the Fair Tax

[Hooahguy]

i came across the Fair Tax when reading a newspaper article on the history of the US tax policy.
it sounds interesting (http://www.fairtax.org/site/PageServer?pagename=about_main)

thoughts?

[Sasaki Kojiro]

It places more of a burden on the middle class according to studies.

[Hooahguy]

not true, according to the site (http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive)

[Yoyoma1910]

not true, according to the site (http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive)




Do you think a place called "fairtax.org" is going to give you impartial information on the "Fair Tax?"



While we're at it, I hear heroin has no side effects from the site www.heroinisgoodforyou.bs!

[Hooahguy]

but it does give the facts. i mean, how can you do a study if its never been in place?

[Yoyoma1910]

Every side to an argument will list "The Facts."


By your own logic, how do you know those are "the facts" if it has never been in place?

[LittleGrizzly]

How would this affect pensioners and the poor, and others that don't pay income tax for various reasons... i suppose this kind of depends on what the current sales tax rate is ?

its 17.5% in the UK, so a 5.5% rise in that tax (or 6.5% reduction for those living below double the poverty line) i really don't see how that could replace all the other tax income...

[Hooahguy]

i suppose it would encourage saving and peanalize extravagant spending. but it doesnt tax the staple foods, like milk and eggs, ect.

[Yoyoma1910]

BTW, during the last election there were two major proponents of the "fair tax" system.


Mike Huckabee and Maurice "Mike" Gravel. While I thoroughly enjoyed the campaigns of both men (I felt so bad for Gravel I donated him $20. I mean, the guy was living off of gift bags and pbj :sad:-wiches), I personally didn't see either of them as heavyweights in their policies. It just seemed that they reached for whatever could get them the uncounted votes, like most bottom feeders. :pisces:

[LittleGrizzly]

There are other potential problems, after i get my uni degree whats to stop me from coming over for a few years and just sustaining myself, basic staples which aren't taxed as heavily and basic shelter, then take my riches back to britian and spend at a lower tax sales rate...

another problem is drugs and the black market in general, i smoke quite a bit of cannabis so something like this would probably work out nicely for me, drugs in general would be more affordable because salary isn't taxed and all other goods are more expensive.... i feel it would encourage black market activity for legal goods as well

Though how much they are problems depends on your current sales tax rate

Also billionaires could simply earn thier money in the US and live thier lives in somewhere like monaco, apart from basic stuff during the working day (and maybe fuel for thier private jet) there would be no need to spend thier money in the US...

[Tribesman]

thoughts?

Sounds good .
Tell you what , if you get your government to introduce it I will set up a nice black market for the benefit of discerning customers .:2thumbsup:

[Yoyoma1910]

Sounds good .
Tell you what , if you get your government to introduce it I will set up a nice black market for the benefit of discerning customers .:2thumbsup:


Yes, hi, I'm here about the tax free Bentley.

[Hooahguy]

too bad many politicians dont want it b/c then they would be paying more for all their extravagant spending. but if it does push through, go ahead, make a black market! since i dont pay income tax anyhow, ill be first in line!
:beam:

[Seamus Fermanagh]

Sounds good .
Tell you what , if you get your government to introduce it I will set up a nice black market for the benefit of discerning customers .:2thumbsup:

Well, we can always stick with the present "progressive" income tax, after all, nobody GAMES that for personal advantage....

:laugh4::laugh4::laugh4::laugh4::laugh4:

[CountArach]

While we're at it, I hear heroin has no side effects from the site www.heroinisgoodforyou.bs!
Your link doesn't work.

:wink:

[Xiahou]

It places more of a burden on the middle class according to studies.In that many of us will have to actually have to start paying a federal income tax, yes. :yes:

The fair tax is.... well, fair. I just don't think we could realistically implement it in our current circumstances. Unfortunately, the bloated size of our government requires at least some sort of progressive taxation in order to fund it. I would like to see the tax rates flattened and the tax code simplified (eliminate most credits/deductions), though.

[seireikhaan]

Frankly, the US will never realistically do a flat tax. My view is that if a country is going to implement a fair tax, they'll have to sacrifice a lot of spending. And people in the US frankly want it doing more and more every year. Not to mention how it always seems that the government can build one project and spend twice the cash on it that a private enterprise does. :shrug: Never have figured that part out.

[Sasaki Kojiro]

Frankly, the US will never realistically do a flat tax. My view is that if a country is going to implement a fair tax, they'll have to sacrifice a lot of spending. And people in the US frankly want it doing more and more every year. Not to mention how it always seems that the government can build one project and spend twice the cash on it that a private enterprise does. :shrug: Never have figured that part out.

What's the evidence for that exactly? Not that I disagree, I just never see any specific examples beyond that "600$ for a toilet seat" nonsense.

[seireikhaan]

The hundreds of millions that seem to be spent on roads?

[Sasaki Kojiro]

The hundreds of millions that seem to be spent on roads?

Are they cheaper when the upkeep is by private companies? And if they are is it because private companies pay workers under the table instead of giving a living wage with health benefits?

[JAG]

How can it be fair when there are goods EVERYBODY NEEDS to get, such as break and milk, yet Prince or Pauper will get taxed the same.

Basically it shifts the burden of taxation onto the little guy, with much more of their money going on tax for essentials while the rich can just keep getting richer.

A fair tax worth the name is a redistributive, progressive tax policy.

[CountArach]

A fair tax worth the name is a redistributive, progressive tax policy.
Communist!

:wink:

[Yoyoma1910]

Communist!

:wink:

Don't wink at the communist, you wobbly!

:happy2:

[Koga No Goshi]

How can it be fair when there are goods EVERYBODY NEEDS to get, such as break and milk, yet Prince or Pauper will get taxed the same.

Basically it shifts the burden of taxation onto the little guy, with much more of their money going on tax for essentials while the rich can just keep getting richer.

A fair tax worth the name is a redistributive, progressive tax policy.

Comrade Jag!

[Oleander Ardens]

Smells like a Miltonian black-hat operation. Or after more consideration is a bit less extremist camo of Friedmanns exact ideas. Note how much the talk about abolishing taxes - strange that the rich and very rich will profit percentage wise vastly more - income tax, estate tax, capital gain - than the rest. If you belong to the middle class or to the poor you are a fool to think about supporting this. It holds a sweet snack in front of a donkey :thumbsdown:

[Seamus Fermanagh]

Folks, the Fair Tax has a couple of key components that address most of your concerns.

