t just rely on someone who is already in the tank for a tax reform system, rely on your own research and studying.
Under The FairTax you keep your paycheck free of federal income taxes, you do not pay a penny in taxes until you spend your money and only then once you’re done taking care of you and your family.
How can just paying a flat rate on your income be better than that?
Also…you think government will keep those rates flat?
The income started as a flat tax….it didn’t stay flat and neither will a flat tax today.
Wake up America, we need to take power AWAY from Washington, not keep it there.
If John Nash’s assessment of human motivation is correct, then a flat tax EVERYONE pays will have a direct impact on the type of person elected. People will vote for fiscal sanity because, if they continue to vote for the fiscal insanity we currently have, they will pay directly for their ludicrous choice. People act in their own self-interest. Voting for fiscal insanity will have a direct negative effect on any majority that votes for fiscal insanity.
The solution is the American people. If the entire population had a vested interest in the sanity of our government, then they would vote for people who put in place a sane government, as opposed to the obvious insanity in our government today.
No more debt. Not for any reason. We need to draw a line in the sand and stand on it.
If John Nash’s assessment of human motivation is correct, then a flat tax EVERYONE pays will have a direct impact on the type of person elected. People will vote for fiscal sanity because, if they continue to vote for the fiscal insanity we currently have, they will pay directly for their ludicrous choice. People act in their own self-interest. Voting for fiscal insanity will have a direct negative effect on any majority that votes for fiscal insanity.
A description of John Nash’s conclusion that people act in their own self-interest.
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The Fair Tax is an incompetent tax: The problems of the Fair Tax are solved with a VAT Tax, which is what Romney advocated. Down-size our Federal Government to only a military then put in a VAT Tax to finance the federal government. We already have state Sales Taxes, so adding a Fair Tax at the retail level tells smugglers exactly how much they can make by smuggling a particular item. An example of the problem with the Fair Tax is the smuggling surrounding Excise Taxes.
A VAT is the worst idea known to mankind.
We add taxes to the products and services we use and they just get tacked onto the price so in the end we all pay the taxes at the final retail sale. What ‘The FairTax’ does is strip out the bureaucracy of all those taxes and payments and just adds it to the end already.
However with no bureaucracy and cost of compliance the prices of goods and services can drop so we’re not just paying the same price + the tax.
Research it, trust me.
On a separate note the UK started a nice little 2% VAT a few years ago….it’s now 20%
If we give the government more power to tax they’ll do just that….TAX!
We need to be in control of when and how much we pay in taxes and ONLY The FairTax does this.
Why is NOBODY talking about the toxic scam BASELINE BUDGETING taboo?
Nobody ever mentions it….this is half the reason for the debt mess…
giving all the gov-meant divisions automatic 4-14% raises a year NO MATTER WHAT costs us many many tens of billions!!!
Drop that to 1% for 3 years…I dare anyone to run those numbers…
I dare anyone to propose another “Grace Commission” to study Federal gov-meant efficiency.
I dare anyone to examine federal worker benefits and exemptions from the Socialized Medicine bill…and ask why!
Also stop quietly accepting the dimdem premise that tax cuts cost when ALL history shows they increase revenues!!! I am sick of hearing that. You want to change, you elite Repubs? Then open your mouths and stop accepting all the utopian socialist lies about basic economic laws!!!
ROSS PEROT WAS THE LAST TO GAIN MOMENTUM POLITICALLY WITH, FLAT TAX, THE ONLY FAIR TAX.! YOU SHOULD STUDY THAT MORE, AND EVEN CONTACT HIM BEFORE HE DIES.
There is no such thing as a ‘fair tax’ because what you deem as ‘fair’ may not be what someone (maybe a politician) deems fair.
Only ‘The FairTax’ treats everyone the same, does not punish/reward one group over another and puts the control of the revenue stream firmly in the hands of we the people.
You pay taxes, but only once you’re done taking care of yourself.
I would really like to see a flat tax no cap on spending, this would do away with the IRS (what a waste no one knows what is going on) that savings alone would really go a long way on paying down our national Debt!!!
A flat tax would not do away with the IRS as our income would still be taxed.
Only ‘The FairTax’ (ignore ‘fair tax’ in this article, its incorrectly pronounced) would remove the need for the IRS and still generate the same revenue without punishing economic growth and thus increase revenue to pay down the debt leaving we the people in control.
Tax codes are about two things, revenue generation and control. Now the government controls the purse strings as the funds are removed from us before we even see them most of the time. Under ‘The FairTax’ we the people control when we pay taxes and only then we pay AFTER we’ve taken care of ourselves and our families.
The income tax discourages investment and productivity. It penalizes exporters who must add the cost of taxes into the price of everything they export. People with high incomes are leaving the United States in droves to avoid taxes. Working people have up to 25% of their income confiscated before they even get their paychecks. The IRS intrudes into our private affairs. We waste hundreds of billions of dollars and millions of hours every year, in compliance costs. People defraud the system for undeserved refunds. Hundreds of billions in revenue from the underground economy and tax cheating is left on the table.
The FairTax changes everything. Because it is a tax on consumption, it sidesteps that entire list of evils associated with the income tax. The FairTax however goes beyond mere reform. The income tax is killing our economy. The flat tax is just a tweak of the current system, subject to the same social engineering and influence peddling. The income tax cannot be repaired. It must be replaced. Of all the plans being discussed on capital hill, only the FairTax can bring the kind of fundamental and comprehensive change that will allow for a permanent fix.
This discussion about tax reform is all well and good and the flat tax, structured properly, would indeed be a far better alternative to our current morass of a tax system. However, we must first confront a more fundamental issue. When you say tax reform to a Democrat, they immediately think of tax increases and all the wonderful new things they can spend the increased taxes on. Virtually none of it will be directed towards paying down the debt. That’s not how they think. The more money confiscated from the private sector through taxes, the better.
When you say tax reform to a conservative or most Republicans, they immediately think of tax decreases and lower spending across the board. The concept of enforcing a “living within your means” environment on the federal government, instead of just perpetually upping the credit limit on the nation’s credit card comes to mind.
My point is that when you start hearing about tax reform coming out of Washington, you have to be very careful who is proposing the “reform” and what they really mean by it. As an example, President Obama is proposing “tax reform”, for lack of a better word, on those he has labeled “rich”. The arbitrary figure of $250,000 was pulled out of the air and assigned by him for purposes of this discussion. In his view, extracting more money to fund ever more government spending on what he deems “important areas” (green energy, new entitlement programs, expansion of existing entitlement programs, etc., etc.) is perfectly reasonable.
Now of course his plan won’t generate the kind of tax revenue he anticipates. Tax increases rarely generate the amounts of revenue they are projected to do and it’s quite simple to refer to historical data of other such increases in the income tax rates to verify this outcome. So in 12 to 18 months time, Obama will once again be out of the stump again advocating “tax reform” on people making say $150,000 or $100,000 or whatever number he selects as necessary to make up for the tax shortfall the government didn’t collect from the “rich”. Then when that reform also comes up short, as it no doubt will, we’ll be treated to a national speech where he proposes either a VAT or some other tax surcharge on top of our existing tax code as a necessary “reform”. Expect to hear the words fairness, equality, and social justice sprinkled liberally throughout the speeches. And the forced march of the country towards socialism and eventual economic collapse continues….
What is the ‘Fair Tax’?
You really need to research this a little more because if you did you’d know it is ‘The FairTax’ (HR.25/S.13). A ‘fair tax’ is whatever someone deems as fair….and we all know politicians love treating everyone fairly.
‘The FairTax’ was polled by TPP a year or two ago and won outright (by a large margin) so why are you still on this flat tax thing?
We have a flat tax, it’s the flat rate payroll tax we and our employers pay and is the most regressive tax there is.
The flat tax has a particular problem. It REQUIRES that the IRS remain in place….otherwise, how could it be flat?
The fair tax has been introduced in the House and in the Senate….it has about 80 co-sponsors. It would require that the 16th amendment to the constitution be repealed. I have talked to no one who would object to the elimination of the IRS. What has the IRS ever done for anyone except those who would like to game the system?
Jim
Tax reform is the most important issue for 2013. The Ways and Means Committee has said that tax proposals will be reviewed in early 2013. It is tremendously important for citizens to become informed and state their desires to W&M. The concept of taxing income is basically wrong and taxing consumption correct and logical. Please go to fairtax.org and thoughtfully review what $20 million private dollars of research produced. The FairTax Bill HR 25 has more cosponsors than any reform proposal. It creates jobs, eliminates the IRS, makes everyone including crooks pay and completely eliminates any tax on purchasdes up to the poverty level. Read about it, you’ll like it then push for it.
