If you’re here in search of information on “Footnote 19″, you’ve probably run into the infamous Mark D. Curran (aka TruthSeeker, FilmCriticOne, Truth, BullShipDetector, Mark Douglas, Mark Curran, Mark Douglas Curran, Mark D, Seeker, Math Matters, 12FlyMe, ItchMyFoot – and many other aliases that we haven’t picked up on yet).
You can find the document Mark is referencing here: A COMPARISON OF THE FAIRTAX BASE AND RATE WITH OTHER NATIONAL TAX REFORM PROPOSALS. I encourage you to read it in its entirety when you have spare time. It is a study that compares the Base and Rate of the FairTax to the flat tax plan, the BTT, and our current tax system.
A major point to note is that this information is coming FROM A STUDY, NOT FROM THE FairTax Act itself. What you are reading does not mean that it will be enacted.
Footnote 19 reads:
The FairTax adopts a pre-payment approach to taxing government investment since much of the consumption generated by government investment would otherwise never be taxed.
And is lead in by:
B. The FairTax Base
H.R. 25 calls for a tax on “all consumption of goods and services in the United States.” That consists, for the most part, of what the NIPA defines as “personal consumption expenditures” and “government consumption expenditures and investment.”[19]
Our (unconfirmed) analysis of the term “pre-payment” is that it means “paying the tax when the purchase is made versus paying it at the end of the year“. We do not believe that the authors of the above noted study inferred, in any way, that the State or Government agencies would have to relinquish funds that a) they do not have yet, and b) cannot feasibly estimate.
Yes, and the “investment” Fairtax taxes — include WAGES.
Fairtax taxes ALL spending by the federal, county, and state governments. ALL spending. That includes wages -and pensions.
Fairtax defines wages not only as pay, but as “any compensation” whatsoever, including disablity, workers comp — that would include combat pay, whatever. The only wages NOT taxed are wages paid to educators, those are not taxed.
But all mlitary wages — taxed. All pensions– taxed.
As William Gale pointed out — soon after Fairtax came out with this nonsense — “Fairtax adopts a prepayment approach to taxing the government — – and would tax all government wages”
Fairtax has never shown clearly what they define as “investments” — but they do say in HR25 that the GOVERNMENT is responsible for the tax on all government spending — an absurdity, in fact, it’s bat shit crazy.
The government must pay 23% taxes on all wages, pensions, and benefits. So when the state of Texas pays a pension, or wage, or benefit — it has to pay 23% to the federal government.
In fact, Texas would owe 12-14 billion, 4 billion in ADVANCE.
And so on, for every state. And so on, for every city. And so on, for every county.
Every dollar of this is an absurdity -not only it is goofy, it is unconstitutional.
That is why they hid it, in the fine print.
That is why they don’t say it in their meetings.
That is why they don’t say it in the interviews or speeches. That is why they don’t make it clear in the books.
I am still offering 50,000 for anyone to show me real research by Fairtax supporting as 23% personal consumption tax that would be revenue neutral. Hiding goofy deception in your fine print, is NOT research. It’s deception. Fairtax, literally, has no research, since hiding stuff in fine print can in no way be research. Research is studying something to find out the truth. Fairtax is hiding stuff to keep the truth hidden. Hence, there is no Fairtax research. And certainly there is none that proves a 23% personal consumption tax would be revenue neutral.
Well, speak of the devil! There he is now.
Mark,
These numbers you keep spewing are – in your own words, “bat shit crazy” because you’re wrong about them. ALL of them. There is absolutely NO possible way that any entity would have to pay out money that they do not have. That is a ridiculous assumption. Maybe you would be better off reading the actual bill instead of some hypothetical study.
And you keep talking about how “military wages are taxed”, but that is total B.S. The first thing you have to remember is that the FairTax does not tax income whatsoever. None. ZERO TAX on Income. EVEN on our military. Again, the FairTax DOES NOT tax income. How can you not understand this rudimentary concept?
