A tax upon your house, and everything else, too. "FairTax" won't work, say experts

[Amerigo Vespucci]

A tax upon your house, and everything else, too

The "FairTax" plan calls for a national retail sales tax to replace income and payroll taxes. Won't work, say experts.

By JONATHAN WEISMAN, Washington Post

Last update: January 5, 2008 - 4:09 PM

http://www.startribune.com/politics/13085471.html

To former Arkansas Gov. Mike Huckabee, supporting a national retail sales tax is more than a policy proposal. It has provided much-needed muscle for his campaign, filling rallies and events with fervent supporters hoping to replace the entire income and payroll tax system. There's one problem: A national sales tax won't work, at least not according to tax experts and economists of all political stripes. Even President Bush's Advisory Panel on Federal Tax Reform dedicated a chapter of its 2005 final report to dismissing such proposals. "After careful evaluation, the Panel decided to reject a complete replacement of the federal income tax system with a retail sales tax," the panel said. It concluded that such a move would shift the tax burden from the rich to the poor or create the largest entitlement program in history to mitigate that new burden.

Under the proposal, known to supporters as the FairTax, the Internal Revenue Service and the entire income and payroll tax system would be abolished. Americans would then pay a sales tax on virtually everything: a new home, yard work, food, health care. Only education would be broadly exempted. FairTax advocates say a 23 percent tax rate would maintain the same amount of money flowing into the Treasury, though that number is debatable. An item priced at $1 would actually cost consumers 30 percent more, or $1.30. FairTax advocates say that amounts to a 23 percent rate, because 30 cents is 23 percent of the product's after-tax cost of $1.30.

To offset the burden on the poor, the FairTax system would send monthly checks to everyone in America, compensating for taxes paid up to the poverty level and ensuring that some minimum standard of living would go untaxed. The president's tax reform panel, in its final report, estimated that such a program would cost $600 billion to $780 billion a year, making "most American families dependent on monthly checks from the government for a substantial portion of their income."

At the same time, federal spending would shoot up because the government would have to pay sales taxes on purchases. To compensate, the sales tax rate would have to rise to more than 40 percent for the government to take in as much as it does now, said William G. Gale, a tax economist at the Brookings Institution. State and local governments, facing a new burden on purchases, would have to increase taxes to maintain current levels, as well.

[no name no slogan]

1. Let's hear it for regressive taxation!

This one's as good as Steve Forbes' so-called "flat tax".

What a load of dingo's kidneys.

[XemaSab]

4. Hey, kidneys are important to dingoes!

Signed, the League of Dingo-Americans

[ayeshahaqqiqa]

2. If Fair Tax is so wonderful, why didn't Huckabee try it in AR?

No, he kept the state income tax and ADDED services to the list of those charging sales tax. Tell that to any Huckster supporters you find. By the end of his term, he was so roundly disliked by Republicans he could count on the support of only 13 legislators.

[napi21]

3. The ny peple who think te Fair Tax is a good idea don't understand it!

I've had this convesation with many people in the past. They don'tlike the IRS so they gravitate to anthing that would make it go away. When you explain this new fair ax system to them, they always change their mind.

[Amerigo Vespucci]

5. Even if the IRS "went away," something much worse would rise in its place...

...the government would need an agency to administer the "prebate" checks.

The government would need an agency to administer the inevitable evasions and "back door" transactions.

Mr. and Mrs. Johnny Lunchpail are too busy high-fiving Pastor Mike over the "death of the IRS" to see the bigger beast waiting in the wings.

[sendero]

6. Any of these massive tax changes....

... are nothing but pipe dreams. The congress doles out favors and punishment using the tax code, and they are not about to give up that privelege.

Tweaks in the system, sure. Massive changes? Not going to happen, period.

[tritsofme]

7. I love the FairTax for the same reason I love science fiction.

I read the book just for kicks, and in theory the FairTax is a very interesting and intriguing concept.

But it just will not work they want it to in their minds, it can't raise enough revenue and it hurts the lower/middle class disproportionately.

I really do believe that many supporters of the FairTax or other similar schemes have the best of intentions, but its about as realistic as a warp drive.

[Amerigo Vespucci]

8. Fair Tax + Science Fiction...it really does have its roots in Xenu.

Scientology's Fair Tax Plot
The New Republic: Plan Backed By Fred Thompson, Other Candidates, Has Roots With L. Ron Hubbard

http://www.cbsnews.com/stories/2007/09/07/opinion/main3241621.shtml

(The New Republic) This column was written by Bruce Bartlett.