The Fairtax maximizes GDP growth and has companion
legislation to have the states repeal the 16th amendment.
The flat income tax leaves the possibility that a Party
can reintroduce the bracketed loophole system that
breeds class warfare. The Fairtax IS the solution for
the Tea Party to endorse! Go to http://www.Fairtax.org
and see why have come to this assertion. Please do
this for our children and their children. Liberty is the
GOAL!!!!
We desperately need the FairTax. It will aid in so many ways and my favorite part – empowering the states to collect federal revenue! http://www.fairtax.org.
The way I see it there is only one way to turn U.S. around and get the U.S.A. back on track is,
(1)Through out the hole Tax program and
(2)Start over with a new 100% Flat Tax
(3)Business would pay 1/8 or 1/4 % of there Gross
(4)the rest of us would pay 10% 15% or what ever
(5)the rest of us from the CEO all the way down to the Sweeper.
(6)All people on food stamps welfare would louse 10% 15% or what ever.
(No change could be made with out referendum vote of WE THE PEOPLE)
(7) We would still have the IRS all they do is Audit us.
(8)Why should the rich pay more then the rest of us,10% of a dollar is 10 cents,if all would pay pay a % that would end the problem of funding obama care.
Martin, you must not forget to add the 7.65% payroll tax to whatever percentage you start with on the flat tax. The only flat tax proposal in Congress (HR1040) starts at 19% and decreases to 17% after 2 years. Add the payroll tax to that, and you have 24.65 – 26.65%. How’s that feel to you? And the folks that don’t pay now (illegals, pimps, pushers, prostitutes and underground businesses STILL won’t pay. The only way to collect from everybody is through consumption – not income. http://www.fairtax.org
My only objection to the information that was given about the Fair Tax is that they did not mention that under the Fair Tax all imbeded taxes, that are added during the manufacturing process, would be removed and that the Federal Sales Tax would be approximately equal to the cumulative imbeded taxes. Therefore, the cost of the product would not increase, which is what most people thing would happen under the Fair Tax.
Go to: http://www.fairtax.org for all the details.
Robert – Finally someone like you make this excellent point about the Fair Tax. The price of the product will remain the same. All the anti-FairTax proponents keep falsely claiming that the Fair Tax is added on top of what an person pays for a product.
To illustrate your important point here is how the Fair Tax actually works: Picture the chain of commerce that goes into the manufacture of that wheelbarrow a customer purchases at the local hardware store.
Starting with the iron ore miner who excavates the ore from the earth. The miner adds his tax and compliance costs to the price of ore he sells to the smelter. The trucker transporting the ore from the excavation site to the smelter add his tax and compliance costs to his transportation charge. The smelter producing the steel from the raw iron ore adds his tax and compliance costs to his smelter expenses which included the miner’s and trucker’s transportation tax and compliance costs to the price of the steel he produced. Again there is the trucker transporting the steel to the wheelbarrow manufacturer adding his tax and compliance cost to the transportation charge. The suppliers of all the other products (the tire, the wooden handles from the lumber mill, the bolts and washer, etc.) that go into the manufacture and assembly of the wheelbarrow, the wholesaler and the local hardware store ALL add their taxes and compliance costs to their selling price.
Extensive studies by leading economists have concluded that the embedded cumulative taxes and compliance costs to bring a product to the market calculates to $0.23 out of every retail dollar spent on goods and services. Almost all products pass through multiple corporations in the manufacturing process and each of these corporations add their embedded tax expenses to the already embedded taxes from their suppliers to the cost of their end product. So besides paying income tax, social security tax and the medicare tax out of the customers wages he/she are also paying an additional .23 cents tax on every dollar spent at WalMart, Home Depot, Tractor Supply Co., etc.
While the Fair Tax is referred to as a sales tax it is unlike our state and city sales tax we currently pay when we purchase a product or service. As you are aware the state and city sales tax is tacked on to the price of the item you buy. For example, if you purchase that wheelbarrow that has a price tag of $100 and the state/city sales tax is 8.25%the retailer will add $8.25 to the price of the wheelbarrow and you will pay $108.25 for the item. Under the Fair Tax system the price tag will still be marked $100 upon which only the 8¼ state/city sales tax will be added. How is this possible your ask?
Let me dissect the $100 price tab for a better understanding of the Fair Tax plan. Under our current tax system assume that the retailer’s wholesale cost for a wheelbarrow from the distributor is $80.00 which includes all the embedded taxes and compliance cost (23%) accumulated in the manufacture of that wheelbarrow. For the purpose of this explanation the retailer’s markup is 25% to cover his overhead expenses and profit thus the retail price tag is marked $100.00. Then when you purchase the item the retailer will tack on the 8.25% sales tax for a total price of $108.25
Now under the Fair Tax there being no accumulated 23% embedded tax and compliance costs the distributor’s wholesale selling price of the wheelbarrow to the retailer has now been reduced to $65.04 not the $80 under the current system of taxation. Since the retailer is the final seller of the wheelbarrow the merchant adds his markup of 25% to his cost of $65.04 and prices the wheel barrow at $81.30. At the check out counter the register will record the wheelbarrow sale at $81.30 and calculate the 23% Fair Tax which equals $18.70. The register then calculates the 8.25% or $6.71 again based on price tag amount of $81.30. The results of the two taxes, $18.70 and $6.71 added to the price tag amount of $81.30 the customer pay $106.71 for the wheelbarrow.
Notice the difference between the $108.25 paid for the wheelbarrow under the current tax system and the $106.71 with the Fair Tax system.
I’ve been watching all issues political for a long time. In other words, I’m old enough to be topping out. At first glance, the matter seems complex. At second glance and after some analysis and retrospective thinking most of the matter can be nutshelled………… Legislators both federal, state and local have spent a good century at least in manipulating tax structures by pandering to the citizenry and its inclusive special interests for the purpose of gaining two primary things ……….favor for votes by which they can better achieve entrenchment in the power structure – and personal enrichment.
Here are some reflections:
WE are the apathetic suckers. WE allow it to be done to us. WE are responsible for the character and ultimate intent of those chosen to “represent ” us. Why, might you think, do we now have a constitutionally illegal occupying the peoples house? A great number of US actually ASK for abuse – wrongly thinking that WE will benefit.
A recommended reading list:
The Constitution of the United States and its Bill of Rights
Mein Kampf
Ingalls and Marx ‘Manifesto’.
Chairman Mao’s ‘Little Red Book’
Lots and lots of personal, introspective thinking.
We need to pass an exam……. a multiple choice question…….
Is it about me?
Is it about thee?
Is it about we?
Congress must never raise the white flag to Obama’s tax increases. It will destroy our country. It will provide Obama blankets of power to destroy. Congress will lose its Congressional power and relinquish to Obama’s demands. Congress must stand firm until Obama cut spending, and cut the national debts.
I think national sales tax is a good way of raising revenue. Close the IRS, and the current federal income tax. Impose national sales tax except all groceries. Everybody must give share because everybody benefits.
Another way is to simplify the tax code. Lower the rates to provide economic growth to reduce unemployment. More people working will give more revenue to the government.
The Neutral Tax is the only tax reform plan that will eliminate 100% of the federal government’s micromanagement of the tax code. The Neutral Tax gets us back to federalism with respect to taxation and it lets states develop their tax structures. So, instead of having these endless theoretical debates about whether the FairTax, flat tax, or some other plan is best at the federal level, the states can enact whatever tax structure they want and determine what is best for their citizens in the real world.
Please read more about The Neutral Tax at http://www.neutraltax.com.
My wife and I each have good pensions and I have social security income. We average about $147K in adjusted gross income annually. We pay about $21K in federal income tax. This means we have a 14.5% effective tax rate, and we are in the 25% tax bracket. As a retired couple we would collect $428/month under the Fair Tax in a “prebate” ($5,138 annually). Under the Fair Tax, we could save or invest about $2000 per month from the tax we currently pay including the prebate paid monthly. That would leave us $123,138 available for spending during the year, which means at a 23% included Fair Tax rate, the federal government would collect $28,322 from us. That means my effective tax rate increases to 19.25% which I would happily pay as my “savings or investment” rate would be 16.3% which means I net only a -2.95% tax loss, (-19.25 +16.3) compared to a rate of minus 14.5% under the income tax. Obviously, I am better off under the fair tax, and those who earn less fare even better. When considering the Fair Tax you have no tax deductions, no forms to file ever, and pay nothing more when you buy something (because the fair tax is included in the price, and the price no longer includes “imbedded corporate taxes” which are replaced by the 23% the fair tax). Everybody wins!