1. Federal revenues should not be decreased as a result of this shift in taxation format.

2. NO OTHER FEDERAL TAX IS LEVIED -- no FICA, no Medicare, no whatever. One source of taxation revenue.

3. There is an individual "prebate" due each citizen at the beginning of the month. This prebate is a direct payment by the government, in advance, for the tax to be paid for spending on basic shelter & sustenance. Yes, the "little guy" would be paying 25% on his rent, but would have already received a check for $X to offset the expected taxation cost of her housing and food. This "prebate" would be the same for every citizen or legal resident.

4. Much of the underground economy would be taxed. Even if the industry in question was illegal, sooner or later the proceeds thereof will be used to purchase legitimate goods and then they'll be taxed.


The Fair Tax goal is NOT to change federal revenue, nor to put a burden on the "little gal." The goal is to avoid a scenario that is confiscatory to ANY segment of society will simplifying the process. This would allow us to downsize the IRS and focus government spending on those programs deemed most necessary by the leadership and the people.

[Ice]

Folks, the Fair Tax has a couple of key components that address most of your concerns.

1. Federal revenues should not be decreased as a result of this shift in taxation format.

2. NO OTHER FEDERAL TAX IS LEVIED -- no FICA, no Medicare, no whatever. One source of taxation revenue.

3. There is an individual "prebate" due each citizen at the beginning of the month. This prebate is a direct payment by the government, in advance, for the tax to be paid for spending on basic shelter & sustenance. Yes, the "little guy" would be paying 25% on his rent, but would have already received a check for $X to offset the expected taxation cost of her housing and food. This "prebate" would be the same for every citizen or legal resident.

4. Much of the underground economy would be taxed. Even if the industry in question was illegal, sooner or later the proceeds thereof will be used to purchase legitimate goods and then they'll be taxed.


The Fair Tax goal is NOT to change federal revenue, nor to put a burden on the "little gal." The goal is to avoid a scenario that is confiscatory to ANY segment of society will simplifying the process. This would allow us to downsize the IRS and focus government spending on those programs deemed most necessary by the leadership and the people.

Good post, Seamus.

It does amuse me when people pretend to know what they are talking about in these threads, which is not to say I'm immune from such action.

[Seamus Fermanagh]

Good post, Seamus.

It does amuse me when people pretend to know what they are talking about in these threads, which is not to say I'm immune from such action.

To be fair to them, there is a "regressive" character to most sales taxes, since the tax levied represents a larger proportion of total wealth for someone who does not have a lot of money or income than it does to someone making megabucks.

[m52nickerson]

The problem I see with a sales tax based system is when you have a economic slow down you will instantly cut federal revenue, more so then if you tax income.

[Koga No Goshi]

The problem I see with a sales tax based system is when you have a economic slow down you will instantly cut federal revenue, more so then if you tax income.

I oppose it on its regressive nature, I consider that sufficient reason to be against it, especially since a "simple tax system", while psychologically appealing, is equally simple to evade. However you are correct-- this system would, IMHO, only work well when the economy is doing well. Every 20 or 50 years you'd be gutting the government or going into steep deficit everytime an economic downturn hit.

[Seamus Fermanagh]

The problem I see with a sales tax based system is when you have a economic slow down you will instantly cut federal revenue, more so then if you tax income.

I don't think a slow down would have such a grave impact. However, an out-and-out recession might. THAT is an issue worth considering.

[LittleGrizzly]

How about people simply working in the US and then spending thier money elsewhere ?

A billionaire could simply work in the US (though to be honest he doesn't actually need to be on US soil) and live in monaco or canada or anywhere, he would earn untaxed money in america and spend it somewhere else...

And then secondly someone could just goto the US work for a few years, save like crazy and take his money home... there are ways around the system...

Also the black market could simply send its money abroad, so that money isn't nessecarily going to stay in the US to be taxed, to be honest this isn't my biggest problem with the fair tax, just the more obvious one...

[m52nickerson]

How about people simply working in the US and then spending thier money elsewhere ?

A billionaire could simply work in the US (though to be honest he doesn't actually need to be on US soil) and live in monaco or canada or anywhere, he would earn untaxed money in america and spend it somewhere else...

And then secondly someone could just goto the US work for a few years, save like crazy and take his money home... there are ways around the system...

Also the black market could simply send its money abroad, so that money isn't nessecarily going to stay in the US to be taxed, to be honest this isn't my biggest problem with the fair tax, just the more obvious one...

You would almost have to track income VS expenditures and tax all purchases.

[Seamus Fermanagh]

How about people simply working in the US and then spending thier money elsewhere ?

A billionaire could simply work in the US (though to be honest he doesn't actually need to be on US soil) and live in monaco or canada or anywhere, he would earn untaxed money in america and spend it somewhere else...

Both the raw number and the aggregate tax value of those able to do so should be small enough to be irrelevant.


And then secondly someone could just goto the US work for a few years, save like crazy and take his money home... there are ways around the system...

Any system designed will be "gamed." Nothing can prevent all such occurrences. However, the Fair Tax is actually designed to promote savings. If that person is working in the USA legally, and keeping their expenditures at/near the prebated level, they could acrue a sizeable amount tax free. Those here illegaly won't be getting the prebate and will therefore contribute some small amount of tax matter how rigorous their savings.


Also the black market could simply send its money abroad, so that money isn't nessecarily going to stay in the US to be taxed, to be honest this isn't my biggest problem with the fair tax, just the more obvious one...

Black market "profits" aren't taxed at the present time anyway (okay, there may be some soul out there listing and paying taxes on their illegal business so that the G can't get them on tax evasion too, but I think that's rare to say the least), so that's a moot point.

[Seamus Fermanagh]

I oppose it on its regressive nature, I consider that sufficient reason to be against it, especially since a "simple tax system", while psychologically appealing, is equally simple to evade. However you are correct-- this system would, IMHO, only work well when the economy is doing well. Every 20 or 50 years you'd be gutting the government or going into steep deficit everytime an economic downturn hit.

Complex systems are even easier to "game" and the wealthy ALWAYS leverage the government for breaks and advantages in such byzantine systems. The current "progressive" system is riddled with wealth-preservation exceptions, in part because it is so complex that virtually no one can read and understand the entire tax code unless it is their full time job.

As to "regressive" taxation, the point about the prebate is to create a scenario where the truly "strapped" or indigent are not paying tax on basic subsistence items and may be, in some instances, being prebated more than they pay in taxes. If there is any "regressive" component, it would be on those above the poverty line and below the median income. Even though their overall taxes might decrease, they would still experience those taxes as a somewhat higher percentage of wealth than would those immediately above or below them. As usual, the middle class would find little actual change in their tax burden. By tapping into the purchases of the upper middle and upper classes, it is likely that we would see a small increase in their revenue contribution -- with no way for their accountants to hide it.

BTW, I philosophically disagree with you. To me, government is not about redressing inequity, but providing certain needed services that cannot be provided by the individual. Since all benefit from such services equally, it has always seemed inappropriate to me that high income earners have to pay more for the same services.