Directly from H.R. 25:
Do you know WHY they define those incomes, Mark? So that they can UNTAX them efficiently. And FYI, Mark, the services of our U.S. Military personnel clearly fall within that definition.
Please don’t act like you understand our military, when you clearly don’t, Mark. Under our current system, Combat Pay is tax free. BUT! – and I spent 8 years in the Navy (in combat zones twice), so I know this well – combat pay is still calculated into the amount deducted for your FICA taxes. So, yes, technically, the military member is still “taxed” on combat pay, it’s just not a direct tax.
I’d say this is a pretty clear definition of “investments”, Mark:
And just a note to everyone else reading this. Even if Mark had the $50,000 to put up against his “bet”, all he’s doing is fishing for people to yell at and call “idiot”, or “f**king moron”, or whatever new word he learned that day. Best to just not even entertain him on that level.
Hey Mark,
I want to thank you again for helping me win my $100 bet. My friend said you couldn’t be stupid enough to continue calling someone “dumfuq” after the terms of the wager had been told to you.
How about doing my friend a favor, give him something that he can go double or nothing on.
Robert Williams,
Whoa up, my friend. Military pay will be taxed as representing services provided to a taxable employer (the government). You need to carefully read Section 2, Definitions, and you will see that governments are classified as a person, (2(a)(7), and a taxable employer, 2(a)(12)(A). A Service is any service performed by an employee for which he is paid wages or salary by a taxable employer, 2(a)(14)(B). And, wages and salary includes the “burdened” amount which includes benefits, workers comp, and the fair market value of any other consideration.
Bottom line is that military pay is going to be taxed. I might add that the 2006 “What rate works” study included military pay in the Fairtax base. Ask Dr Tuerck, the BHI study Director, if you don’t believe me!
You and Kicker51 are both wrong about the Prebate. While AFFT wants you to believe that the prebate is a tax refund, that is just not true. The prebate is a cash grant entitlement costing $600 billion annually, and coming at a time when entitlements are squeezing out discretionary spending in the federal budget. Just look in your checkbook for proof. The prebate adds to your gross monthly income, while a tax refund does not. I could just as well think of the prebate as an offset to my alimony payments, or anything else. The prebate can be saved, or spent and taxed as your financial conditions warrent. CBO will score the prebate as an entitlement, period!
So let me get this straight, I have an income, where from doesn’t matter. I spend some of my income on purchases, up to the poverty level, and pay taxes on those purchases. I also make purchases of goods and services above the poverty level and pay taxes on those.
The FairTax says the government will not collect taxes on purchases below the poverty level, and refunds those monies collected on purchases up to that level, keeping the rest.
But now, according to you, those monies I surrendered to the government, which the government says were “collected in error”, and returned to me, are now an entitlement.
I pay money, I get money back…. doesn’t sound like an entitlement to me. Seems more like a refund.
If you want to argue that spending below the poverty level is “optional”, and folks either choose not to, or can’t, spend at that level, then you may have a point. But my counter-argument would be that we should then drop the poverty level since it is not supporting a sustenance level of existence, but, instead, financing a higher lifestyle.
The FairTax is designed to make sure folks take care of themselves first, and then render onto government monies as part of their “luxury” purchases. It is not an entitlement. It is a fundamental human right to provide for ourselves and our families first. Anything else, and we are nothing but chattel, working for the government, owned by the government, and controlled by the government. Just like now, under the income tax you so strongly defend.
Here is also where YOU are wrong, my ‘friend’. Military personnel wages are NOT taxed, as you assume they are. This is taken directly from FairTax.org:
So, Hank, now you know. But I have to ask, will you continue to (disingenuously) claim that the wages of our Military personnel are taxed? Or are you good with this?
Once again, it looks like Hank is trying to bend the FairTax to fit a model of his own making. While it is true that governments are considered “taxable employers”, Hank has “conveniently” chosen to leave out a significant exclusion from the definition of (taxable) service, specifically, 14(B)(ii), which reads
(and) ‘‘(ii) shall not include any service performed by an employee for which the employee is paid wages or a salary—
(I) by an employer in the regular course of the employer’s trade or business,
So, what we have here is a clear example of someone attempting to misrepresent the FairTax for his own purposes.