These are good economic reforms but the real reforms are never specifically mentioned like eliminating the Departments of Agriculture, Education, etc., the EPA, the NRLB, the military bases in the countries around the world, the strangling regulations, auditing and eliminating the Federal Reserve, inventoring the gold in Fort Knox, and reducing /eliminating all the other unconstitutional and unnecessary activities. There are specifics that were never mentioned by the establishment candidate. No wonder we lost. Lets get back to the Tea Party fundamentals.
The problem is too much spending, not insufficient revenue.
You are exactly right. All the talk around tax reform focuses on keeping things revenue neutral. We should NOT be settling for the status quo of Obama’s spending hikes since he took office. Since when are annual deficits, due to increased spending, of over $1 trillion dollars a year considered either normal or acceptable. Federal spending should be reduced to the 2007 levels, which were the historic norms.
Getting Outside The Box – Reforming The Tax Code and Immigration
By Frank Brassell
America faces an unprecedented problem, an explosive situation that is ticking away as we sit, as citizens, held hostage in the blast zone. We face exploding taxation that will affect all demographics; races, belief systems and ideologies.
As Superstorm Sandy was the result of multiple unfortunate circumstances all occurring simultaneously and acting synergistically, the Unites States faces a perfect storm that could lead to sustained economic malaise, huge increases in poverty, and an end to the prosperity that has allowed the US to become the preeminent national force in the world.
The so called “fiscal cliff” of taxation and sequestration, the deficit spending and resultant runaway debt level, and the lack of a useful and/or fair immigration policy. The first two are obvious. But what does immigration have to do with it?
Let’s change the name and widen the scope, because “illegal immigration” is only one segment of the actual problem; we’ll call it “shadow economy”. This is the sum total of economic activity that flies under the radar, hundreds of billions of dollars that are not subject to the Government’s control or or even clear knowledge. It includes many activities; people working “off the books”, illicit drug trafficking, prostitution, organized crime, tax evasion. I’m sure there are other things too, but I’ll not waste our time listing them. The point is, there are tens of millions of people and hundreds of billions of dollars that cannot be taxed with our traditional income tax system. Why on earth do we leave this source of revenue off the table?
Let’s go after these people and funds for the revenue portion of the “balanced” approach, and conveniently solve another problem that dogs our economy and country.
I’m talking about finding the solution by getting outside the box. The FairTax (HR25/S13) at it’s heart is simply a national sales tax that REPLACES the current tax system. The income tax, FICA tax, capital gains tax, death tax and gift tax would all disappear. Everyone (and I mean EVERYONE) would be on a pay as you go system, with no withholding and no end of year filing. A pre bate to all households (comparable to the Standard Deduction in the current law) would completely reimburse taxes paid on spending up to the poverty level for each household demographic, and would result in a progressive effective tax rate from zero at the poverty level, up to a near 23% of consumption on the most wealthy.
Most lay people, and more importantly, most elected officials have never studied the Fairtax. How would I know this? Because I have read many responses from elected officials regarding the Fairtax to their constituents from all over the United States. Except for a very few, their reasons for failing to support the FairTax are weak restatements of flaws perpetrated by poorly prepared politicians and media types, and biased economic hacks.
There is another, darker side, however. Many politicians are unwilling to trade some of the power they wield to manipulate the people and to profit from wrangling over the tax code in order to do the right thing for the country. Look at it this way… how many times are important issues ignored or pushed aside conveniently in favor of messing with or arguing over the tax code? How many times has the tax code been quietly altered to benefit a particular industry or demographic group in order to curry favor and votes? It’s time for this to STOP. The current tax code has been dead for years, and it’s time we buried it, along with the IRS, tax cheats and the associated corruption with it.
Now you may ask why we should establish a whole new group of Washington bureaucrats to collect and police this tax. The answer is, we shouldn’t, and we needn’t. Collection and enforcement at the ground level will be handled by the state sales tax agencies. These organizations already have the infrastructure and know-how to do this job efficiently. The retail level “collector” sends the deposit of funds to the state, and the state forwards it to the treasury. Simple. Easy. AND- already in place. This is why the IRS would be phased out over a couple of years. It won’t be needed once it has cleaned up loose ends from the current code. That’s 14 billion in savings.
What about jobs? Let’s be serious… the only condition that can rescue the US from the spiraling rise of citizens needing aid from the Government in order to survive is one where jobs are plentiful. Plentiful employment opportunities leads to full employment, which causes wages to rise. Labor is suddenly worth something again, and businesses will need to compete for qualified applicants. As income rises, so does revenue. This is one reason we are borrowing so much money. People are out of work, so not only is there a drop in revenue, it is multiplied because instead of contributing a percentage of income, they are drawing out their whole income. Talk about the math not working!
The FairTax will set the conditions for growth, but only if we can dispel the myth that corporations and businesses actually pay taxes. They don’t. Individuals do. Businesses (including corporations) have no monetary input other than that which comes from sales of their goods and/or services. The taxes are wired into the prices, and so are collected all year long from consumers. In the event that the lawyers and accountants do a good job of finding deductions, exemptions and loopholes, these collected taxes never end up being paid to the treasury. Clearly, the individual still pays the estimated tax liability, but the company pockets the money as a hidden windfall. These middlemen (businesses) should not be involved in “collecting” taxes from consumers unless there is some guarantee that the funds will be deposited. The FairTax is still collected by businesses at the retail level, but beyond the short transition period after the FairTax is enacted, there is no excuse for failing to deposit the collected amounts. If you think this can be beaten, think again. The states are very vigilant in policing sales tax, and very insistent on receiving collections on time and in the correct amount.
Which brings me to one of the issues that dogs the FairTax. There is a feeling that businesses should pay more taxes. But we have just learned two things…
Businesses collect money from individuals (YOU) to pay their taxes.
They don’t always send these collections to the treasury.
Just so we get the whole picture here… the army of lawyers and accountants that figure out how to avoid sending in the money? YOU pay their expenses also, through your commerce with that company, directly or indirectly.
This all results in you paying higher prices due to the hidden “embedded” taxes. Some of the people I have explained this to are outraged. The truth is, we should ALL be outraged, because we are getting swindled. It’s not as though anyone is doing anything illegal, it’s just that the system we use has gotten so complicated and has been used to reward and punish or to pick winners and losers for so long that everyone just accepts it, and the loser is the individual. That’s you, by the way.
The FairTax does away with business taxes. So that high corporate rate that send jobs overseas? It drops to zero, which makes the United States the best rather than the worst tax climate for business. Will the business still generate tax revenue? Yes, because all of it’s employees and ownership will be paying the FairTax on their consumption. Stockholders and investors will pay as they spend their earnings. Prices before adding on the FairTax will be lower (because the army of lawyers and accountants will be much smaller), and so after the FairTax is added on, it won’t effectively be the full 30% increase over current prices that opponents like to shout out in order to scare you away. Businesses currently in the US will also end up being more competitive both domestically and abroad, because the cost of doing business will go down, making US products more affordable compared with foreign goods, the price of which will not go down. Imagine what regaining millions of manufacturing jobs could do for our economy!
So, to recap, everybody beyond the poverty level pays at least some taxes, even those who have been beyond the reach of the current system, such as criminals and undocumented workers. Businesses pay no taxes at the Federal level, and so can flourish even while they lower their prices to stay competitive. Businesses are attracted to the US, instead of fleeing. More jobs are created, wages rise rather than falling, and tax revenues increase over time as people have more money. These are good things!
Oh, and just so I don’t get called out on it, there are two classes of purchases that are exempt from the FairTax. Used goods (even homes and autos) and education and training expenses. Your tuition and books are exempt, but you will still need to pay taxes on your cheer leading uniform.