[CountArach]

BTW, I philosophically disagree with you. To me, government is not about redressing inequity, but providing certain needed services that cannot be provided by the individual. Since all benefit from such services equally, it has always seemed inappropriate to me that high income earners have to pay more for the same services.
On the other hand the people who need these services most (eg - public transportation) are the very same people who can't afford them. A Fair Tax IMO defeats its own purpose because it forces those who can't afford something to pay for it anyway.

[Koga No Goshi]

BTW, I philosophically disagree with you. To me, government is not about redressing inequity, but providing certain needed services that cannot be provided by the individual. Since all benefit from such services equally, it has always seemed inappropriate to me that high income earners have to pay more for the same services.

Well, what can I say ... you're wrong? :)

A big employer, a very wealthy individual with multiple corporations and such, is pulling from a literate potential workforce with at least a modicum of education, people who, perhaps, are alive because there were police and fire services available, etc. etc. I philosophically disagree with the increasingly dominant notion in the corporate and ownership classes in America that employers are doing the country a "favor", which is ungratefully repaid by the public with forcing them to pay "unfair taxes." Corporations which do business in the U.S., BENEFIT from the American public-- either via having them as an available workforce, or cashing in on the fact that commodities can be sold at a high price in the U.S. because of the relatively high per capita income and quality of life. Even if the goods they are selling were produced in China at 1/500th the price for which they are sold in the U.S.

I also think particularly with regard to police and education as well, the idea that the rich do not receive substantially better services than people in low-income areas is a very weak assertion.

I also have not heard for any windfall profits taxes on all the private corporate contractors who benefitted from the use of our military in the Middle East-- perhaps the only true beneficiaries, in fact. Despite the fact that everyone's grandkids will be paying the debt on the war.

The idea that the government sucks money from the rich and only turns around and provides any sort of service, or disproportionate service, to the interests of the poor, is very selective analysis IMHO.

[Oleander Ardens]

From the CNN money (http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/) - Article in the Spoiler

I think this is a far and balanced review of the "fair tax".

Seems that I have a keen nose BTW - part of it truly smells as I have said before:


Smells like a Miltonian black-hat operation. Or after more consideration is a bit less extremist camo of Friedmanns exact ideas. Note how much the talk about abolishing taxes - strange that the rich and very rich will profit percentage wise vastly more - income tax, estate tax, capital gain - than the rest. If you belong to the middle class or to the poor you are a fool to think about supporting this. It holds a sweet snack in front of a donkey

This part is especially telling, and I think tailored to win monetery support for this plan:


The FairTax is what economists call a consumption tax, and the basic economic rationale for it is the same as for all such taxes. It is designed to make saving and investing more attractive to people and companies, which most economists think would spur economic growth as people plow more cash into starting businesses, building factories and so on. With the FairTax you'd get taxed only when you spend money on retail goods and services.

The trouble with a pure consumption tax is that it can put a hideous burden on poor and middle-class people, who have to spend most of what they earn to live.

So the FairTax tweaks the formula by sending a "prebate" to every American for the amount of tax they pay on spending up to the poverty line, which today is $22,400 for a couple with one kid. In effect, basic necessities are tax-free. FairTaxers propose a tax worth 23 of each $1 you spend, so a family of three earning $30,000 a year and spending that much on taxable goods would pay about 6 percent of their income in tax after the rebate. A family earning and spending $125,000, about 19 percent. (State and local taxes would be levied on top of that.)

The rebates help make the FairTax progressive -- tax jargon for "richer people pay more." For the very rich, however, that's not quite the whole story. Say you earn $2 million a year. You can live pretty well spending $1 million, and as a result pay a mere 11 percent of that year's income in taxes. If the very rich pay less, that means more of the total tax burden in any year has to fall on somebody else, most likely the middle class. Reasonable people can disagree about whether this really matters -- over time, a consumption tax looks more progressive because the rich savers or their descendants eventually spend the money and get taxed. But Boortz and Linder say that all this worry about progressivity at the top is just jealous carping anyway. "We have very few Communists left in this world, but there are some," says the congressman.


Still the instrument itself can be interesting - the danger lies that its positive sides are used as a smokescreen to lessen the "burden" of the very rich. To promote it, it seems also that they are overly optimistic about the revenue they can connect - the tax might have to be a good deal higher.



Let's separate the message from the messengers for a moment. The goof Boortz and Linder have made hardly blows apart the argument for the FairTax. A simplified tax code that reduces the costs of enforcement and compliance -- $110 billion in 2003, by Michigan Prof. Slemrod's conservative estimate -- would be an economic plus. And any tax that results in more growth would, by definition, leave you with more money in your pocket over time.

Some economists predict that a consumption tax could increase the average American's real income by 9 percent over the long run. Others say the numbers are much lower; it all depends, they say, on how you design the tax and the assumptions you make about how people's behavior will change. But few experts think our current tax code -- with its crazy quilt of deductions and exemptions, not to mention that nasty AMT -- couldn't be improved upon.

And although Boortz and Linder use the red-meat language of the right when pitching the FairTax, there are some elements of their plan that liberals ought to take a close look at.

It replaces the Social Security payroll tax, which tends to hit less affluent people harder. Rich big spenders could end up contributing more to the retirement system than they do today. And the other tax plans favored by Washington types raise their own fairness questions. Boston U.'s Kotlikoff, who recently argued for the sales tax in a cover story for the liberal New Republic, worries that other consumption-driven reforms will be a boon to the already wealthy.

These are serious ideas Americans should hear more about. What we don't need is more spinning. FairTaxers promise a world where taxes are effortless, the IRS is dead and gone, and nobody has to sacrifice a thing. But we know this:

There are complications in any tax system. Somebody's got to collect the money for the government. And there will always be losers in the tax game



[/QUOTE]

Just how fair is the 'FairTax'?
The push to scrap income taxes -- and the IRS -- is gaining fans. But the plan has a lot of holes.
September 7, 2005: 12:28 PM EDT
By Pat Regnier, Money magazine
Neal Boortz
Neal Boortz
The tax reform process
• Behind the Bush reform plan
• High hurdles to AMT reform
• Tax simplification: Not so simple
• Le Tax: Do the French have it right?

NEW YORK (Money magazine) - If you don't care much for talk radio, or you don't live in the South, the name Neal Boortz might not ring a bell.

But pay attention: Around 4 million people nationwide catch his radio show. It's No. 1 in Boortz's home market of Atlanta and ranks first or second in numerous smaller cities in red states.

His 180-page polemic for radical tax reform, The FairTax Book, made its debut at No. 1 on the New York Times' bestseller list in August.