The FairTax imposes taxes on government services for a reason, to prevent unfair competition between government and private industry in the provision of those services. For example the collection of garbage, which can be performed by private industry, or by government. The FairTax ensures government does not have an unfair advantage when supplying those services.
But the military is an obvious example of where private competition doesn’t exist. And military personnel are not providing any service to the public except in times of war. The rest of their time is spent in training and preparation, which is “the regular course of the employer’s trade or business”.
Give it up Hank. The writers of the FairTax were much smarter than you think, and have constructed a system of taxation designed to be simple, fair and efficient. You can try and twist their words to your own ends, but it just isn’t going to work.
Robert/Steve,
Wow! I foolishly thought we were coming together on some Fairtax facts I presented, but it is obvious both of you are addicted to that Fairtax “Kool-Aide” Put down the glass and pay attention.
Starting with the prebate, I didn’t invent the entitlement descriptor, the 2005 Bush bipartisan tax Commission did. They wrote:this conclusion in Chapter 9, A National Retail Sales Tax, “A cash grant program to make the tax appropriately progressive would cost at least $600 billion per year– which would make it America’s largest entitlement program.” And here again is the Wiki definition of “entitlement”–”An entitlement is a guarantee of access to benefits based on established rights or by legislation.” HR25 does exactly that! I know AFFT still tries to convince everyone that the prebate is a tax refund, but it isn’t. Steve, it is not true that “The FairTax says the government will not collect taxes on purchases below the poverty level, and refunds those monies collected on purchases up to that level, keeping the rest.” The Fairtax tax collects the sales tax on all sales, and offers a cash grant entitlement to help offset taxes on spending up to the AFFT adjusted poverty level. The Fairtax prebate increases everyone’s gross income, a tax refund does not! The prebate can be saved, or spent and taxed on anything as conditions warrant. The CBO will score the prebate as an entitlement. Case closed!
Turning to the taxation of military pay, it is clear from the Section 2 Definitions, that governments are taxable employers, and services performed by employees of a taxable employer are taxable. Steven claims that one of the exceptions is services performed for a taxable employer in the regular course of the employers “trade or business”. He claims that the government is a “trade or business”, which is nonsense. The exception he quoted is simply to assure businesses that they don’t have to pay a tax on their employees services. It has nothing to do with the military.
David Tuerck was the study Director from BHI, who along with Larry Kotlikoff and Karen Walby spent almost a year producing the “What Rate Works” study for AFFT back in 2006. Here is his answer to my recent query: ” I am sure that we included government salaries and wages in the (Fairtax) base.”
Robert, your quote simply says that income from any source is not subject to income taxes or payroll taxes under the Fairtax. Terrific, but it doesn’t exempt government pay from sales taxes as described in Section 2. I continue to claim that military pay is taxed, and there is nothing disingenuous about it. No matter how you squirm and try to attack the messenger, my message is clear and factual. Get over it!
Anyone who uses the Bush Tax Commission as a source of information on the FairTax obviously doesn’t recognize the purpose of the Commission. They worked very hard to undermine the FairTax, and their “redefinition” was just one example.
As to the prebate increasing my gross income, I start with $100. I spend $100, of which $23 is taxes. I get a check from the government for $23. I now have $23 plus the goods I purchases with an untaxed value of $77. Seems to be my gross income is the same. (Or does $23 and $77 not equal $100 by your math?)
Steven,
Each month you and your wife (family of 2) get paid $5,000 by xyz Corporation and, under the Fairtax, that full amount is deposited to your local bank account. On the first of every month, a government entitlement check for $416 is also deposited to that bank account. Your annual gross goes from $60,000 to $65,000. How you spend any of those funds is up to you, but isn’t it clear that the prebate increases your annual gross? The same can not be said for a tax refund today. If you overpay your taxes, (or foolishly over withhold), you can apply for a refund from the IRS. But your gross pay won’t change by one thin dime.
