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I can certainly appreciate anyone is passionate about politics, but Brian is just flat wrong:
The result is that support for replacing the federal income tax with a national consumption tax is broad and deep – especially among the politically engaged.
A poll done by the Tax Foundation came to a very different conclusion:
We then asked people what system they would prefer for collecting federal taxes: the current system with deductions; a flat-rate system with no deductions; or a national sales tax. By nearly a 2 to 1 margin, respondents favored a flat-rate system with no deductions over the current system or a national sales tax.
While the same poll indicated that outright opposition is declining, that doesn’t equate to support. As for Brian’s argument that the so-called “Fair Tax” deserves more consideration than a new constitution for the State of Alabama because at least there is a fully-fleshed out plan we can debate on its merits…
All of us are more than willing to debate Mr. Huckabee’s, or anyone else’s, tax plan, but we also have a right to state our belief that going down the road to a national sales tax is not where we want to head. Whereas, many of the same people do want to head down the path toward a new constitution in Alabama, no matter the result.
Flashpoint » Blog Archive » As Huckabee rises, the FairTax follows
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I’m curious…
How many tax proposals can you name that have held multiple rallies in different states (GA, FL, SC, and IA) that were each attended by thousands of people? The only one in the last century that comes to mind is the FairTax.
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[...] Read the rest of this great post here [...]
First of all, every time I leave a comment it get left “in moderation” for days if not permanently. You might want to look into that if you want to foster actual dialog as opposed to just letting bots leave spam comments.
How many tax reform proposals can you name in the last 100 years that have held rallies in multiple states (GA, FL, SC, and IA) with thousands of supporters at each? Just one: the FairTax. I am proud of you for finding a two and a half year old poll (gee, you didn’t mention how long ago it was conducted) that says people would prefer a flat tax to a consumption tax. I’m not even sure if I had heard of the FairTax at that point.
Even when the flat income tax was popular it never gained the kind of grassroots traction that the FairTax had. People thought it was a good idea and they might write their congressman, but they weren’t sacrificing their own time to staff booths at fairs, hold meetings, and speak to social clubs.
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As an Alabamian running for Congress in Alabama’s fifth district, I certainly understand the problems with the Alabama constitution, but that reform is a long way off. My main platform is to get the FairTax bill passed. The above analysis is erroneous. A national consumption tax is not the FairTax. I, myself, had never heard of the FairTax until June, 2006. The problem is that most people have very little, if any, knowledge as to what the FairTax is. The more the people learn about it, the more popular it becomes. At this time, it is the only proffered solution to solving the horrific tax code plaguing everyone in this country. As a congressman, I will strive to solve problems. No more band-aids.
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Brian,
I do apologize for my moderation queue, but I try to substantially limit the amount of bots that get comments onto my site. I have tweaked the settings and your comments should not be put into moderation in the future.
Rallies do not a majority make…Ron Paul has lots of support and big rallies, but that doesn’t mean he has majority support. That doesn’t mean the proposal won’t get there someday.
As for Mr. McKee, here is the brief description on the Fair Tax website:
A sales tax is a consumption tax…by definiton. I happen to have a good deal of knowledge about the FairTax and I don’t believe it is the answer to the problems people are outlining. You are going from having an IRS that people hate to a huge federal bureaucracy to manage the so-called “prebate”, which has huge potential for fraud of its own.
I certainly don’t think the status quo is the solution, and I believe we should be having the debate. You just haven’t convinced me the Fair Tax is the answer, and it is not because I’m ignorant of what it is all about.
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Sorry I was not more precise. Again, the FairTax is not a national consumption tax or national sales tax referred to in the Tax Foundation poll. The FairTax is a sales tax on services and “new items” only and has a considerable offset by way of the prebate. Furthermore, I understand that major charge card companies are waiting in line to manage the prebate and pay the government a fee for being allowed to do that. At any rate, the prebate should be no more difficult to handle than social security checks (and by the same organization). As mentioned, I am running for Congress, and I am certainly open to a better solution. However, the FairTax did come about by expending tens of millions of dollars to universities and individual economists without any outside pressures to arrive at a particular answer. Merry Christmas and Happy New Year.
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Ray,
I understand where you are coming from, but it doesn’t change my original point, that no one has yet demonstrated that the FairTax has broad national support because most people, if you asked them, still don’t know what it is. I appreciate your engagement on the issue and your willingness to be open to other solutions.
No one is saying the status quo is good enough.
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My only experienced point of reference is that I have given people in my office (real estate attorney) an opportunity to sign a petition in support of the FairTax. Over 90% wanted to sign. I have personally attacked the Americans for Fair Taxation for failure to adequately educate the people in the past 10 years. I have undertaken to do that job in North Alabama.
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Economist Dale Jorgensen, Harvard University, was commissioned to find out what portion of current prices were represented by costs for complying with the federal income tax code (i.e., embedded tax costs). He concluded that 22% (average) of every retail dollar, spent by consumers, constituted a price-embedded tax. Thus, in addition to individual income tax and FICA withholding, individuals are unwittingly paying these unseen, embedded business tax costs with every purchase of a new product, or service.