When Boortz came to Jacksonville for a book signing at a downtown hotel on a sticky, sweltering Thursday night last month, close to 1,000 people turned out for a chance to meet him -- and to bask in his rage at the Internal Revenue Service.

"How many of you want the federal government out of your paycheck?" asks Boortz from the hotel's ballroom stage. Wooo-hooo! roars the crowd. Boortz's wife Donna, standing at the back of the room, looks on in amazement.

"This is for taxes," she says. "This is not sex and violence we're talking about."

No kidding. Everybody likes a tax cut, but fundamental tax reform is one of those issues that's generally as boring as it is important. Who wants to waste an evening thinking about marginal rates? But the plan Boortz is selling is disarmingly simple: Just eliminate most federal taxes -- income tax, Social Security tax, corporate tax, what's left of the estate tax -- and replace them with a big, fat national sales tax.

No more complex tax forms. No more IRS audits. No more long lines at the post office on April 15.

Could this actually happen? Boortz's timing certainly couldn't be better.

Right now in Washington, a group of top policy experts and former lawmakers appointed by President Bush are hammering out a proposal to overhaul the tax system. Supporters of the FairTax, backed by a grassroots network of 600,000, have worked hard to keep their plan on the panel's agenda. The panel is holding public hearings in September, and the report is due at the end of that month.

Although few tax watchers expect the panel to fully embrace the FairTax, most predict that it will call for dramatically simplifying the code and making the system far more friendly to savers -- two steps in the FairTax's direction.

If that happens, FairTaxers expect to gain even more momentum. "There's no way you can stop this train," says FairTax organizer Howard Johnson, a retired Navy jet mechanic at the Jacksonville signing who says he puts in four or five days a week for the cause.

Republican congressman John Linder of Georgia, Boortz's co-author and longtime friend, has 37 co-sponsors for his bill to make a national sales tax a reality. Even so, it may be hard to believe such radical change is possible -- especially since many tax experts say that the numbers just don't add up.

But Yale law professor Michael Graetz compares the FairTax with the campaign to kill the estate tax. He co-wrote a book about that fight, and points out that a decade ago nobody in Washington thought the estate tax was vulnerable either. Says Graetz: "You fail to take something like [the FairTax] seriously at your own risk."
Who's listening to this guy?

"I can't allow this to become the FairTax radio show," says Boortz, sitting in a Jacksonville radio studio and chatting during a break from his show. His producer, Belinda Skelton, says that whenever Boortz talks about the sales tax, her board lights up with callers. She turns most away. Clearly, Boortz has hit a nerve with his audience -- so just who are they?

They're probably a little different from the crowd that goes for Rush Limbaugh or for Boortz's pal Sean Hannity.

In person, the 60-year-old Boortz is warm and courtly, and that rubs off on the show. His on-air rapport with Skelton, a charming thirty-something who calls just about everyone "sweetie," and with associate producer Royal Marshall, who is black, leavens the Angry White Guy shtick.

Boortz presses many of the usual conservative hot buttons, and he's been getting seriously worked up about Cindy Sheehan lately. But he took the other side from Hannity on the Terri Schiavo case (he supported the husband) and refuses to let callers talk about abortion -- unless, he quips on air, "You were an aborted fetus."

During a break in the Jacksonville broadcast, Boortz and Skelton run over to another studio in the building to watch a morning duo called Lex & Terry put on a weekly act that involves, basically, getting a pretty woman drunk on the air.

This week's volunteer, a diminutive, scantily dressed blonde named Erin, smells of Crown and Coke from 10 feet away. Boortz leans over and tells her, "You know, tall men love short women." Suddenly, she leaps up and wraps her legs around Boortz's burly, six-foot-plus frame.

Not long after, Boortz is talking about this on his own show, and there's a picture of him and Erin on his website. These antics probably don't win him much favor with the more religiously minded right-wingers. And they won't do him any good with effete, blue state, mainstream media types either. (On the air, he teases me for looking appalled at the whole scene.) But if you like irreverence mixed with equal measures of patriotism and distrust of the government -- pleased to meet you, Mr. Swing Voter -- you'll like Neal.

Steve and Marci Colwell are avid Boortz listeners. They came to the book signing wearing T-shirts declaring themselves "Parishioners of the Church of the Painful Truth." (Boortz sometimes calls himself High Priest of the Church of the Painful Truth.)

The Colwells own a candy store, so a national retail sales tax would have a big impact on them. But to them, that pales beside the impact of today's tax load -- Marci says high taxes have kept them from opening a second store. Steve likes that a sales tax would collect a fair share of taxes from people who now don't pay, like "drug dealers, prostitutes, even sky caps at the airport."

They're also impressed with a key argument of the book, that ending federal income taxes would take something called "embedded taxes" out of the price of everyday goods. "When you remove that, you save a lot of money," says Marci.


The best tax plan $23 million can buy

The FairTax is not Neal Boortz's idea.

"I leave arriving at the numbers to the experts," he says, stretched out in back of an eight-seat charter plane bound for his next signing in Mobile, Ala. "I'm just selling the concept."

The FairTax was designed by Americans for Fair Taxation (AFFT), chaired by Houston businessman Leo Linbeck. The group says it has spent some $23 million coming up with a way to simplify taxes, signing up A-list economists to do the research and focus-grouping the concept. Linder says that a focus group even helped come up with the tax's nifty brand name. According to a report by American Public Media, AFFT and a related group have spent about $22,000 funding trips (mostly speaking engagements) for Linder.

Boortz, who's an amateur pilot and all-around aviation nut, says with some excitement that AFFT has discussed giving him and Hannity the use of a Gulfstream jet for a FairTax barnstorming tour.

The FairTax is what economists call a consumption tax, and the basic economic rationale for it is the same as for all such taxes. It is designed to make saving and investing more attractive to people and companies, which most economists think would spur economic growth as people plow more cash into starting businesses, building factories and so on. With the FairTax you'd get taxed only when you spend money on retail goods and services.

The trouble with a pure consumption tax is that it can put a hideous burden on poor and middle-class people, who have to spend most of what they earn to live.

So the FairTax tweaks the formula by sending a "prebate" to every American for the amount of tax they pay on spending up to the poverty line, which today is $22,400 for a couple with one kid. In effect, basic necessities are tax-free. FairTaxers propose a tax worth 23 of each $1 you spend, so a family of three earning $30,000 a year and spending that much on taxable goods would pay about 6 percent of their income in tax after the rebate. A family earning and spending $125,000, about 19 percent. (State and local taxes would be levied on top of that.)