I don’t know just exactly why AFFT keeps insisting that the prebate is not an entitlement, but is more like a tax refund. I suspect that the term “entitlement” concerned the authors of HR25 greatly, because they and everyone else recognized that more entitlements are just what we don’t need in the federal budget. Just a guess?
I’m not going to waste time defending the Bush Commission work, but have you ever read chapter 9? Contrary to the weeping and wailing respose from AFFT, the Panel ” initially evaluated the federal retail sales tax using the broad tax base described by advocates of the “Fair Tax” retail sales tax proposal”.(page 209) And again on page 211, “The Panel considered the cash grant (prebate) program advocated by proponents of the Fairtax.”
Because of the well known problems with taxing services, the Panel evaluated other tax bases which resulted in higher rates. AFFT also had assumed a zero evasion rate so the Panel examined higher evasion rates which also raised the sales tax rate. The Bush Commission did not recommend either a sales tax or a VAT for several reasons, but it seems clear that they didn’t “work very hard to undermine the Fairtax”. Sorry you didn’t like the result.
But the fact remains, the Panel described the “prebate” as an entitlement, and the Panel members were all pretty solid economists and government experts. I’ll stick with their descriptor, because the prebate sure as hell isn’t a tax refund!
So, using your logic, you have your gross pay for the year, then, all of a sudden, your income tax refund shows up. Suddenly, your gross income increases…. and we have a new entitlement.
Obviously, if one is a refund, so is the other.
Steven,
A tax refund is not an entitlement, and does not add to your gross for either year. At some point you really ought to consider the awful possibility that I could be right? Cheers!
// “I’m not going to waste time defending the Bush Commission work” //
Hank, that’s ALL you’ve been doing. You’ve wasted so much time defending it that I’m beginning to think you were on that panel.
// Wow! I foolishly thought we were coming together on some Fairtax facts I presented //
Yeah, I guess so. I don’t know what would have given you that idea. None of the so-called “facts” of yours have even made sense. You take HR-25 wording out of context and expect it to be a “fact”. Then when we put it back into context, you don’t believe it and claim we’re “drinking the kool-aid”. Sorry, Hank, that’s not going to work here.
Steven,
By the way, I agree that governments should not have an unfair advantage over the private sector in providing goods or services. But, Section 704 takes care of that issue by mandating that any government that sells $2500 per quarter or more is classified as a Government Enterprise, and has to collect and remit the sales tax. The playing field is level, and there was no need to tax all government consumption. How idiotic was it to give up a chance to reduce government costs by 10% or so, and propose a tax system that will increase the cost of government by 15-20%. Have we lost our minds?
How could you possibly think that not taxing government services would result in “cheaper” government. It simply shifts it from one pocket to another. In case you hadn’t noticed, since the FairTax is revenue neutral, if government doesn’t pay “their fair share”, then it’s going to be made up by higher taxes on the public. How stupid would we be to give ourselves higher taxes, drive our own companies out of business, and promote a stronger, larger, less accountable, central government? Haven’t we already seen where that ends up.
As to your other post, please define the service provided by the military, and to whom is it provided?
Steven,
You are quite right that taxing the Federal government has no effect on the Fairtax rate. One pocket to the other is correct, so why do it?
Different story for taxing State and Local government consumption. In order to pay the federal government the 23% sales tax, S/L governments are going to have to raise all of their taxes of every kind. The only savings to S/L governments would be the elimination of the government share of FICA on their employees, and that won’t begin to cover the sales tax cost. I estimate that 10% to 15% of the federal revenue will be hidden in higher S/L taxes. How transparent is that, my friend?
I thought you understood that only people pay taxes? What is stupid and dishonest is to believe that taxing governments somehow relieves our tax burden. Absolutely untrue! Don’t you agree that we need to see just exactly what government is costing us?
(B) SERVICE- For purposes of subparagraph (A), the term `service’–
`(i) shall include any service performed by an employee for which the employee is paid wages or a salary by a taxable employer,
I “served” our country for 20 years, and would respectfully suggest you need to back off this nonsense. There should be no question about what military service is and for whom the service is provided.
