Hi all. I never dreamed this Fair Tax movement had so many people jumping onto it like lemmings off the cliff. What I am hearing is screaming vitriol against the income tax. O.K. fine. I get it that our income tax system is rife with problems, loopholes, and favortism. I get it that people resent that. What I don't get is why intelligent people are so desperate to grab onto another faulty, complicated scheme amounting to as many or more problems as the existing system we have now. I know you all are not stupid, so take a deep breath and step back a bit to analyze this thing with open eyes.... and try to keep history in your mind while you do.
(Caveats here: I am an artist by trade and this discussion is annoying me because I should be painting. I know I'll get some really nasty comments on that revelation. But, to raise my credentials here, my Dad owned a retail business all of his career and I owned a wholesale business for ten years. Because of those circumstances, I have had experiences in both areas. I know the impact of taxes on consumers and on businesses having been on all sides of the spectrum. That being said, I am not an economist with ideas on social engineering / central planning a tax code. For this conversation, I am relying on my own experiences and research on the web.)
Because I should be painting and have many other obligations today, I am going to refer my readers here to the websites I found to be the most credible opposition to the Fair Tax. This is assuming anyone will take the time to read some clear opposition and give it more thought.
Jews for the Preservation of Firearms Ownership Strange connection here, but their arguments against the Fair Tax make sense to me.
An answer to John who commented on my previous post from the JPFO.org site:
"We're likely to end up with both a national sales tax and an income tax. Even if legislation required abolition of the income tax (as HR 25 does), a “national crisis” would soon cause the income tax to be “temporarily re-instated” and the Internal Revenue Service would remain in our lives on an “emergency basis” that never ended.
Likelihood: High probability."
My argument regarding manipulation by the bureaucrats is supported also by JFPO.org:
"The national sales tax is subject to manipulation in even more direct ways than the income tax has been. Let's say that Congress or some powerful regulatory agency decides that fatty foods or sugar or potato chips are bad for you – wham! Suddenly there might a 200 percent tax on those items.
Government won't have to ban firearms; they'll just place a 500 percent sales tax on them. Or a 1,000 percent sales tax on ammunition. Cigarettes? Imported clothing? “Gas-guzzling” SUVs? Given the wonders of the computer age, the eternal greed of government, and the unquenchable meddling of social engineers, we'll soon have custom tax levels for them all, constantly calculated and adjusted by computer.
FairTaxers talk about the tax being self-limiting; when it gets too high, people stop buying. While they praise the limiting effect that might have on government, they ignore the damage that a too-high tax might have on the unfortunate industries or individuals that get hit with it – a problem that's built into the tax even in its initial form, and which becomes Draconian once politicians realize they can use the sales tax as a club or a threat.
Another article from 2007 which Unspins the Fair Tax is here: Fact Check.org
Earlier I said the Fair Tax is good for the rich and bad for the poor. Fact Check.org finds that the Fair Tax is good for the rich and bad for the middle class. If the poor come out better, then someone has to pay the difference. According to the Fair Tax Chart and the Treasury Dept. Chart, it is the middle class who get hit. The explanation is shown here below:
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.
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.
My take on the "prebate" idea. The Fair Tax folks claim that the reporting burdens on the public will be alleviated by getting rid of the income tax. However, under the Fair Tax, applications must be made to qualify and receive the prebate. This amounts to at least as much reporting or more, so filing income tax forms may turn out to be a nostalgic dream after we get through figuring out the prebate forms. The Fair Tax prebate is supposedly going to be handed out to every household in the U.S. In effect, this puts every single household into a government entitlement program. For those of you who are sick of "big government" and entitlement programs, welcome to hell. We will all instantly be stuck into a dependency entitlement program. I don't want government money. I don't apply for grants. I didn't go for the minority SBA loan when I owned my business. You say....but wait, it is your money they are giving you back. Since when does money laundering by the government work out for the taxpayers? This does not take into account the administrative costs. So if you get rid of the IRS, you immediately replace it with tax enforcers in just another bureaucracy to implement the Fair Tax. All pain, no gain.
Those two sites are only two of many I found that counter the Fair Tax suppositions. I urge you all to take the time to research this further and then decide if you still think the Fair Tax is all it is cracked up to be. I have concluded it is not even close to the propaganda.
There are many ponderables and unintended consequences in the Fair Tax. While proponents insist the Fair Tax covers all contingencies, I maintain it does not. The biggest argument I am having with proponents is this: They believe the Fair Tax cannot be manipulated or abused by consumers or by politicians. I think this is a very naive perspective. Any tax code implemented by government bureaucracies and politicians is going to be manipulated and abused. We have to have some way to fund the Federal government. The question remains, what is the most efficient way to fund our government in the most equal way for all citizens? The Fair Tax does not fit that need.
Get your noodles working and look beyond the sales pitch. Don't take Neal Boortz at face value. He has a dog in the fight. Because he is in the upper wealth tier he stands to gain from the Fair Tax. Frankly, I find him to be arrogant and condescending, but that is my personal take on him.
I hope this Fair Tax never happens. And I hope you realize, after researching it, that what you want in tax reform is not in the Fair Tax. We will find a better way.