So… I mentioned immigration. What does the FairTax have to do with immigration? It represents an opportunity and incentive that can be used to bring undocumented persons into a legal status over time. You see, the pre bate that all households receive to offset the taxes on necessities (I said above that it is analogous to the standard deduction) will not be available to non-citizens. This means that citizens will pay an effective rate that is lowered due to the offsetting of taxes up to the amount paid on consumption up to the poverty level. Non-citizens, however will not get this pre bate, and so no matter what their income they will pay the full 23% on their consumption.
I propose that after passing the FairTax, undocumented workers could register and after a period of five or so years with a job and no significant lawbreaking, they could take the citizenship test and once they pass, could become citizens and qualify for the rebate. For that period, they would be paying the full FairTax rate with no offset, which would satisfy the need for a sacrifice in order to “get in line”.
The registration period for this privilege and honor of a path to citizenship should be around six months, with additional security on the border during that time. It should be based on a household, parents and children only (no uncles or cousins) and a one time occurrence, because keeping it open to new applicants would be a magnet to increase the problem.
The rest of the details could be worked out by the Congress and Administration.
One of the biggest reasons that illegal residency is such a problem is that undocumented workers take from the system without contributing. A period when these people are contributing, and at a higher than normal rate, would go a long way toward making a path to citizenship more palatable to most citizens. For a single person, the pre bate is a little over $200 a month; five years would represent over $12,000. A couple would pay in twice that much. The amount paid in would grow with the number of people in the household, making it reasonable to extend citizenship to spouses and dependent children.
This will work. The FairTax is already written, and should not be altered. It is a masterpiece of legislation. It is simple, hard to cheat, and above all, fair without being crushing to any demographic. If the rate goes up, it goes up on everyone. If the rate goes down, it goes down for everyone. Everyone gets the pre bate based on household demographic, and everyone has lower lifetime tax rates.
The Fairtax – EVERYONE pays, so everyone pays LESS. Let’s get outside the box and do this!
OK Congress… I’ve solved two huge problems for you. No need to spend the whole time wrangling with the tax code. Done. The Fairtax broadens the base by 10-20 million people with the majority of these paying the absolute top rate, so the added revenue will be there, especially as businesses start to flock to the US for tax purposes. A trillion or so dollars hidden offshore will probably be repatriated since the Government will not be confiscating it as soon as it gets here. People will be able to start working, lowering the amount of aid that goes out each month. The economy will right itself on the revenue side. The issue of what to do with undocumented residents will be off the table too.
Now you will have plenty of time to figure out how to cut the spending. GET ON IT!
Whose Property is it?
Tax reform is imperative, if this country is to survive. In the early 20th Century, really “smart” people convinced the unwashed masses that an income tax would be a great step toward getting money from the evil rich to pay for government and lighten the load on the worker: ”From each according to his ability, to each according to his need” – so to speak. Very Marx-like. This convincing argument led to the 16th Amendment, which allows the government to tax you directly and to take your whole salary, if it were to be so brazen. Read the Amendment! What did the Amendment accomplish? Think about it. Since the 16th was ratified, the government owns your paycheck until it takes “what it needs to pay the bills”, then lets you have the rest. In the early 1800′s, Frederick Douglass’ “master” did the same to him! He earned as much as $10 a week on self contracted jobs, was required to turn it over to his “master” at the end of the week and account for every penny, then was allowed to have five or six cents to spend on himself! ”From each according to his ability, to each according to his need!”
Our Forefathers broke the bonds with England through the Declaration of Independence where they declared “that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness.” I submit to the reader that the 16th Amendment totally destroys these unalienable rights by taking your property before you even have it in your possession. To have the right to life and liberty, you must be able to acquire property (money to live on) to sustain those rights. The Fair Tax Act returns those property rights through repeal of the 16th Amendment and by only taxing new goods and services consumed by the individual. Plus, it rebates in advance the taxes you will pay each month on your necessities of life. You get paid before the government is able to tax what you consume. No longer will it be able to tax you on what you produce. That to me is very American! Let’s get behind The Fair Tax Act, HR 25 in the US House and S 13 in the Senate, and return our country to its original greatness when ingenuity, innovation and risk taking guided us to achieve American exceptionalism.
See http://www.fairtax.org for more information on the FairTax, especially: http://www.fairtax.org/PDF/GradingtheTaxReformPlans_10.16.2011.pdf and http://www.fairtax.org/PDF/PrebateExplained2012.pdf
One Hundred Years of the Destructive Income Tax is Long Enough! FairTax!
“It does not take a majority to prevail … but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men.” —Samuel Adams
What is the use in wasting time on 12 ways to do anything, especially overcome an obama agenda? This is almost silly. Obama is not going to agree with any of this. Nor are most democrats. It is time to take action and to hell with expecting any politician to represent conservatives, patriots, pro-Americans or the Constitution. It is time to go our way without silly little plans and hoping for idiots like Boehner to help. Ninety plus % of all politicians don’t give a crap for anyone else. The other 10% don’t have and never will have any effect. Damn it people, America is broke financially and our government is broken so it is up to us to TAKE IT BACK AND RESTORE THE ORIGINAL INTENT OF THE CONSTITUTION. Is our freedom to worship, freedom of speech, freedom to work and earn an adequate income, and the future of our children not worth fighting for? We MUST throw out the traitors at every level of government. Throw our the filth in the local school district that are teaching our children sexual immorality and teaching them socialism and taking away parents rights to oversee their own children. Throw out “BLOOMBERG” type mayors, dump socialist governors. Our federal government is full of card carrying Communists. Obama was endorsed by Communists. Obama has violated the Constitution over and over with absolute arrogance. So……someone organize civil disobedience, noncompliance with EVERY obama law, order or regulation. Begin work stoppages; one day a week, then one week a month. Refuse it all. Obama MUST be told NO; NO TO EVERYTHING. No deals, no compromises, nothing. Dealing with obama is like dealing with the devil. In the meantime everyone should plan to survive a civil war or international war. The Islamists are taking over. The Methodist and Episcopalian Churches both have interrelation programs to “understand and educate” about Islam. There is nothing to understand beyond the obvious; they kill women and children, the kill ALL who are not Islamic, they lie to advance their cause. Islam cannot coexist with our Constitution, Christianity, or the American culture. This is not a war on paper, it is real and it is happening now. Obama is a Islamist Marxist who uses Nazi tactics. Now take this common sense and get busy saving your family, the country, Christianiy, and freedom.
Pete is correct
There are two big issues with America’s current tax program.
One, it is subject to annual, weekly, daily tinkering, adjusting, modifications by craven politicians. Markets and economies need stability, predictibility, simplicity and transparency – our current tax structure is none of these things.
Two, our current income tax scheme is misguided and a great hinderance to our economic growth and competitiveness; if as our founder’s believed, that the power to tax is the power to destroy, and further that taxing anything discourages that thing. Specifically, taxing income discourages income – that is our income tax program discourages productivity – contrary to our nation’s and our personal best economic interests.
Ideally, 1) we would devise a new tax structure with the input of private sector economists and business leaders – probably something along the lines of the Fair Tax. 2) Next, the 16th Amendment must be abolished – an absolute prerequisite. 3) Whatever tax program is adopted must be simple, transparent and predictable and out of general purview of Congress – to prevent continual tinkering, modifications, changes – absolutely, the new tax guidelines/structure should be placed in a new, very tightly worded Constitutional Amendment. 4) The new tax program should not allow the government to tax the economy past a set percentage (i.e. 10% of GDP, 20% of GDP, etc…) and should not exceed a set percentage of sales tax (i.e. 10% of GDP, 20% of GDP, etc…), it should require a 3/4ths supermajority of Congress for a raise in tax rates (which shall still not exceed either of the set percentages), 5) should provide strong Constitutional protections for citizens against abuse and persecution by any tax authority or tax police (i.e. not citizen shall ever be require to pay more than 10% of their annual income in Federal taxes, no citizen’s 4th or 5th amendment rights shall be voided by any tax police, etc.)
Yes Bryan. The income tax is right up there in the three dumbest things the US population has let their government do to us. Why would anyone think that taxing labor (reducing wages) would have no effect on the concept of productive labor? It is obvious to many unskilled in our society it does not pay to work so, they don’t which is as much the problem as the tax itself; unproductive and dependent citizens.
Let’s turn the box on its side and remove this disincentive to work. The Federal Budget is divided into two large expense categories; discretionary and mandatory. So, let’s put in place two revenue streams and require rates that completely pay for all national expenses based on the accrual accounting method (no unfunded liability growth).