While I certainly respect your service to our Nation, I refuse to allow you to use it as a means of avoiding the issue. Under the FairTax, if I sell a product to and end user, it’s a taxable transaction. If I sell the same product to another business, to be used in the execution of their business, then it is not taxable. My question is both relevant and central to the military issue.
And yes, while people are the only ones who pay taxes, we don’t want to allow governments, of any level, to exercise an unfair advantage over “people” in the provision of goods and services. You want government to be untaxed so as to lower the costs of the services they provide. I want them to be just as high as the private company working to provide those same services. And given a choice, I’ll go private every time, helping to shrink the scope and reach of government, and forcing efficiency because governments would no longer have an exclusive right to control those services, or a cost advantage by which to supply them.
And showing the true cost of government is EXACTLY what I am doing, while your proposal allows government to shove off the tax component of those services to the private sector. Under the FairTax, the provision of services will have exactly the same costs, government or private, given similar efficiencies, size, ect. Under your proposal, you’ve given government a decided advantage, and helped put more private companies out of business, put more workers out of a job, and increased other costs of government. Which makes the bureaucrats, social engineers, and self-styled elitists happy.
I fail to see why you’re working against the FairTax in order to help those who would destroy the American promise, restrict or remove our liberties (the very ones you may have fought to protect), and turn our great Nation into another Euro-nanny state.
Steven,
Very strange and irrational post, imho. I thought you understood that Section 704 in HR25 requires any government agency at any level that sells $2500 in goods and services in each quarter to collect and remit the 23% sales tax. The playing field is certainly level. And I certainly don’t agree that government agencies might provide free services or goods in competition with the private sector. It would be idiotic to suggest that your town council would vote to provide and pay for a “free” town laundry. Who pays for “free” government services? We do, and that council would have a very short shelf life if put to a vote.
How you believe that hiding 10-15% of federal revenue collection in higher S/L taxes is beyond me. Please tell me how to calculate how much of my S/L taxes are going to the federal government? Are you sure the Fairtax is transparent?
// I estimate that 10% to 15% of the federal revenue will be hidden in higher S/L taxes. //
YOU estimate, Hank? Please show credentials that say you are an expert on estimating State/Local revenues. As I’ve shown, part of $22M in research has proven just the opposite would happen. I’d like to see how you have come up with better (and contradictory) numbers than they have.
// I “served” our country for 20 years, and would respectfully suggest you need to back off this nonsense. //
I only served our country for 8 years. In your eyes, Hank, does that make me less of a servant than you? There are millions of people who serve our great nation each year, yet you keep throwing up this military card like it trumps everything else. There is no – and has never been – any question about your service or any other military personnel’s service, but when you start twisting the definition of “(B) SERVICE” to meet your individual qualifications, there is something wrong, Hank.
You need to rethink your strategy and stop pretending to be the ultimate resource for the FairTax. Accept the fact that we will not agree with you and leave it at that. If this were YOUR website, then I would do that. It is your turn to step down, not ours.
Robert,
Tell you what, I’ll show you how I conclude that 10-15% of federal revenue is hidden in higher S/L taxes. But then I expect you to show me the part of the $22M in “research” that shows the opposite.
The only authoritative study on the Fairtax details is the 2006 “What Rate Works” study done for AFFT by the combined team of BHI/Kotlikoff, and the AFFT Director of Research. It took almost a year, but their report is still relevant.
Table 2, the Computation of the Fairtax Base, shows that S/L taxable consumption was $1093 billion. Taxed at 23%, S/L governments would have to pay $251 billion in federal taxes. $251 billion is 11.3% of the total revenue to be raised which was $2228 billion. 11.3% is in the 10-15% range I wrote about. It could be higher than 11.3% because the sales tax rate the study came up with was 23.8%, not 23%. I’ve shown you mine, now please show me yours.
I’m glad you had an opportunity to serve, Robert, and can I assume you, unlike Steven, understand the term “Service” as it applies to the military?