The rebates help make the FairTax progressive -- tax jargon for "richer people pay more." For the very rich, however, that's not quite the whole story. Say you earn $2 million a year. You can live pretty well spending $1 million, and as a result pay a mere 11 percent of that year's income in taxes. If the very rich pay less, that means more of the total tax burden in any year has to fall on somebody else, most likely the middle class. Reasonable people can disagree about whether this really matters -- over time, a consumption tax looks more progressive because the rich savers or their descendants eventually spend the money and get taxed. But Boortz and Linder say that all this worry about progressivity at the top is just jealous carping anyway. "We have very few Communists left in this world, but there are some," says the congressman.


Pssst. Wanna buy some tax-free milk?

All these questions about fairness will be a political obstacle to a sales tax. But the practical problems seem even more daunting. Many mainstream economists and tax experts like the idea of some kind of consumption tax -- in fact, the superiority of consumption taxes is almost conventional wisdom these days.

But many of the same people point to serious problems with the FairTax plan. (A sales tax is just one way to levy a consumption tax. Competing plans include the European-style value-added tax, or VAT, as well as variations on the flat tax Steve Forbes made famous.)

Critics claim the FairTax has two major flaws: It wouldn't work in practice and, even if it did, it wouldn't raise enough money. The first problem has to do with the fact that people cheat on their taxes; they do it now, and they'd find ways to do it under a sales tax. With all of the taxes we'd owe being lumped into one big sales tax, lots of people might be tempted to try evading it, with black markets springing up everywhere.

Joel Slemrod of the University of Michigan's Office of Tax Policy Research says that only six countries in the world have tried to collect a sales tax north of 10 percent, and four of them eventually adopted alternatives like a VAT. Consumers might also be unpleasantly surprised by all the things that get taxed: Not just milk at the grocery store, but legal fees, rent on an apartment, even health-care expenses.

Linder says the administrative problems with a sales tax have been over-blown. Really, he asks, is your local big box store going to help you cheat on your taxes? And the FairTax frees millions from filing tax returns and gets the hated IRS out of their lives.

"I want a system that doesn't have an agency that knows more about you than you are willing to tell your own family," says Linder. This is crucial. FairTaxers seem to care as much, if not more, about getting rid of the IRS as they do about the economic and budgetary impact of reform.

Policy wonks in Washington may have a hard time appreciating how infuriating and confusing the income tax system is for many ordinary Americans. I heard plenty of that in Jacksonville. "It's the complexity of the system that drives me nuts," says Kellum Sowers, another of Boortz's self-described "parishioners."

Just a few years back, this magazine sent identical tax scenarios to 45 professional tax preparers and got 45 different answers back. None of them came up with what we believed to be the correct tax liability.

A knottier problem is what the rate would have to be.

The FairTax bill pegs it at 23 percent in order to fund the government at current levels without raising the deficit. (If you think of the FairTax like a state or local sales tax, you'd say that this is a markup of 30 percent on prices at the store. See the chart above.) But economist William Gale of the Brookings Institution says that this number is way, way too low. "They're telling kind of a big lie about tax reform," he says.

Gale calculates that a 23 percent rate would blow a $7 trillion hole in the budget over 10 years, and that a more realistic rate is 31 percent, and higher still if you allow for evasion. And if lobbyists convince lawmakers to exempt things like health care or other necessities -- a real possibility, given the culture of Washington -- the gap looks even bigger.

FairTaxers respond that Gale isn't taking into account the huge economic growth they believe would occur once the tax system started encouraging investment. And besides, they add, whatever rate you'd pay is comparable to what you now pay. Counting Social Security and payroll taxes, your marginal rate may be north of 30 percent. "To talk about [sales tax rates] independent of what we're currently facing is slightly unprofessional," says Boston University economist and FairTax supporter Laurence Kotlikoff, speaking of Gale.

So the FairTax is certainly debatable -- fiercely so. But in their book, Linder and Boortz push the argument even further. They make a very big claim that isn't debatable at all. It's just wrong.
The painful truth

Toward the end of The FairTax Book, there's a handy little box summarizing what the authors say will happen if we make the switch to a sales tax. Here are the first three points:

* We start collecting 100 percent of our earnings in every paycheck.

* We all get virtual raises, since payroll taxes are no longer siphoned

From our checks.

* We all start receiving monthly prebates equal to the amount of

Consumption tax we would be expected to pay on life's basic necessities.

This sounds pretty good. Of course, we know that it isn't nearly as big a gift as it seems because we'll have to pay some of it back in taxes when we buy things at the store, right? Er, apparently not. Boortz and Linder write:

* The prices of consumer goods and services remain essentially the same, with the removal of embedded taxes compensating for the added consumption tax.

We'll explain this bit about "embedded taxes" in a moment. But first, let's consider what Boortz and Linder appear to be saying. Prices at the store are the same. Your boss stops taking all that money out of your paycheck. Uncle Sam is sending you money instead. And, oh yeah, the government is still up and running.

This just can't happen. "It is practically and logically impossible for the government be collecting the same amount of money as before and have everyone suddenly be better off," says Daniel Shaviro, a tax law professor at New York University.

Part of the problem is the way Boortz and Linder are using the idea of embedded taxes. In an eight-year-old study paid for by AFFT, Harvard economist Dale Jorgenson noted that because the taxes paid by everyone in the chain of production are embedded in the cost of goods, prices could decline an average of 20 percent if all those taxes were scrapped. The FairTax Book devotes an entire chapter to this idea.

What The FairTax Book fails to mention is that prices can only fall this sharply if companies cut wages. I asked Jorgenson about this, and he agreed. Say your salary is $100,000 a year today, but you take home $80,000 after taxes.

Your company is still paying that extra $20,000. In a FairTax world, it will save that money, and be able to lower its prices accordingly, only if it can reduce your salary to $80,000. In other words, your take-home pay is the same as before. Sure, you'd get to "keep 100 percent of your paycheck," as Boortz and Linder repeatedly write, but it would be a smaller paycheck. That's kind of a big thing to leave out.

I pressed the point with Boortz and Linder. Boortz denies that the book intentionally overpromises. The introduction, he notes, emphasizes that "this book isn't about saving a penny in taxes." But he concedes that the book is confusing about this, and vows to correct it in later printings. Fair enough.

Meanwhile, these guys want to replace the entire tax code, they've ignited a populist movement to get it done, and tens of thousands of copies of the uncorrected book make the FairTax sound like magic.
The wages of spin

Let's separate the message from the messengers for a moment. The goof Boortz and Linder have made hardly blows apart the argument for the FairTax. A simplified tax code that reduces the costs of enforcement and compliance -- $110 billion in 2003, by Michigan Prof. Slemrod's conservative estimate -- would be an economic plus. And any tax that results in more growth would, by definition, leave you with more money in your pocket over time.