First, to cover the $1.6 trillion in discretionary (includes military spending) expense put in place a national property tax on all real property. At today’s values that could be as small as 10%. So, the larger your home or office the more you pay. If you are not the owner but rent, the amount of this tax paid in rent will be mitigated somewhat by the market rate for rentals. We should get the environmentalists to join as it will inhibit “sprawl”.
Second, put into place a national sales tax on all items other than food and healthcare to pay for all “social” programs. We currently run about $12 trillion in consumption and need $2 trillion to cover this category we all call “entitlements”. So, a 20% sales tax should accomplish the goal of no debt spending and everyone will have to contribute to this part of our liability whether their income is legal or they have overstayed their visas.
What this does is give incentive to produce income while inhibiting unnecessary sprawl, unleashing capital out of protective tax investments. Every worker would bring home whatever they make incentivizing them to work more not less. At the same time those with wealth will pay more taxes based on the real property they own and on all their luxury purchases. They might redirect some cash from these purchases and put it to work in new income producing ventures growing the economy and jobs for those who want to work. Most important, this balances the budget and puts government spending “in the face” of everyone providing some incentive to inhibit the growth of the Federal government.
Pete is absolutely nuts! And so is Ron G for agreeing with “a revolution” producing chaos and massive civl disobediance. Once you break the mold through insurrection (armed or unarmed), the chances of have an ordered society again pale in comparison to having some autocratic regime that nobody wants. What is needed is for intelligent conservative people to recruit friends and business associates to join them in Tea Party like groups (including Fair Tax advocates, Americans for Prosperity, American Conservative Union, Citizen’s United, Family Research Council, Alliance for American Manufacturing, etc) and then have those groups consolidate into a umbrella policy board to advocate for sensible change and support candidates who will carry our combined agenda. We have the numbers (go to an elections results map and see how many “red” counties there are in the USA). If we do nothing however, it will inevitably get worse in short order.
I like the flat tax with a couple of modifications. Each person in a household is entitled to tax freedom on a set amount with a flat rate of taxation above that. Example: One person $30000 tax free, then 30%. Two people $60000 tax free then 30%. Family of three people $90000 tax free then 30%. The numbers can be played with but the bottom line is that poor people pay no taxes but the tax code applies to everyone the same way. No more different tax laws for different people. Earned income tax credit is gone. Mortgage interest is gone. Capital gains tax is gone exept when it is redeemed for personal use. Then regular tax rates apply.
The flat tax changes nothing and keeps the IRS intact. The flat tax won’t stay flat long and would simply reset the the tax law amendment counter back to zero. The lobbyists and career politicians would love the renewing of their IRS cash cow. Plus, there is no flat tax legislation written.
The HR-25/S.13 “The FairTax Act of 2011″ already has the support of 70 House and 10 Senate sponsors and co-sponsors.
http://www.fairtax.org/PDF/The%20FairTax%20RealReformVsTheFlatTax.pdf
Open letter from 80 economists supporting the FairTax: (Source – FairTax.org)
-1-
An Open Letter to the President, the Congress, and the American people
Concerning Reform of the Federal Tax Code
Dear Mr. President, Members of Congress, and Fellow Americans,
We, the undersigned business and university economists, welcome and applaud the ongoing
initiative to reform the federal tax code. We urge the President and the Congress to work
together in good faith to pass and sign into federal law H.R. 25 and S. 25, which together call
for:
•
Eliminating all federal income taxes for individuals and corporations,
•
Eliminating all federal payroll withholding taxes,
•
Abolishing estate and capital gains taxes, and
•
Repealing the 16th Amendment
We are not calling for elimination of federal taxation, which would be irresponsible and
undesirable. Nor does our endorsement call for reduced federal spending. The tax reform plan
we endorse is revenue neutral, collecting as much federal tax revenue as the current income tax
code, including payroll withholding taxes.
We are calling for elimination of federal income taxes and federal payroll withholding taxes.
We endorse replacing these costly, oppressively complex, and economically inefficient taxes
with a progressive national retail sales tax, such as the tax plan offered by H.R. 25 and S. 25 –
which is also known as the FairTax Plan. The FairTax Plan has been introduced in the 109th
Congress and had 54 co-sponsors in the 108th Congress.
If passed and signed into law, the FairTax Plan would:
•
Enable workers and retirees to receive 100% of their paychecks and pension benefits,
•
Replace all federal income and payroll taxes with a simple, progressive, visible,
efficiently collected national retail sales tax, which would be levied on the final sale of
newly produced goods and services,
•
Rebate to all households each month the federal sales tax they pay on basic necessities,
up to an independently determined level of spending (a.k.a., the poverty level, as
determined by the Department of Health and Human Services), which removes the
burden of federal taxation on the poor and makes the FairTax Plan as progressive as the
current tax code,
•
Collect the national sales tax at the retail cash register, just as 45 states already do,
•
Set a federal sales tax rate that is revenue neutral, thereby raising the same amount of tax
revenue as now raised by federal income taxes plus payroll withholding taxes,
•
Continue Social Security and Medicare benefits as provided by law; only the means of
tax collection changes,
•
Eliminate all filing of individual federal tax returns,
•
Eliminate the IRS and all audits of individual taxpayers; only audits of retailers would be
needed, greatly reducing the cost of enforcing the federal tax code,
An Open Letter to the President, the Congress, and the American people
-2-
•
Allow states the option of collecting the national retail sales tax, in return for a fee, along
with their state and local sales taxes,
•
Collect federal sales tax from every retail consumer in the country, whether citizen or
undocumented alien, which will enlarge the federal tax base,
•
Collect federal sales tax on all consumption spending on new final goods and services,
whether the dollars used to finance the spending are generated legally, illegally, or in the
huge “underground economy,”
•
Dramatically reduce federal tax compliance costs paid by businesses, which are now
embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world
markets,
•
Bring greater accountability and visibility to federal tax collection,
•
Attract foreign equity investment to the United States, as well as encourage U.S. firms to
locate new capital projects in the United States that might otherwise go abroad, and
•
Not tax spending for education, since H.R. 25 and S. 25 define expenditure on education
to be investment, not consumption, which will make education about half as expensive
for American families as it is now.
The current U.S. income tax code is widely regarded by just about everyone as unfair,
complex, wasteful, confusing, and costly. Businesses and other organizations spend more than
six billion hours each year complying with the federal tax code. Estimated compliance costs
conservatively top $225 billion annually – costs that are ultimately embedded in retail prices paid
by consumers.
The Internal Revenue Code cannot simply be “fixed,” which is amply demonstrated by more
than 35 years of attempted tax code reform, each round resulting in yet more complexity and
unrelenting, page-after-page, mind-numbing verbiage (now exceeding 54,000 pages containing
more than 2.8 million words).
Our nation’s current income tax alters business decisions in ways that limit growth in
productivity. The federal income tax also alters saving and investment decisions of households,
which dramatically reduces the economy’s potential for growth and job creation.
Payroll withholding taxes are regressive, hitting hardest those least able to pay. Simply
stated, the complexity and frequently changing rules of the federal income tax code make our
country less competitive in the global economy and rob the nation of its full potential for growth
and job creation.
In summary, the economic benefits of the FairTax Plan are compelling. The FairTax Plan
eliminates the tax bias against work, saving, and investment, which would lead to higher rates of
economic growth, faster growth in productivity, more jobs, lower interest rates, and a higher
standard of living for the American people.
An Open Letter to the President, the Congress, and the American people
-3-
The America proposed by the FairTax Plan would feature:
•
no federal income taxes,
•
no payroll taxes,
•
no self-employment taxes,
•
no capital gains taxes,
•
no gift or estate taxes,
•
no alternative minimum taxes,
•
no corporate taxes,
•
no payroll withholding,
•
no taxes on Social Security benefits or pension benefits,
•
no personal tax forms,
•
no personal or business income tax record keeping, and
•
no personal income tax filing whatsoever.
No Internal Revenue Service; no April 15th; all gone, forever.
We believe that many Americans will favor the FairTax Plan proposed by H.R. 25 and S. 25,
although some may say, “it simply can’t be done.” Many said the same thing to the grassroots
progressives who won women the right to vote, to those who made collective bargaining a reality
for union members, and to the Freedom Riders who made civil rights a reality in America.
We urge Congress not to abandon the FairTax Plan simply because it will be difficult to face
the objections of entrenched special interest groups – groups who now benefit from the
complexity and tax preferences of the status quo. The comparative advantage and benefits
offered by the FairTax Plan to the vast majority of Americans is simply too high a cost to pay.