Under FairTax ( http://snipr.com/irsgone ), prices would fall due to removal of embedded business tax-related costs. Concurrently, wages may rise due to a mix of factors, including reversion of withheld pay (or some portion thereof) to employees, advancement opportunities due to business expansion resulting from retained earnings, and/or increased demand for labor accompanying increased competition (from that expansion). Where profits (or wages) appear lucrative, competition will move into the market space, driving out excesses (immediately present after FairTax is enacted), arriving at new “market-adjusted” prices.
For FairTax to constitute 23% of the transaction cost (i.e., “market-adjusted” price plus FairTax), a mark-up of 29.9% on the new “market-adjusted” price is necessary. (Before balking, consider what we’re paying NOW after converting income tax rates to sales tax rates on NET income instead of gross income. The following figures can be compared to the 29.9% FairTax mark-up: Fifteen pct bracket = 17.6%, twenty-five pct bracket = 33.3%, twenty-eight pct bracket = 38.9%, and thirty-five pct bracket = 53.8% of what’s left over after the tax is deducted from gross pay.)
In order to make FairTax a PROGRESSIVE consumption tax (such as that called for, recently, by Warren Buffett), all legal-citizen families are simply sent a “monthly consumption [tax] allowance,” called a “prebate.” This prebate is intended to reimburse taxes on necessities without need for record-keeping or reporting. Moreover, the direct payment bypasses the creation of a tax code specifying exempted products and services around which a lobbyist industry could grow. The amount is variable, based on family size, and is equal to the FairTax rate on poverty-level spending, as defined by the Dept. of Commerce. At present, a family of one would receive ~$200/month, a family of four, ~$500/month. Thus, the “effective” FairTax rate paid by citizens, will *never* equal the full 23%. Of course, U.S. visitors (legal, and illegal) will pay the full FairTax when they purchase anything new, at retail (used are not taxed again). Under FairTax, working families will have their whole paychecks (minus any state or local income tax withholding) plus their monthly family prebate.
Additionally, citizens will no longer have to spend the average 50 hours per year preparing their federal tax returns. Having more monthly income may result in using credit less, and saving more. Larger savings will make it easier to purchase a home, at a lower interest rate and monthly payment. (Thus, mortgage deductions are no longer applicable when income is not the basis for taxation).
But is FairTax “fairer”? To provide substantive answers, Prof.’s Kotlikoff and Rapson (10/06) have concluded ( http://snipr.com/kotcomparetaxrates ),
“…the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.
“Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax.”
Further, per Jokischa and Kotlikoff (2005) ( http://snipr.com/kotftmacromicro ),
“…once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there’s a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent.”
The current income-based tax system is also more expensive to run, because of the manner in which the tax code is gamed by politicians and lobbyists. Politicians realize great power, and attract constituencies for support, by granting tax favors (i.e., credits, deductions, exemptions) through lobbyists. Fully, fifty-three percent (that’s 53%!) of Washington lobbyists are there because of the tax code! The tax code is continually changing, making it more complex and more difficult to understand. And, the salaries and costs of tax lawyers and lobbyists end up in the prices of the products and services we buy. Additionally, the time and money required to keep records, file returns, report for audits, retain accounting and legal help, pay IRS penalties and interest, is time and money lost for other productive, or recreational, activities. Depriving us of the use of withheld wages increases our expenses through zero-interest withholding, inflation, return preparation time, and interest paid on credit cards and loans that otherwise may not have been necessary. Summed up, the cost of tax compliance, nationally, has been estimated to range anywhere from $265 billion to twice that amount, depending on the extent to which tax-avoidance consultation is sought and utilized. These expenses constitute a substantial “hidden tax” which is incomprehensible to the average working American. And the FairTax gets rid of all of it for most Americans, and most of it for business owners.
It is our belief that government should serve We, the People, with a fair tax system that will not enable politicians to pit poor against rich (creating barriers to achieve wealth, adding tax penalty to the sacrifices made for personal success). Nor do we want politicians to continue using business as a tool to hide taxes from consumers, often villifying business, which discourages entrepreneuship, personal achievement, economic growth. Liberty and happiness depends on restoring the fruits of labor to those who produce them. We believe that the tax function should align with economic growth, not against it, that government should be paid for in the same manner as working Americans – when, and because, something is sold.
As things stand at present, Americans labor under nothing less than “tax slavery,” having our wages confiscated every working hour, as reflected in our paychecks every two weeks.
Many of us have joined FairTax.org ( http://snipr.com/becomeamember ) in order to build a national movement to free ourselves, our family pocketbooks, and our businesses from confiscation of income, and punishment of productivity. And this we say to our federal representatives, “Either scrap the code ( http://snipr.com/scrapthecode ) and enact the FairTax, or we intend on replacing you with someone who will.”
(Permission is granted to reproduce in whole or part. – Ian)
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