Some economists predict that a consumption tax could increase the average American's real income by 9 percent over the long run. Others say the numbers are much lower; it all depends, they say, on how you design the tax and the assumptions you make about how people's behavior will change. But few experts think our current tax code -- with its crazy quilt of deductions and exemptions, not to mention that nasty AMT -- couldn't be improved upon.

And although Boortz and Linder use the red-meat language of the right when pitching the FairTax, there are some elements of their plan that liberals ought to take a close look at.

It replaces the Social Security payroll tax, which tends to hit less affluent people harder. Rich big spenders could end up contributing more to the retirement system than they do today. And the other tax plans favored by Washington types raise their own fairness questions. Boston U.'s Kotlikoff, who recently argued for the sales tax in a cover story for the liberal New Republic, worries that other consumption-driven reforms will be a boon to the already wealthy.

These are serious ideas Americans should hear more about. What we don't need is more spinning. FairTaxers promise a world where taxes are effortless, the IRS is dead and gone, and nobody has to sacrifice a thing. But we know this:

There are complications in any tax system. Somebody's got to collect the money for the government. And there will always be losers in the tax game

P.S: Note that I think that the real payroll tax in the USA is over 30% (~15%+~15% which gets nominally shouldered by the company) - (which made the Bush tax "cut" even worse, because he inflated the budget while taking less from the rich and very rich).

[Ice]

How about people simply working in the US and then spending thier money elsewhere ?

A billionaire could simply work in the US (though to be honest he doesn't actually need to be on US soil) and live in monaco or canada or anywhere, he would earn untaxed money in america and spend it somewhere else...

And then secondly someone could just goto the US work for a few years, save like crazy and take his money home... there are ways around the system...

Also the black market could simply send its money abroad, so that money isn't nessecarily going to stay in the US to be taxed, to be honest this isn't my biggest problem with the fair tax, just the more obvious one...

The fair tax would probably cause legalization of many black market products simply because the government cannot get the large of tax revenue generated from them if they are illegal!

I do agree with people taking their money outside of the US. I'm sure some sort of clause would be included penalizing those who did.

[Ironside]

So if I understood that article correctly OA, Boortz and Linder want's to turn it into a VAT, by removing the embedded taxes? And keeping that as the only source of income?

Eh, start a private firm, buy most of your luxary stuff thruogh the firm. Congratulations, you have just avoided most of your taxes. Unfortunatly, all your money went worthless as your nation went bankrupt within a year.

Not gonna happen, or rather not gonna succeed. :book:

[Pannonian]

Am I the only person doubtful about any plan with the name "Fair Tax", as with "Patriot Act", "No Child Left Behind", etc? It's as though they can't persuade people without accusing opponents of favouring unfair taxes, being unpatriotic, leaving children behind, etc.

[Strike For The South]

Am I the only person doubtful about any plan with the name "Fair Tax", as with "Patriot Act", "No Child Left Behind", etc? It's as though they can't persuade people without accusing opponents of favouring unfair taxes, being unpatriotic, leaving children behind, etc.

Thats kind of the point...

[ICantSpellDawg]

I'm against the Fair Tax. I don't believe that it is necessary. I am in favor of lowering income taxes, cutting spending, and reducing loopholes.

BUT please don't call the current taxation system "fair" it is redistributive in nature. The entire modern federal government operates on a redistributive angle. I'm not saying this is wrong - roads that service everyone based on wealthy peoples tax generated revenue isn't "fair" but it is practical. Our education system attempts to give children equal access to education irrespective of their parents tax generated revenue, that isn't "fair" either, but it is a good idea (if they can ever figure out how to do it while making our kids internationally competitive)

Life isn't fair and we don't need the fair tax. We can simply limit the excesses of our redistributive system by cutting out the fat and lowering all taxes.

[Oleander Ardens]

After thinking it through I came up with a very important point which hasn't been brought up by the article: the deferred effect of the "fair tax" as it is a sales tax. This is a godsend for people which large and very large savings/investments. It won't get taxed at all until money is taking out and consumed. This is critcal fact, and perhaps one which only meets the eye/mind of somebody with a certain interest in investment.

Take the example:


Say you earn $2 million a year. You can live pretty well spending $1 million, and as a result pay a mere 11 percent of that year's income in taxes. If the very rich pay less, that means more of the total tax burden in any year has to fall on somebody else, most likely the middle class. Reasonable people can disagree about whether this really matters -- over time, a consumption tax looks more progressive because the rich savers or their descendants eventually spend the money and get taxed. But Boortz and Linder say that all this worry about progressivity at the top is just jealous carping anyway. "We have very few Communists left in this world, but there are some," says the congressman.

So you pay 220000 in taxes, leaving you with 780000. You start to invest and yield a real gain of 5% per year. You do this for 20 years you have a inflation-adjusted capital of 28.871.516 while you played in all 4400000 in taxes. It would be much less capital if you had to pay income taxes (especially capital gain hurts). But the fun continues: You give half of it to your children, let us say 5 million to each of the three. Even if the they spend each 500000 (poor children) a year you defer your taxes for some years - which safes you huge money. Clever bastards. If you are rich and earning really a lot this plan is one worth supporting against the nasty unpatriotic, unfair, unamerican communists of this nation.

[Koga No Goshi]

I'm against the Fair Tax. I don't believe that it is necessary. I am in favor of lowering income taxes, cutting spending, and reducing loopholes.

BUT please don't call the current taxation system "fair" it is redistributive in nature. The entire modern federal government operates on a redistributive angle. I'm not saying this is wrong - roads that service everyone based on wealthy peoples tax generated revenue isn't "fair" but it is practical. Our education system attempts to give children equal access to education irrespective of their parents tax generated revenue, that isn't "fair" either, but it is a good idea (if they can ever figure out how to do it while making our kids internationally competitive)

Life isn't fair and we don't need the fair tax. We can simply limit the excesses of our redistributive system by cutting out the fat and lowering all taxes.

Tuff, speaking just for myself, I think any tax system is going to be unfair. I mean, what if you have two people each making 1 mill, and one person lives in an apartment paying about 40,000 a year (non deductible) and the other has a mortgage and pays about 100,000 per year? There's no way to make a single tax code that will fairly cover every possible set of choices individuals will make, or account for every kind of income, or catch every single abused deduction. I think a flat 17% tax rate is unfair, I think a progressive system is unfair (both at the bottom AND the top!), as you say, life isn't fair.

The whole "fairness" argument about taxation, to me, is like someone launching a crusade over toilets having a lot of bacteria in them. It's like, grow up already. It's a toilet. There's no way it's not going to have bacteria in it.

[Kommodus]

Here's one more useful article (http://www.factcheck.org/taxes/unspinning_the_fairtax.html) from a web site that is pretty good at providing a balanced and factual analysis of policies.