Therefore, we the undersigned professional and university economists, endorse a progressive
national retail sales tax plan, as provided by the FairTax Plan. We urge Congress to make H.R.
25 and S. 25 federal law, and then to work swiftly to repeal the 16th Amendment.
Respectfully,
Donald L. Alexander
Professor of Economics
Western Michigan University
Wayne Angell
Angell Economics
Jim Araji
Professor of Agricultural
Economics
University of Idaho
Ray Ball
Graduate School of Business
University of Chicago
Roger J. Beck
Professor Emeritus
Southern Illinois University,
Carbondale
John J. Bethune
Kennedy Chair of Free
Enterprise
Barton College
David M. Brasington
Louisiana State University
Jack A. Chambless
Professor of Economics
Valencia College
Christopher K. Coombs
Louisiana State University
William J. Corcoran, Ph.D.
University of Nebraska at
Omaha
Eleanor D. Craig
Economics Department
University of Delaware
An Open Letter to the President, the Congress, and the American people
-4-
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Henry Demmert
Santa Clara University
Arthur De Vany
Professor Emeritus
Economics and Mathematical
Behavioral Sciences
University of California, Irvine
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Demissew Diro Ejara
William Paterson University of
New Jersey
Patricia J. Euzent
Department of Economics
University of Central Florida
John A. Flanders
Professor of Business and
Economics
Central Methodist University
Richard H. Fosberg, Ph.D.
William Paterson University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Professor James Frew
Economics Department
Willamette University
K. K. Fung
University of Memphis
Satya J. Gabriel, Ph.D.
Professor of Economics and
Finance
Mount Holyoke College
Dave Garthoff
Summit College
The University of Akron
Ronald D. Gilbert
Associate Professor of
Economics
Texas Tech University
Philip E. Graves
Department of Economics
University of Colorado
Bettina Bien Greaves, Retired
Foundation for Economic
Education
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management
and Leadership
Arizona State University
Darrin V. Gulla
Dept. of Economics
University of Georgia
Jon Halvorson
Assistant Professor of
Economics
Indiana University of
Pennsylvania
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
James M. Hvidding
Professor of Economics
Kutztown University
F. Jerry Ingram, Ph.D.
Professor of Economics and
Finance
The University of Louisiana-
Monroe
Drew Johnson
Fellow
Davenport Institute for Public
Policy
Pepperdine University
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Richard E. Just
University of Maryland
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
David L. Kendall
Professor of Economics and
Finance
University of Virginia’s College
at Wise
Peter M. Kerr
Professor of Economics
Southeast Missouri State
University
Miles Spencer Kimball
Professor of Economics
University of Michigan
James V. Koch
Department of Economics
Old Dominion University
Laurence J. Kotlikoff
Professor of Economics
Boston University
Edward J. López
Assistant Professor
University of North Texas
Franklin Lopez
Tulane University
Salvador Lopez
University of West Georgia
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
Glenn MacDonald
John M. Olin Distinguished
Professor of Economics and
Strategy
Washington University in St.
Louis
Dr. John Merrifield,
Professor of Economics
University of Texas-San
Antonio
An Open Letter to the President, the Congress, and the American people
-5-
Dr. Matt Metzgar
Mount Union College
Carlisle Moody
Department of Economics
College of William and Mary
Andrew P. Morriss
Galen J. Roush Professor of
Business Law & Regulation
Case Western Reserve
University School of Law
Timothy Perri
Department of Economics
Appalachian State University
Mark J. Perry
School of Management and
Department of Economics
University of Michigan-Flint
Timothy Peterson
Assistant Professor
Economics and Management
Department
Gustavus Adolphus College
Ben Pierce
Central Missouri State
University
Michael K. Pippenger, Ph.D.
Associate Professor of
Economics
University of Alaska
Robert Piron
Professor of Economics
Oberlin College
Mattias Polborn
Department of Economics
University of Illinois
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
Barry Popkin
University of North Carolina-
Chapel Hill
Steven W. Rick
Lecturer, University of
Wisconsin
Senior Economist, Credit Union
National Association
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory Univeristy
John Ruggiero
University of Dayton
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina at
Chapel Hill
Dr. Carole E. Scott
Richards College of Business
State University of West
Georgia
Carlos Seiglie
Dept. of Economics
Rutgers University
John Semmens
Economist
Phoenix College
Arizona
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and
Finance
Marshall School of Business
University of Southern
California
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
James F. Smith
University of North Carolina-
Chapel Hill
Vernon L. Smith
Economist
W. James Smith
Dean of Liberal Arts and
Sciences and Professor of
Economics
University of Colorado at
Denver
John C. Soper
Boler School of Business
John Carroll University
Roger Spencer
Professor of Economics
Trinity University
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and
Resource Economics,
University of California, Davis
Curtis R. Taylor
Professor of Economics and
Business
Duke University
Robert Vigil
Analysis Group, Inc.
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
F. Scott Wilson, Ph.D.
Canisius College
Mokhlis Y. Zaki
Professor of Economics
Emeritus
Northern Michigan University
The only fair tax is a flat tax where every person pays the same percentage rate with zero deductions and zero loopholes. Every time “Flat Tax” is dicussed we hear that it will hurt the poor. Therefore, determine a poverty wage level. Those earning below that wage pay zero tax. Nor do they receive a so called “Refund” in excess of monies paid in i.e., no earned income tax credit. At tax time, those below the poverty wage would be refunded all the monies they paid into taxes.Tax determination would be simplified to entering on the tax form:
1. Wages earned from W2 plus monies earned from all other sources.
2. Multiply wages earned by tax rate in percent.
3 Amount withheld from wages(amount already paid)
4 Subtract line 3 from line 2.
5 If line 3 is larger than line 2, the result is your refund.
6. If line 3 is smaller than line 2, the result is what you owe.
We could lay off 75% of the unnecessary IRS employees
The reason this will never happen is because the wealthy would have to pay their fair share and the wealthy “own” our politicians who will be rewriting the tax code.
see my plan below; I can emil more detail if interested, along with your new tax form. write me at tbeebe6535 (at) yahoo (dot) com
Remember the 80/20 Rule. Right now it’s killing Us, but there is a practical way to make it work FOR Us.
Why will the FairTax make American goods and services more competitive both domestically and abroad? (These are very simplified examples, but they demonstrate the process at work under the FairTax.)
The removal of embedded taxes will lower the cost of a given item from 10 to 15%, possibly more.
Domestically:
Assume an item has a shelf price of $100 in the US after passage of the FairTax. The actual cost of the item is $77 with the other $23 being the FairTax. That same item sold for $88.55 prior to the FairTax. The Foreign import of that item sold for $77 prior to the FairTax. After the FairTax, the foreign item sells for $100 dollars, because the cost is $77 and the FairTax is $23.
Of course, it’s very possible that the item from China, for instance, could be even cheaper than the $77, Let’s say it was $70. Once the FairTax is added on, it would have a shelf price of $91. In this case, instead of having to spend an additional $18.55 to buy American, the difference in price would only be $9. On a $100 item, that’s a pretty small amount to pay for the increased American quality, making the option of “buying American” plausible, even if the only reason is to stick it to the Chinese, or to support American business.
Abroad
Foreign goods sold in their own countries have embedded taxes just like we do. So, when OUR embedded taxes are stripped away, our goods leave the US at the lowest cost point. Using our widget above, in it’s own country, it might sell for the $77. Without the FairTax added on, our widget would also sell for $77. That ought to help our trade imbalance!
Also, keep in mind that the more complex the labor and supply chain for a given item, the greater the amount of the embedded taxes, because embedded taxes are cumulative. Firewood, for example, comes from a single source, and has few processing steps. A house or automobile on the other hand, has numerous sources of materials, all of which have multiple processing steps. Each of these sources and all of these processing steps incrementally increases the embedded taxes. Another source of embedded taxes are the costs to comply with the current tax code. Since there are no Federal taxes on businesses under the FairTax, the armies of accountants, tax preparers, tax lawyers and tax LOBBYISTS are unnecessary. Currently, the care and feeding of these unnecessary positions is borne by the consumer in the form of higher costs.
Removing all these embedded costs will make the FairTax effectively far below the “face value” rate, because the cost that the tax is added on to is far less than the status quo. There is even an initial one time tax credit to businesses to facilitate the lowering of costs from day one. Read the bill.