The basic theological tenets of the Church of Scientology are well known: a fanatical hatred for psychiatry coupled with a creation myth that involves an evil alien ruler named Xenu and his sundry galactic allies. The basic tenets of its tax policy are somewhat less familiar. But Scientologists promulgated and, at one point, heavily promoted a proposal that would replace all federal income taxes with a national retail sales tax (NRST). And the theology and tax policy aren't entirely unrelated: Xenu used phony tax inspections as a guise for destroying his enemies. In a strange confluence, the Scientologist proposal happens to be nearly identical to one of the trendiest conservative tax proposals of the year, the so-called FairTax, which has been endorsed by John McCain and Fred Thompson, as well as second-tier presidential candidates Mike Huckabee, Tom Tancredo, Duncan Hunter, and Democrat Mike Gravel. Georgians John Lindner and Saxby Chambliss have introduced FairTax legislation in the House and Senate that would establish a 23 percent national sales tax.

But, when you mention any hint of the nexus between Scientology and the NRST - as I did briefly in a recent Wall Street Journal op-ed - you'll be denounced by FairTax supporters as a smear artist. This retort, however, is simply evidence that these FairTax supporters don't know the history of their own proposal. That's too bad. Perhaps if they understood its origins in Scientology, they might have a greater appreciation for its inherent flaws.

The story of the FairTax's provenance is one that I can tell with some firsthand knowledge. In 1993, fresh from a stint at the Treasury Department, I spent a few months at the Cato Institute. I was filling in for Steve Moore - now an editorial writer at The Wall Street Journal - who took a brief leave from his job as director of the think tank's fiscal studies program to advise former Texas Representative Dick Armey. It was there that I was visited by a man named Steven L. Hayes, the founder of group called Citizens for an Alternative Tax System (CATS) that promoted the NRST, and who was, as Moore pointed out to me, a prominent Scientologist.

It wasn't hard to figure out the Scientologists' motives for hawking the NRST. The IRS had refused to recognize Scientology as a legitimate church - a fact that seemed to enshrine their popular reputation as a "cult." To remedy this situation, Scientologists waged war against the IRS. At various points, the Church attempted to infiltrate the tax authority and even hired private investigators to examine the private lives of IRS officials. And the same impulse behind these measures led them to devise the NRST. One church spokesman told National Journal's Paul Starobin, "We thought, If this is happening to us, there must be a lot of people to whom this is happening.' ... How could some positive changes be made?" Since nearly every state has a sales tax, it would be a simple matter to get them to collect a federal NRST, rendering the IRS instantly superfluous, a ripe target for abolition.

[pop goes the weasel]

10. that's unfair

There may be some previously unknown property of light or time that could make warp drive a possibility. But there's no unknown principle of economics that will somehow render the blackmarket impossible. Imagine the joy in the hearts of flat-tax supporters when Treasury agents show up to raid their garage sale or close down their farm stand or haul off their son for mowing lawns without collecting the sales tax. A policy that makes tax collectors out of everyone is doomed to fail, doomed to be ignored and avoided. Idiots.

[nebenaube]

14. uh...

Doesn't the goverment actually have a nack for creating and promoting blackmarkets?

[pop goes the weasel]

15. sure...

As a tool of a police state, blackmarkets provide a great excuse to round up just about whoever the state wishes. But as a tool of revenue collection, they aren't advisable. The majority of people in the US don't just have some personal wealth--they have negative personal wealth. No assets worthy of the name to confiscate. Even in the current drug blackmarket, confiscations don't come close to covering just the cost of enforcement, let alone support any other governmental function.

[ima_sinnic]

9. hate-filled gasbag Neal Boortz pushes this, so you KNOW it's bad

For those who haven't heard of him, Neal Boortz is a wannabe Rush Limbaughian "libertarian" radio "comentator." Among other things, he believes women, students, those "on welfare," and anybody else who "benefits from government handouts" should not be allowed to vote. He has never answered my question, what about the CEOs and other greedy corporate pigs who feed at the trough of government handouts, subsidies, tax breaks, etc.--they don't "benefit" from the government? He blames Katrina victims for their own plight. He is simply a pus-filled, racist, sexist, selfish scumball.