Unspinning the FairTax
May 31, 2007
We look at the numbers behind the numbers.
Summary
In our recent article on the second GOP debate, we called out Gov. Mike Huckabee as well as Reps. Tom Tancredo and Duncan Hunter for their support of the FairTax. We wrote that the bipartisan Advisory Panel on Tax Reform had “calculated that a sales tax would have to be set at 34 percent of retail sales prices to bring in the same revenue as the taxes it would replace, meaning that an automobile with a retail price of $10,000 would cost $13,400 including the new sales tax.” A number of readers pointed out that H.R. 25, the specific bill mentioned by Gov. Huckabee, calls for a 23 percent retail sales tax and not the 34 percent used by the Advisory Panel on Tax Reform. That 23 percent number, however, is misleading and based on some extremely optimistic assumptions. We found that while there are several good economic arguments for the FairTax, unless you earn more than $200,000 per year, fairness is not one of them.

Update June 14: In a letter, Americans for Fair Taxation wrote to say that it disagrees “very strongly” with FactCheck’s analysis of the FairTax. For their objections and our response, see the end of the “Analysis” section.
Analysis

How to Make 30 Look Like 23

Americans for Fair Taxation (http://www.fairtax.org/site/PageServer) offers the following plain-language interpretation of H.R. 25:

Americans for Fair Taxation: A 23-percent (of the tax-inclusive sales price) sales tax is imposed on all retail sales for personal consumption of new goods and services.
It is the parenthetical that is important, for it hides the real truth of the tax rate.

First consider the way in which sales tax is normally figured. A consumer good that carries a $100 price tag might be subject to a 5 percent sales tax. That means that the final bill for the item is $105. The 5 percent figure is the amount of tax that is charged on the original purchase price. But now suppose that instead of pricing the item at $100, the shop owner simply priced the item at $105, then sent $5 directly to the state. The $105 price would be a tax-inclusive sales price. But $5 is just 4.8 percent of $105. That 4.8 percent number, however, is relatively meaningless. You are still paying exactly the same 5 percent tax on the item.

The 23 percent number in H.R. 25 is the equivalent of the 4.8 percent in the previous example. To calculate the real rate of the sales tax, we have to determine the original purchase price of an item. We can begin with the same $100 item, keeping in mind that a price tag that reads $100 has sales tax already built in. If our tax rate is 23 percent of the tax-inclusive sales price, then of the $100 final price, $23 of those dollars will be for taxes, meaning that the original pre-tax price of the item is $77. To get $23 in taxes on a $77 item, one must impose a 30 percent tax. In other words, a 23 percent sales tax on the tax-inclusive sales price is equivalent to a 30 percent tax on the actual price of the item.

FairTax proponents object to the 30 percent number, claiming that critics use the larger number to frighten people. Americans for Fair Taxation claims that it uses the tax-inclusive number to make it easier to compare the FairTax to the income tax that it will replace (since most of us think of income tax rates on an inclusive basis). But we are not accustomed to thinking of sales taxes inclusively. The result is that many FairTax supporters (about 15 percent of those who wrote to us, for example) do not understand that the 23 percent figure is tax inclusive.

Our analysis of the FairTax used a figure of 34 percent as the basic exclusive tax rate. One e-mailer complained that our number was at least 10 percentage points “higher than [the FairTax] is” because we calculated it as an addition to retail prices. But our 34 percent number is not 10 percentage points higher than the legislation. A 34 percent exclusive number is equivalent to a 25 percent tax inclusive rate – only 2 percentage points higher than the FairTax bill. We think that, intentional or not, the use of the tax-inclusive 23 percent rate has misled a lot of FairTax proponents.


But 30 Is Not 34 Either
Americans for Fair Taxation, however, has complained (http://www.fairtax.org/PDF/Excerpts_from_response_to_tax_panel-103006.pdf) that H.R. 25 calls for a 23 percent inclusive (or 30 percent exclusive) rate, not a 34 percent rate. Our number came from the President's Advisory Panel on Tax Reform, which calculated that a 34 percent rate on the actual price of consumer goods would be necessary to make the program revenue-neutral. Americans for Fair Taxation has said that the Advisory Panel did not use the FairTax as detailed in the legislation but instead made up its own plan. This complaint is disingenuous. The Advisory Panel did in fact begin with the 30 percent figure that proponents of the FairTax submitted. But the panel rejected those figures, claiming that they were based, at least in part, on the unrealistic assumption that there would be full compliance with the FairTax. In other words, proponents assume that no one will cheat on taxes. However, the Treasury Department estimates that the evasion rate for the entire U.S. tax system under current law is approximately 15 percent. The Advisory Panel accordingly assumed a 15 percent evasion rate for the FairTax.

More significantly, however, the panel found that FairTax supporters were employing questionable accounting. In calculating federal revenue, proponents assumed that purchases made by the federal government would be taxed at the full 30 percent rate. But when calculating federal expenditures, FairTax proponents did not factor in the additional costs of the 30 percent sales tax. The Advisory Panel thus threw out the revenue from federal purchases, noting (correctly) that increased revenue from taxing federal purchases is exactly canceled by increased costs in the federal budget. Unfortunately, the Advisory Panel has thus far refused to release its methodology, making it difficult to reconcile its projections with those of Americans for Fair Taxation.

Using a formula that corrects for the faulty assumption about government spending, William Gale, director of the economic studies program at the Brookings Institute, calculates that a 39.3 percent exclusive rate would be necessary for revenue neutrality. (We used the lower Advisory Panel number). A more recent study by FairTax supporter and Boston University economist Laurence Kotlikoff – working from Gale’s formula and adopting the same basic assumptions – determines that a 31.2 percent exclusive (or 23.8 percent tax-inclusive) rate would be sufficient.

Even if Kotlikoff is correct that a 31.2 percent rate is revenue-neutral, there remains some reason to doubt that the rate actually would be that low. The FairTax proposal assumes a 100 percent tax base on consumption. By way of contrast, most states that have sales taxes have roughly a 50 percent tax base. With the FairTax’s 100 percent base, consumers would pay taxes on a great many things that may not intuitively seem like consumption. The list would include:


Purchases of new homes
Rent
Interest on credit cards, mortgages and car loans
Doctor bills
Utilities
Gasoline (30 percent in addition to current taxes, which would not be repealed)
Legal fees
At today’s prices, gasoline would cost almost $1 per gallon more. A $150,000 new home would run $195,000 – plus the 30 percent tax that the buyer would pay on the interest on the mortgage. In short, the FairTax taxes everything that one buys, with the one notable exception of education. Any exceptions to the tax base (for instance, eliminating rent or credit card interest from the tax base) would require an offsetting increase in the rate.