Won’t the FairTax lead to a huge black market? No. And here’s why.
Since the FairTax is only paid on new products, couldn’t vendors start selling those products with out the FairTax? Well they could, but there would really be little (or nothing) to gain, and a lot to lose. Because there are no business to business taxes, raw materials to be processed into goods and finished goods for business use (to sell) would be exempt from the FairTax. BUT – to get that exemption, the buyer must qualify to buy wholesale (or resale). That means that for the tax free inputs, the enforcement agency (the state sales tax agency) will expect FairTax deposits. If you start buying a bunch of stuff tax free, ostensibly for resale, and then don’t make any FairTax deposits, the state will be on you in a very uncomfortable way, at least by revoking your wholesale privileges, possibly with criminal prosecution. On the other hand, if you were to try and fly under the radar by avoiding becoming a wholesale buyer, there would be little advantage because your raw materials would be a taxable purchase. So you would pay the FairTax on your materials out of your own pocket, and then would not be able to significantly undercut your reputable competition. If there is no advantage gained by cheating, there is little reason to cheat.
This doesn’t mean that unscrupulous people won’t try… and there may be a few instances where the FairTax won’t be paid directly, an example might be a kid paid to mow your lawn. But then he will go spend his earnings, and the tax will be paid then.
Someone once brought up that stolen goods could be sold without collecting the FairTax. Fine. But those are STOLEN goods, and hopefully that will be taken care of by throwing the seller (and the stealer) in jail.
The truth is, none of these schemes could ever approach making even a negligible dent in the amount of revenue collected, because even when someone makes a profit by criminal activity, sooner or later he’ll spend his ill gotten gains, and the tax will be collected then. Unless he just buys his own criminal products.
Is there anything positive about having used goods being FairTax exempt?
Aside from the obvious fact the goods are only taxed ONCE, which I believe is very positive, there is a significant possibility that we might start repairing and reselling items instead of throwing everything that has a minor flaw into the landfill. If used goods are suddenly worth more on the market than they historically have been, it’s reasonable that a lot of items that in the past weren’t worth repairing will be given new life. The parts and repair labor would be subject to the FairTax, but the reconditioned item should still sell at an attractive price in comparison to a new item.
Won’t the wealthy stop spending? Not likely.
The wealthy will still need to maintain their goodies, even if for a short time they don’t buy too many new toys (have you ever priced a new roof for a 10,000 square foot home?). But look at it this way. Under the income tax system, someone really wealthy might take a bath in the stock market one year, and so show a big loss. Not only will he get off the hook for income tax this year, but there may be losses large enough to carry over into subsequent years. You’ve all heard of wealthy people buying businesses for tax shelters… they don’t care if those businesses show a loss, because that offsets a huge profit made somewhere else in their “empire”. Under the FairTax, even if a wealthy person lost money from an income standpoint, it’s not like they aren’t going to be spending money maintaining the lifestyle to which they have become accustomed. Consumption goes on whether the wealthy have income in a given year or not. This is why consumption is a more stable source of revenue than income. Right now, it seems like everybody is out of work. The cruel joke is, that even though they don’t think they’re paying taxes, as mentioned before, there are still the embedded taxes that even the most tax exempt people pay throughout the year. The FairTax just gets this out in the open, and MAKES SURE that the taxes collected by businesses are actually deposited to the treasury.
Consumption by the wealthy does fluctuate though… some years you buy a yacht, some years you save for one. You still need to buy fuel for the LearJet, pay the pilot and maintenance, lube and service the limo, pay the pool company, etc., etc., etc.
I have a lot of current debt. Will that hurt me if the FairTax is passed? NO.
On the contrary, right now, you are servicing that debt with money that has been taxed. After the FairTax is passed, you will be paying your existing bills with money that has NOT been taxed, and since the debt was incurred prior to the FairTax, the FairTax is moot with respect to it. For instance:
You have a current mortgage of $1,000, an auto payment of $500, school loan payment of $250, credit card payments of $250, you save $100 a month. That ends up being $2,100 a month right off the top of your consumption, or $25,200 a year.
if you have an income of $40,000, plus $5,000 FairTax rebate, you might think that your tax would be 23% of that $45,000 or $10,350. BUT that $25,200 you are servicing your current debt with WON’T be taxed, and so your numbers are $45,000 minus the $25,200 or $19,800 consumption, for a tax paid of $4,554. Your EFFECTIVE tax rate on your $45,000 available funds ends up being around 10%, which is just a couple of points over what you now pay in FICA alone. Of course, as you clear the current debt the ratio of non-taxed payments to taxed payments will change, and you will start paying more tax, but since the economy will start to pop by then, you’ll probably get a fat promotion that will make it all better. Another aspect of the FairTax that I believe is important to note, is the absence of “Brackets”; as your consumption goes up, your taxes rise on a curve rather than the stairstep way they do now. So you might pay one more percent next year, but you don’t just go to a whole new far higher effective rate. Unless you become filthy rich all of a sudden. Keep in mind, if you get a huge raise and BANK or INVEST most of it, it’ll barely affect your taxes paid at all, and your effective rate will actually go down. In other words, you have the opportunity for more consumption, you just don’t choose to do it. The FairTax gives back control to YOU.
And now for a couple of questions from our readers:
I am a successful drug dealer. I have never paid taxes in my life. Will I start paying if the FairTax is passed? YES, you stinking low life tax cheater. Next question.
I am a Congressman. How will the FairTax affect me? You will lose the power to manipulate the people through making changes constantly to the tax code. You will lose the smoke screen of tax discussions that you use to avoid solving real problems. You will only be able to make taxes go up (on everyone) or down (on everyone). You will no longer get kickbacks for tax favors from lobbyists. The tax code will no longer be your cash cow. But, if you vote the FairTax in, you will be a hero, and you will have a lot of time to solve problems that are actual problems. Next question.
I am in the country illegally. How will the FairTax affect me? You my friend, will pay the full 23% on consumption, something that even Bill gates and Warren Buffet won’t be doing. Illegal residents DO NOT receive the rebate, and so there is no reimbursement (think standard deduction) of your FairTax paid. Sorry, but you can always leave. Next question.
I am mentally unsound!!! Oh, you’d probably prefer the current tax code, or maybe a flat tax.
I have put A LOT of posts about the FairTax (HR25/S13) on here. Please find the oldest one and read them in chronological order, because some of the newer ones won’t make a lot of sense unless you read the older ones first. But you will have many questions about the FairTax answered, with simple examples to help you see the advantages it holds. Even so, there are still the stimulative effects to be discussed. If the moderators are so kind as to approve these posts, I’ll try and get to that. Thank you for the time you spend reading this stuff… the FairTax really IS the way to go. The FairTax – EVERYBODY pays, so everybody pays LESS.
I a country that proclaimed in its founding document that all men are created equal, why do we have a tax system that has created a class system? (“the rich”, “the middle class”, “the poor”, etc.) The government should be treating all of us as Americans, nothing more and nothing less. When it comes to taxes I think “everyone should have skin in the game”. If I am paying an effective rate of 25%, then everybody else needs to be paying 25% too. Right now approximately half the people in the country don’t really care if taxes go up (and so don’t care how much taxpayer money the government is spending) because they don’t pay any taxes. I want those folks to have skin in the game. If we can make the IRS largely go away in the process…that is even better.
We already have a 19.5% flat tax paid by low and middle income people deceptively called “social security and medicare contributions”, “employer taxes”, and “corporate income taxes” which are in reality passed to consumers as higher prices. This is a very unfair tax which pushes some into the welfare system. We need a FAIR FLAT TAX exempting the first $10,000 income per person. A 23% rate on all non exempt income would replace ALL current Federal taxes and raise revenue equal to 19% of the GDP. Investment profits would be income when they are taken out to be spent on non investments. This eliminates the confiscation of savings just because they are moved from one investment to another. Gifts would be treated as a transfer of income and taxable to the recipient who keeps and spends it. This preserves the tax incentive for charitable gifts and puts all gifting on the same footing.
shorter than the Fair Tax; more obvious than salees taxes which are death by a thousand cuts; a plan much broader than either, to reform “entitlements” and all other transfer payments; a complete restatement of the role of government:
The federal government shall collect no taxes other than provided in this act and make no payment except in return for goods or services rendered to it, or as provided for in this act. There shall be no federal tax any business.