By the way, you have every right to shut down this exchange as it is your blog. That is up to you, but I had hoped that any readers of your blog might benefit from input from a Fairtax skeptic with differing views. As Neal Boortz wrote: “Don’t believe anything you hear and only half of what you read. Do your own research and come to your own conclusions!” Very good advice, imho!
Robert,
I’m waiting for your response–patiently?
Sorry, Hank. There comes a point where a man just has to give in and just say to himself “No matter what I say, he just won’t get it”, and then move on.
I encourage future comments of yours, and I will answer and refute them to the best of my ability and within reason, but will not “entertain” them or you to the point that it detracts from other work I have.
Thank you.
Robert,
I’m confused. You challenged my claim that 10-15% of federal revenue would be hidden in higher S/L taxes. I explained in detail why that is true. I fully expected you to present other data that would disprove my point. If you have already put forth such data, perhaps I just missed it. Just point me to where it is or come up with your response. I can’t “get it” until you show me what “it” is. I’m always ready to accept new facts. Just show them to me!
I’m sorry, Hank, I assumed that with your experience you could cross-reference information: http://fairtaxer.wordpress.com/2011/07/13/re-six-reasons-why-the-fairtax-is-a-really-bad-idea/#comment-192
And since I didn’t provide an actual link to the study, here is that too: http://www.beaconhill.org/FairTax2007/FiscalFederalismNatFairtTaxStatesBHI-071025.pdf
Robert. Thanks for reminding me about this 2007 BHI report. I dragged it out of my files along with the comments I sent BHI at the time.
The report is just too “rose colored glasses” for me. There is no way 50 States are going to become conforming states. States already know that trying to tax all services is a loser. No one has ever done it! In addition, federal taxation of S/L consumption is unconstitutional, and all 50 Governors are opposed to any kind of national sales tax. Does anyone really believe that the states will fall in line, not to mention voting to repeal the 16th Amendment?
The report also assumes no monetary accommodation by the Fed, which according to economists means retail prices can not rise. I have an economics degree, although I’m not an economist. But it seems to me that the $1.6 trillion that will go to us consumers in the form of tax relief plus the prebate is enough to support a 17% retail price increase. The Fed doesn’t have to do anything in the way of accommodation, just get out of the way. All that money in the hands of consumers has got to be inflationary. What is the problem?
The report does agree that States will have to raise their taxes jn order to pay the federal tax bill. Or even “tax the tax”, which goes against the goals laid out in HR25.
If you want to accept this report as proof that S/L taxes will go down, not up as I claim, so be it. But I am going to write David Tuerck and inquire if the $251 billion in federal taxes was included in his state by state analysis leading to reducing their taxes by half.
Cheers!
Hank, maybe you aren’t aware of this, but 45 States already impose sales and use taxes on retail sales. For those 45 states it would be fairly simple (no, I’m not saying it would be a cake-walk) to convert to the FairTax system. The other 5 might be a little difficult, but they can start out as Administering State and let one of the other states handle their remittances.
You keep talking about how “all services can’t be taxed”, well, I will agree with you on one condition – that you’re including services which are not performed by a legal business; such as a person who does roofing as a side job, but does not have a registered business.
I’m sorry, but the state will have no problems collecting taxes from legal (registered) businesses who provide services such as AC/Heating repair services, plumbing services, or the like.
Those minor side services won’t make one iota of a difference, because the money they make from those side jobs will go towards purchasing new goods that include the FairTax.
Sorry, running late, more later…
Good points, and remember, if a business isn’t registered, then it doesn’t have an ID number, so it can’t buy it’s raw materials “tax free”, therefore the price it charges to “do a job” will likely be higher. In other words, the FairTax encourages honesty and legality. Something that certainly can’t be said for the current system!!
Robert/Steven,
Not surprisingly, Fairtax supporters claim that collection of the 30% sales tax can be fairly easily done, while detractors tend to maximize the collection and enforcement problems. But what does an unbiased pair of tax experts and economists think? Here are some extracts from an excellent book entitled Taxing Ourselves. If you haven’t read it, get it!