But on the subject of the so-called oxymoronically named Fair Tax, he suddenly becomes "concerned" about those making less than he does (which is enough for him to own his own plane, among other things, that he did NOT use to help Katrina victims, needless to say--unlike Al Gore's personal expenditure for a charter jet to rescue hospital patients from NO).

You can bet your last dime that the only people who would benefit from this scam are the rich. They already don't pay their share of income tax, but they have so much money, they wouldn't care about a stupid sales tax. I'm sure they would also find some way to exempt their purchases of luxury cars, yachts, penthouses, mcmansions, jets, villas, jewelry, and all that other greedy materialistic crap they own.

And how the hell is a monthly check to "every American" going to be administered? This has got to be THE stupidest idea I have ever heard of! You think tax forms are bad--but at least they only have to filled out once a year. Can you imagine the hoop-jumping to get your "rebate"? And the personnel and resources that would be needed to make out the checks and get them to the people. What a fucking clown act. Hopefully those STUPID enough to fall for this are in the minority!!

[Historic NY]

11. The Republican FAIR TAX the plan that taxes you to death....

wait even death will cost you. The price of a casket and other funeral expenses would also cost you more. The average funeral of say $5000 thousand dollars would cost you $1150 dollars more. In my county we pay an 8.25% sales tax on everything, couple that with sky high school tax and property taxes and with all those Federal Excise taxes and fuel tax and thats all we will get tax on tax until death we do part. NY State is one of the highest tax states in the country and the politicians are wondering why 1.2 million people have fled the state.

[DinahMoeHum]

12. Sheesh, Huckabee is a dumber fuck than GW Bush. . .

and THAT is saying volumes.

:evilfrown:

[yellowcanine]

13. First or all it is outrageous that Huckles calls it a 23% tax when it is actually a 30% tax.

No one computes percentages that way. 30 cents on the dollar is a 30% tax, by the mathematical definition of percent. Anything else is "fuzzy math". And a 30% tax on a $200,000 house is a whopping $60,000. Who in the heck could support such a proposal? Talk about a regressive tax!

[Thothmes]

16. Fair Tax

That is not how the "fair tax" supposedly operates. One of the underlying assumptions for the proposal is that there is about 23% Federal taxes (FICA, income, etc.) levied and collected during the course of manufacture, distribution/transportation, and sale. The proposal call for eliminating all of these taxes, and collecting the 23% tax at the point of final sale. A second assumption in the proposal is that the the operators of the production chain will lower their price by 23% during the course of manufacture, distribution/transportation, and sale. This is because they no longer have to pay the Federal Government these taxes. For the sake of argument, lets assume that the basic premises are correct. Your $200,000 home would be offered for sale at $189,420. That is 200,000 X 23% = 46,000. 200,000 - 46,000 = 154,000. 154,000 x 23% = 35,420. 154,000 + 35,420 = 189,420. The whole proposal strikes me as PFM. First of all its suppose to be tax neutral, but if my understanding of the proposal is correct the Feds would lose about $10,580 on the transaction. Second, there is no mechanism in the tax proposal to force manufactures, distributors & sales operations to lower their prices after the federal tax is removed. The assumption that manufacturers would lower their prices may be valid for a completive industry such as automobile manufacturing. Since Asian and European cars would be taxed at 23% without the offset in federal taxes, in theory Detroit could cut their costs by 23% and still maintain their profit margin. In other industries, such as home construction or coffin manufacturing, that do not have that much competition, I do not see any inclination to cut their sales prices. I believe that the whole proposal is on shaky grounds and probably unworkable.

[underpants]

17. Does this actually cover ALL revenues raised by the Feds?

Income tax
Soc. Security tax
Payroll tax
Phone tax
all fines and fees

ALL of that is covered by 23%? or is it just implied?


Also-check the argument given against the SCHIP funding through raising the tax on tobacco-THEY said that it would decrease use thus decreasing the revenue that was supposed to fund the SCHIP well wouldn't that need to apply here too
?

[Thothmes]

18. The way the proposal is stated

is that it covers all federal taxes levied and collected. They say that the 23% will cover all the Federal taxes collected. I guess this is an average,
seems to me that some industries or operations are taxed more heavily than others. As far as SCHIP is concerned, it would eliminate all taxes federal taxes associated with growing, processing, transporting or selling tobacco products. SCHIP would then be funded from the general revenue provided by the 23% "fair tax".