All persons shall come together in households to report all income and to receive federal benefits. They need not be related, need not reside together, and a household may consist of as few as one person.
Each year congress shall set a “minimum wage” and a “tax rate”, which in turn will be applied to the previous year’s reported incomes to determine the budget of the government.
The following income shall be exempt from taxation:
An amount equal to a year’s earnings at the minimum wage rate, for adults (age 20-65), decreasing 10% per year to 50% at age 15, and increasing 10% per year to 150% at age 70.
Payments for necessary health care including pharmaceuticals prescribed by a recognized health care professional, and vision and hearing aids. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
Educational expense including day care, that portion of state and local taxes identified as spent on education, that portion of parochial school expenses identified as going for non-sectarian education, and private school education at any level.
Income saved into an account from which investments may be made. All withdrawals from this account for the benefit of any member of the household are taxable. Withdrawals that are not for a members’ benefit are exempt from taxation.
The “tax rate” shall be applied to any income over and above the deductions listed above, regardless of amount. When deductions exceed income, the government shall make payment to the household equal to the tax rate times the deficiency.
It has to be the FairTax…
A flat tax is still:
1. An economy killing tax on your income.
2. A tax that will not stay flat for very long; Kennedy’s and Reagan’s cut at a “flat tax” did not last. We are living under Reagan’s version of a flatten tax now.
3. Going to have loopholes and exceptions if it is to be progressive.
4. a tax system that leaves the politicians and lobbyists in charge.
Here is a link to an article that explains why the FairTax (HR25/S13) would revitalize our economy, even to the point of making the US back into a manufacturing giant. It includes the summary of a survey of 500 businesses operating offshore commissioned by Bill Archer, former House Speaker. They would love to come back to the US; the FairTax would be what will bring them back.
http://www.examiner.com/article/survey-shows-that-companies-would-create-jobs-us-if-fair-tax-was-instituted
First I will comment on the letter and clarify some points. Later I’ll comment on the individual comments.
1) The Flat Tax is similar to the tithe in the Bible. The biblical tithe required the Jews to give the priests 10% of their income. Rich or poor: tithe was the same percentage for all. Likewise, the Flat Tax will be the same tax rate (percentage) on all. This will take care of the 50% (actually 47% I think) which presently pay no tax. They will be taxed at the same Flat Tax rate as everyone else.
2) Any tax on income will encourage cheating. This is why there is widespread cheating today. Cheating would be cut down greatly under the FairTax.
3) “The FairTax institutes a national sales tax.” Yes, it does. But that tax is inclusive (like the present income tax and withholding taxes are). The tax is taken out before the money (income) is paid to the individual. The sales tax–on the other hand–is exclusive: it is added at the end. This is a very important point to remember.
4) “Monthly reimbursement check from the Federal Government to all households equivalent to assessed poverty-rate consumption levels.” What the letter is talking about is the monthly “prebate” which is a rebate in advance. However, instead of a check to cover the assessed poverty rate, it is a check to cover the tax on the assessed poverty rate (level of spending). The result is that up to the poverty level of spending, there is no tax. Neither rich nor poor are taxed on the basic necessities of life: basic food, clothing, shelter,…… Poverty level is determined by the Federal Government.
5) Repealing the 16th Amendment is part of the FairTax (HR-25). When the FairTax passes, the first step will be to repeal the 16th Amendment–which allows the Congress to levy and income tax. This Amendment was passed many years after the US Constitution was written and was considered unconstitutional until 1913 when suddenly it became OK.
Patriots, please consider revising your narrative for this section: “Additionally, because legislation cannot repeal Constitutional amendments, there is always the threat that the income tax could return – we would then have double taxation. Which is why it would important to repeal the 16th Amendment before instituting the Fair Tax.”
The FairTax bill (HR-25/S-13) has a sunset clause built in that mandates the abolision of the 16th Amendment within five (5) years of passage of HR-25/S-13. If the 16th Amendment has NOT been abolished or a subsequent amendment overiding its authority, the FairTax will itself sunset and the tax code will automatically revert back to the present day system. That means after five years of everyone bringing home their ENTIRE PAYCHECK… suddenly they will be subjected to withholding and FICA taxes again… and for many tax brackets, that means loosing upwards of 1/3 of their gross income to withholding.
If YOU have gotten used to bringing home all that you earn, how do you think you will react when the Gov’t get’s its hand into your pocket BEFORE you ever see one dime of your earnings? The Gov’t will get paid before you put one spoonful of food in your child’s mouth, cloths on her back or a roof over her head? If that doesn’t motivate the public to repeal the 16th Amendment… nothing will.
Also note that we’ve tried a “Flat Tax” before. Reagan’s Tax Reform Act of 1986 effectively WAS a flat tax, lowering the top rates down to three low simple tax brackets and abolishing almost 90% of all tax deductions. Here we are 25yrs later, and we are facing the same problem.
The FairTax solves the problem of us making the same mistakes over and over. Let’s do it right this time and pass the FairTax bill. Over SIX DOZEN Congressional Cosponsors have sign on in support of HR-25/S-13. Please get the congressional leadership to follow suit… or send them packing next election.
With an income tax, your money is involuntarily SEIZED.
With the FairTax, your money is voluntarily PAID!
Support the Congresscritters that Support the FairTax!
A chain is only as strong as it’s weakest link.
Is there a way to accurately calculate a history of ALL the Sales transactions and Total $$ transacted in each State? Can we project the amount Needed for All of it’s Legal and Registered, Tax-paying Citizens to live a poverty-free, decent, Contributing (somehow) Life, then derive the needed % amount from that commerce, THEN they can start contributing Federal Money for the Common National Necessities.
The U.S.A. happened Long after The States had established themselves and were merely trying to create a FAIR and Harmonious system by which to bring their Best TOGETHER.
Right now this entire federal government system is Obviously Broken!
We Must Reconsider based upon Good Principles and Rearrange accordingly; NOW.
I would prefer to exert myself in striving for Peace by Design.
Thanks for posting this. I read the Fair Tax book and am volunteering with Georgians for Fair Taxation.
Any elected official who supports continuation of any income tax (flat, graduated or otherwise) is effectively saying they want to force honest taxpayers to subsidize criminal gangs who report no income (e.g. drug dealers), prostitutes & others engaged in off the books activity, illegal aliens, who from an IRS standpoint, don’t even exist. Nice company, legislators – they thank you for continuing your enthusiastic support.
We need a consumption based tax – The FairTax.
In all the blather here, people are ignoring a couple of basics. We tried the “flat tax” in 1985 – a sisngle-rate Income Tax, with a ‘simplified’ Tax Code. Over the following 25 years, Congress add five tax rates, so the tax is no longer ‘flat,’ and passed more than 20,000 Amendments to the Tax Code, leaving us far worse off than we would have been if Congress had done nothing. People in Congress like Keynesian economics, which embody the idea that governments can spend beyond their means “forever,” by borrowing. That should tell us that the key is to get ride of the Income Tax and take Congress out of the picture. You could say the Founding Fathers were of the “Austrian school” of economics. They made a tax on income un-Constitutional. Modern advocates of the “Austrian school” of economics would include people like Milton Friedman (Nobel prize winner) and Ludwig von Mises. The only tax bill which embodies their approach to taxation is HR25, the Fair Tax. That bill DOES take Congress out of the “tax reform” business, out of “social engineering” throuogh taxation, by replacing the Income Tax with a National Retail Sales Tax. The Fair Tax is also a single-rate tax, but it incorporates a monthly “prebate” payment to every householdl of record (for the amount of Fair Tax a Poverty Level household would pay), which makes it “progressive.” It fully funds Social Security and Medicare, on an actuarially sound basis, which Congress seems unable to do. It eliminates busisness income taxes too (consumers ultimately pay all taxes on businesses), which will result in retail prices quickly dropping an average of 26%. When the 23% Fair Tax is added at checkout, the total amount paid will – on average – be slightly LESS than we pay now. You wiil decide how much federal tax you will pay, and when you will pay it, on the basis of your daily buying decisions. There is no federal payroll withholding, so take home pay is 30% greater. Individuals don’t file federal tax returns. We save six billion man-hours and at least $400 billion in “compliance costs.” Economists say it will roughly triple the growth rate of the economy. That is the only way we will ever be able to deal with the fantastic federal DEBT. The country NEEDS the Fair Tax.
See “First, Why We Need a FairTax.” 10,750 views.