Taxing Ourselves—A Citizens Guide to the Debate Over Taxes
Joel Slemrod and Jon Bakija
Chapter 7—What are the Alternatives? Page 245
“Another problem with the retail sales tax is that at high rates, it becomes difficult to enforce because it collects all the money from what is, for compliance purposes, the weakest link in the production and distribution chain—retail. Consumers have no incentive to make sure retailers are paying their sales tax, and retailers have no incentive to pay aside from the threat of audit. Moreover, consumers have the incentive to inappropriately acquire business registration numbers to avoid the sales tax. A study by the Florida Department of Revenue estimated that 5 percent of tax free business purchases involved abuse or misuse of business exemption certificates, and it recounts how “paper” businesses are created solely as a means of obtaining business exemption certificates and avoiding taxes on purchases intended for personal use. Florida has a sales tax rate of 6 percent, and the magnitude of this problem for a rate five times higher can only be imagined.”
“As Alan Tait, a leading expert on sales taxation around the world has stated, at 5 percent, the incentive to evade tax is probably not worth the penalties of prosecution; at 10%, evasion is more attractive. And at 15-20%, it becomes extremely tempting. Tait did not even characterize the problems that would occur at the rate of 30% or more that would probably be needed to replace current income tax revenues and provide a rebate to offset the otherwise regressive distributional impact.”
“Worst of all, no historical precedent is available to reassure us that these problems are manageable in a retail sales tax. Only six countries have operated retail sales taxes at rates over 10%, and all of them have since switched to a VAT. Based on a review of worldwide practice, VITO Tanzi, the former director of the Fiscal Analysis Division of the IMF, concludes that 10% is probably the maximum rate feasible for a retail sales tax.
We believe that because of compliance and enforcement problems, replacing the income tax with a retail sales tax would be unwise, especially given that a VAT can achieve the same goals while avoiding most of these problems.”
Hank, once again you’re ignoring the Prebate. If you would just stop ignoring the Prebate, this whole “avoidance” or “tax-evasion” argument of yours would be meaningless. Yes, I know you feel that it is “welfare”, Hank, but you yourself admitted that you would take it if offered. So, even though your receipts will show 23% (or 30% if you choose to calculate it yourself), with the prebate you already received at the beginning of the month, your effective tax rate has already been reduced.
So, let’s assume you kept all your receipts for the year and add them up. Your total spent comes to $36,000 on everything (rent/mortgage, utilities, groceries, vehicle payment, fuel, and whatever else you want) over the year. Out of the money you spent throughout the year, 23% went to paying the FairTax (because THAT is how much the govt will take – not 30%). So that’s $8,280 to FairTax. The Prebate will give you and your wife $417/mo (or $5,009/yr). Out of the $36,000 you spent, you have already received $5,009 to cover the taxes on your necessities. So #1, you’ve really only spent $30,991 and #2, because you were reimbursed $5,009 of the $8,280 you paid out in taxes, your effective taxes paid come to $3,271. $3,271 is 9.1% of your original $36,000.
Simplified it looks like this:
1. Spent: $36,000
2. Taxes: $8,280
3. Prebate: $5,009
4. Eff. Taxes (2-3): $3,271
5. Eff. Tax Rate (4/1): 9.1%
So, “As Alan Tait, a leading expert on sales taxation around the world has stated, at 5 percent, the incentive to evade tax is probably not worth the penalties of prosecution; at 10%, evasion is more attractive”. This tells me that your exaggeration of the 30% is an absurd tactic to try and scare people into believing there will be more avoidance than there actually will be. You seem to be intentionally ignoring facts that would otherwise play a pivotal role in their decision making. That, Hank, to me is impure.
2nd point: Enforcement. There are some 22,000,000 registered businesses in the US already. The government knows exactly how many businesses are registered every year and they have known this every year for the past 50 years (at least). Do you not think they would be able to figure out that, if there is a sharp increase in business registrations immediately before or after the FairTax is imposed, there is some additional fraud going on somewhere? And do you not think they would immediately start auditing those brand new businesses to ensure that they are in fact legitimate businesses? I mean, would that not make sense to you? It certainly makes sense to me.
