2 Comments to “Vote for the FairTax”

1. 

   Mark Curran 8 February 2008 at 10:14 am #

   I wish the fairtax would work. I loved it when I first heard of it.

   I wanted it to be true. The tax code we have is horrible, mostly cause it punished earned income — aka work.

   But Fairtax is based on several fatal fallacies.

   In fact, it would be impossible — not just difficult — for the Fairtax to last if it were enacted.

   The major problem — the fairtax would have to be 40% or more, just because of ONE math mistake

   And that is — the impossibility of the federal government paying taxes to the federal government.

   Oh, I know that fed gov paid FICA for their employees, and that sort of thing. But thats money it pays to its employees, or an account for their employees.

   Thats entirely different than taxing yourself on purchases you made, which is in effect, sending yourself a check every time you buy something.

   When the US Navy has to send 4 billion in sales tax on an aircraft carrier -the Treasury has to pay that 4 billion. In no way is that a gov receipt that it can spend. Therefore, its a defacto exemption — since no money is gained by the treasury.

   Boortz insist that the “federal government itself will be a major taxpayer ” (Page 148 FT BOok)

   But thats like me paying myself 500 dollars a day to cut my grass. I can write the check to myself, I can even deposit the check. But I dont make 500 dollars.

   If I could make money by paying myself to cut my grass, I would pay myself 500,000.

   This one fallacy (there are others). The tax rate would have to be 35-40% to make up for this one fallacy.

   A 40% sales tax on new homes, on cars, on rent — would actually be preposterous.

   Here is another major fallacy — that people will be able to afford the sales tax on items, because they get to keep their entire paychecks.

   That might be true — if everyone had a paycheck, and no one had huge bills from cancer, or other diseases or health conditions.

   People living in nursing homes dont have paychecks. But they will have sales taxes of 25,000 a year, just on the cost of living in the nursing home.

   Cancer patients — could easily have 50,000 sales tax on surgery, chemo, and rehab in hospital.

   The Cancer patient might not even MAKE 50,000 a year – but get a tax bill for that amount.

   Their insurance might have paid the 250,000 for their medical care. But the insurance isnt going to pay the tax.

   When cancer patients, nursing home patients start to see these taxes, they will scream bloody murder.

   And congress won’t make them pay the sales taxes. Any congressman silly enough to insist cancer patients pay a tax greater than their income, won’t be re-elected.

   So health care get an exemption.

   Thats a 460 billion dollar shortfall in the Fairtax budget — because Fairtax depended on taxing health care.

   Ive just shown two fallacies — 1)government taxing itself, 2) health care paying 460 billion in taxes. Together, thats 800 billion or so shortfall in the Fairtax receipts.

   There are OTHER fallacies – but just these two, would make the tax rate over 60%.

   I would actually love to see the Fairtax enacted, because I think our country needs a wake up call. Not about taxes so much – -but about our addiction to “easy answers” and believing propaganda.

   I think it would be great for the us to learn that the truth matters, math matters.

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2. 

   Ian Repley 10 February 2008 at 7:12 pm #

   Gov. Huckabee’s advocacy of the FairTax ( http://snipr.com/irsgone ) is the single most important policy position in this election. Research findings explain why:

   The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars – $358 billion more than the taxes it replaces [BHKPT] ( http://snipurl.com/whatratewks ).

   The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan [THBP] ( http://snipurl.com/baserate ).

   Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case [THBNP] ( http://snipurl.com/realwages ).

   The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be [ALM] ( http://snipurl.com/econbenes ).

   Consumption benefits [ALM] ( http://snipurl.com/econbenes ) :

   • Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10.

   • Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place.

   • The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted.

   • By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent.

   Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system [KR] ( http://snipurl.com/kotcomparetaxrates ).

   Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively [JK] ( http://snipurl.com/kotftmacromicro ).

   Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax [THBPN] ( http://snipurl.com/lessregress ).

   Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20 [THPDB] ( http://snipurl.com/moregiving ).

   On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base [TBJ] ( http://snipurl.com/staterates ).

   The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent [WM] ( http://snipurl.com/homebenes ).

   ALERT: Kotlikoff refutes Bruce Bartlett’s shabby critiques of the FairTax ( http://snipr.com/bbrebuke ).

   References:

   [ALM] Arduin, Laffer & Moore Econometrics, “A Macroeconomic Analysis of the FairTax Proposal,” July 2006.

   [BHKPT] Bachman, Paul, Jonathan Haughton, Laurence J. Kotlikoff, Alfonso Sanchez-Penalver, and David G. Tuerck, “Taxing Sales under the FairTax: What Rate Works?” published in Tax Notes, November 13, 2006.

   [JK] Jokisch, Sabine and Laurence J. Kotlikoff, “Simulating the Dynamic Macroeconomic and Microeconomic Effects of the FairTax,” National Tax Journal, June 2007.

   [KR] Kotlikoff, Laurence J. and David Rapson, “Comparing Average and Marginal Tax Rates under the FairTax and the Current System of Federal Taxation,” NBER Working Paper No. 12533, revised October 2006.

   [THBNP] Tuerck, David G., Jonathan Haughton, Keshab Bhattarai, Phuong Viet Ngo, and Alfonso Sanchez-Penalver, “The Economic Effects of the FairTax: Results from the Beacon Hill Institute CGE Model,” The Beacon Hill Institute at Suffolk University, February 2007.

   [THBP] Tuerck, David G., Jonathan Haughton, Paul Bachman, and Alfonso Sanchez-Penalver, “A Comparison of the FairTax Base and Rate with Other National Tax Reform Proposals,” The Beacon Hill Institute at Suffolk University, February 2007.

   [THBPN] Tuerck, David G., Jonathan Haughton, Paul Bachman, Alfonso Sanchez-Penalver, and Phuong Viet Ngo, “A Distributional Analysis of Adopting the FairTax: A Comparison of the Current Tax System and the FairTax Plan,” The Beacon Hill Institute at Suffolk University, February 2007.

   [THPDB] Tuerck, David G., Jonathan Haughton, Alfonso Sanchez-Penalver, Sara Dinwoodie, and Paul Bachman, “The FairTax and Charitable Giving,” The Beacon Hill Institute at Suffolk University, February 2007.

   [TBJ] Tuerck, David G., Paul Bachman, and Sylvia Jacob, “Fiscal Federalism: The National FairTax and the States,” The Beacon Hill Institute at Suffolk University, June 2007.

   [WM] Walby, Karen, and Dan Mastromarco, “Promoting home ownership: How the FairTax’s benefits for homeowners exceed the mortgage interest deduction,” Americans For Fair Taxation White Paper, August 2006.

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