But the FairTax Will Lower Prices


Proponents of the FairTax point out that prices on consumer goods contain what are called “hidden taxes.” Under current law, corporations have to pay taxes on their earnings. Moreover, businesses have to pay social security taxes for each employee. The money to pay these taxes has to come from somewhere, and FairTax supporters argue that the cost is passed on to the consumer. In fact, the best-known proponent of the FairTax, talk-show host Neal Boortz, argues that 22 percent of the price of a consumer good is really a “hidden tax.” Get rid of corporate and social security taxes, Boortz argues, and consumer good prices would drop by 22 percent. Even with the 23 percent FairTax, prices stay the same, and with the elimination of income taxes, paychecks will get bigger. Everyone gets a raise and the federal government still gets its revenue. About 10 percent of the e-mail messages we received from FairTax proponents trumpeted this kind of magic act. It is easy to understand the confusion on the issue, as Boortz himself made similar assertions in the hardcover edition of his book. (He later issued a corrected version (http://boortz.com/nuze/200509/09152005.html) in paperback.)

A bit of critical analysis shows that this cannot be right. The FairTax is revenue-neutral. That means that for every tax dollar collected under the current system, the FairTax has to collect a dollar. If the FairTax exactly equaled embedded taxes, then it could not possibly be revenue-neutral, since embedded taxes do not take into account personal income or estate taxes. The FairTax rate would have to be high enough to replace embedded taxes plus income and estate taxes.

Chris Edwards, the Cato Institute's director of tax policy studies, points out that prices do not really matter; corporate, payroll, income and estate taxes currently generate approximately $2.4 trillion, and a revenue-neutral FairTax would still require that taxpayers pony up $2.4 trillion. Nor is it clear that the 22 percent embedded tax figure is particularly meaningful. David Burton, chief economist of the Americans for Fair Taxation, calls it "simplistic" to think that the entire cost of corporate taxes is borne by consumers. Cato's Edwards suggests that while consumers do pay at least part of the costs, producers also bear some of the burden. That is, employees pay part of the costs of hidden taxes (in the form of lower wages), and corporate shareholders pay another portion (in the form of lower returns on their investments).


The FairTax: Is It Regressive?


Sometimes sales taxes are called regressive, meaning that the poorest pay higher rates than the wealthy. Strictly speaking, sales taxes are flat, since everyone pays the same rate. But because the poor tend to spend a high percentage of their income on basic consumer goods such as food and clothing, sales taxes do require the poor to pay a higher percentage of their income in taxes.

The FairTax plan, however, helps to alleviate this difficulty by exempting sales taxes on all income up to the poverty level. Taxpayers would receive a "prebate," which Edwards calculates to be about $5,600 annually. The Treasury Department estimates that the prebate program would cost between $600 billion and $700 billion annually, making it the largest category of federal spending. Americans for Fair Taxation disputes the Treasury Department numbers, claiming that the actual cost would be closer to $485 billion per year. The Treasury Department has so far refused to release its methodology, making it difficult to determine whose estimate is correct.


Who Really Pays?


With the prebate program in effect, those earning less than $15,000 per year would see their share of the federal tax burden drop from -0.7 percent to -6.3 percent. Of course, if the poorest Americans are paying less under the FairTax plan, then someone else pays more. As it turns out, according to the Treasury Department, “someone else” is everybody earning between $15,000 and $200,000 per year. The chart below compares the share of the federal tax burden for different income groups under the current system and under the FairTax. Those in the highest and the lowest brackets will see their share decrease, while everyone else will see their share of taxes increase.


http://cdn.factcheck.org/imagefiles/Fair%20Tax%20Distribution%20Slide%20by%20Income.JPG





Americans for Fair Taxation rejects the Treasury Department analysis, objecting that Treasury considers only the income tax. By leaving out payroll taxes (which are actually regressive) Treasury’s chart makes the FairTax look worse by comparison. We found that including all the taxes that the FairTax would replace (income, payroll, corporate and estate taxes), those earning less than $24,156 per year would benefit. AFT’s Burton agreed that those earning more than $200,000 would see their share of the overall tax burden decrease, admitting that “probably those earning between $40[thousand] and $100,000” would see their percentage of the tax burden rise.


http://cdn.factcheck.org/imagefiles/Fair%20Tax%20Revised%20Slide.JPG

Why Be Progressive?



It is easy to look at charts like the one above and dismiss the FairTax as simply another way to help the rich get richer. But there is an economic argument for a less progressive tax system, though that argument is extremely technical. Kotlikoff has asserted that the FairTax will lower the marginal tax rate for all earners. (The marginal rate is the tax rate paid on the last dollar earned.) Because marginal rates are lower, each extra dollar of income will result in greater purchasing power. The decrease in marginal rates is progressive – that is, marginal rate reductions are greater for the working- and middle-classes than for the wealthy.

Moreover, even FairTax critics like Gale agree that consumption taxes increase the size of the economy. Many studies show that long-term incomes would rise under a consumption-based tax system. Optimistic accounts show a 10 percent rise in income over time, but even the more cautious studies show gains of 5 percent to 7 percent. Because the FairTax will grow the economy, workers will eventually see increases in their income. FairTax proponents claim that the growing economy, coupled with the reduction in marginal tax rates, will offset the increased tax burden. Burton argues that "the FairTax is a positive-sum game," one in which purchasing power will grow faster than the tax burden. The size of any such gains is disputed, however; Americans for Fair Taxation consistently chooses from among the most optimistic growth projections.


Upon Further Review


We stand behind our earlier analysis of the FairTax. The proposal to which Gov. Huckabee referred is not a 23 percent tax, but rather a 30 percent tax. And it is revenue-neutral only through an accounting trick. It will collect more money from those earning between $15,000 and $200,000 per year and less from those earning more than $200,000 per year. It is possible that the FairTax would make most people better off, but much of that gain would be a direct result of making the tax code less fair.

- by Joe Miller

[Seamus Fermanagh]

Here's one more useful article (http://www.factcheck.org/taxes/unspinning_the_fairtax.html) from a web site that is pretty good at providing a balanced and factual analysis of policies.


Nice piece Kommo. Gets at the pluses and minuses pretty fairly. Ultimately, the Fair Tax is pretty much of a wash in terms of taxation (and has to be) but I would be happy with taxes that were more overt.

Also, GOOD to hear from you again!

[CountArach]

Am I the only person doubtful about any plan with the name "Fair Tax", as with "Patriot Act", "No Child Left Behind", etc? It's as though they can't persuade people without accusing opponents of favouring unfair taxes, being unpatriotic, leaving children behind, etc.
Not to go off topic but a lot of other things that many people have taken for granted are named in this way as well - eg Pro-Choice and Pro-Life. The implication being you are either Anti-Choice or Anti-Life if you disagree with the position.