Additionally, if businesses are required to report their earnings on a monthly basis (as they are under the FairTax). Do you really and truly believe that people like you or me would go to lengths of reporting and remitting their taxes on a monthly basis – JUST so they can avoid paying 5-10%? I hardly think so; because as a business, they would have to turn over 23% of their “business” earnings or risk losing their business license. Hank, I don’t know about you, but I have a hard enough time filing taxes annually; and when I owned a business, I certainly didn’t want to file them quarterly. Monthly is completely out of the question for me and I’m certain of that for the majority of Americans. Leave that to someone who gets paid to do it.
As for “the weakest link”. If they are currently the weakest link, then how will the FairTax change that (positively or negatively)? Under the current system, (A) retail businesses are forced to file lengthy forms; and (B) spend millions of dollars complying with current laws. Reducing or relieving businesses of both (A) and (B) will allow them to more easily focus on one primary question: How much taxable income did you have this month? A: $1,023,978. Calculate the FairTax at 23%, send us $235,514.94, and you’re done!
Robert,
You really wandered into left field on this one. As I see it, I presented an unbiased opinion by some econ/tax experts that concluded that any sales tax over 10% wouldn’t work. You responded by showing how someone’s effective tax rate would be 9.1%. What on earth are you talking about. Everyone understands that when discussing evasion, we are talking about the tax at the cash register, whether State, or federal under the Fairtax. And, the federal sales tax at the cash register is 30%. I don’t know what is “impure” about the truth? Perhaps you can explain? Effective tax rates have no bearing on the decision to evade taxes.
And speaking about the Fairtax rate, HR25 is a piece of tax legislation, and sales taxes in the USA are generally couched in exclusive terms. 305 million Americans understand that. I predict that one of the first things the staff of the W&M Revenue Subcommittee does is describe the sales tax in exclusive terms. For marketing purposes, you can continue to explain that the 23% inclusive tax is listed that way in order to make comparisons to the inclusive income tax. However, that is a very weak argument, because no one can make that comparison without first coming up with effective tax rates for both systems.
The Fairtax rate is 30%. Get used to it!
Ya know Hank, it baffles me that you’ve been attacking the FairTax for 6+ years and you still (intentionally?) fail to understand that regardless of whether you say it is 30% exclusive or I say it is 23% inclusive, the amount is exactly the same. So why even try to argue the point? Does it make you feel like a big man to say “they’re lying to you”, even though you know that it really doesn’t matter? Another impurity in your actions, Hank. And yes, excluding a fact is lying by omission and is considered impure (as well as extremely biased) – even if you are telling the truth about other portions.
For anyone else that has actually made it this far into the conversation, Hank likes to throw out these “detractors” that mean absolutely nothing to the FairTax. Like this 30% load that he wants everyone to believe. Here, this will explain it much easier than I can:
I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter?
Hank, I think this conversation is over. Thank you!
Robert,
You have disappointed me greatly. Typical Fairtax cult response. If you can’t rebut the message, attack the messenger.
I do thank you for linking everyone to the Fairtax FAQ that makes my point clearly. As much as it pained them, AFFT did sneak in a one word answer confirming that the sales tax at the cash register is 30%. Nowhere else can you find that important fact, not even on the proposed sales tax receipt.
Yes, no matter whether you call it 23% or 30%, the revenue collected is the same. I never said otherwise. I would suggest that you add the word inclusive to the 23%. 300 million Americans mostly believe that the 23% tax is what is added at the cash register. A bit disingenuous, don’t you think?
Hank, that is just as easily a typical anti-FairTax cult response, just because I warn people of your disingenuousness and your need to detract from the conversation doesn’t mean I am “attacking” you. No where in this thread or any other thread have I attacked your character outside of how you are being disingenuous about the FairTax.
Thank you! Conversation closed.