The Tax Plan To Kill K Street - George Will endores 23% National Sales Tax

[papau]

washingtonpost.com
The Tax Plan To Kill K Street

By George F. Will

Thursday, March 31, 2005; Page A19


The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.

His bill would abolish the Internal Revenue Service and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax, and the earned-income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.<snip>

Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay "as much as they choose, when they choose, by how they choose to spend." And his bill untaxes the poor by including an advance monthly rebate for every household equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.<snip>


Furthermore, by ending payroll and corporate taxes, the United States would become the only nation selling goods with no tax component -- such as Europe's value-added tax -- in their prices. With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. "This," Linder says, "would unleash freedom around the globe."<snip>

http://www.washingtonpost.com/wp-dyn/articles/A14401-2005Mar30.html

[havocmom]

1. because the ultra rich are not taking the shirts off of American workers'

backs fast enough.

So what happens to the vampires when they have enslaved the entire human population and their greed still gnaws at the whole where their soul should be?

EAT THE RICH

[On the Road]

2. Ending Payroll Taxes?

Meaning that he wants to end FICA and destroy Social Securtiy, along with Medicare?

With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. "This," Linder says, "would unleash freedom around the globe."

How would losing all their corporate HQs to the US unleash freedom in foreign countries? How many multinationals are based in unfree societies, anyway?

:shrug:

[wryter2000]

3. Is he out of his fricking mind?

23% Have they lost all touch with reality?

I'm putting this one out there where the sheeple can see it. This'll kill their agenda off at warp speed. If they stepped in it with Social Security, they've lost 99.9999% of Murikans if they think they can get a 23% sales tax.

Thanks, Bushies! Buh-bye!

[BillZBubb]

4. More Republican "free lunch" economics

First it was the "supply side" idiocy. Now this.

If the wealthy are now taxed at over 25% of income, how in the world do they not have a much diminished tax burden with a 23% tax on just consumption? Either government revenues fall dramatically--and the red ink grows by leaps and bounds, or a heavier tax burden falls on the middle class.

But, I'm sure they'll tell us "we'll grow our way out of the deficits!". I hope the sheeple won't get fooled again.

[Larkspur]

5. Oh, don't worry, the very rich will never pay the 23% sales tax

the Repukes will make exceptions for it, and to enforse the rich get richer tax rule, the IRS will not go away. It will be renamed the National Sales Tax Collection Agency and it's goal is to punish Middle Class and the Poor for trying to evade paying sales taxes.

[Massacure]

6. So $2.25 gas will cost $2.77.

Good luck getting Americans to agree to that.

[happyslug]

12. Not $2.77, $3.56 a gallon

See my thread below as to why the sales tax rate has to be 60% not 23% unless you want to cut out ALL of our Military.

[orwell]

7. DOA

Of course this is a very regressive tax scheme, just the way the elites would want it.

I especially like the "advance monthly rebate...as calculated by the government". Would this be calculated by the same fuzzy math with which we calculate the inflation numbers?

This will be DOA.

[Ilsa]

8. Here comes the Black Market and Barter system...

An underground will develop that is unbelievably strong if they attempt this. They'll quit spending except for necessities until it is revoked, much like the wealthy did in the late 1980's when the luxury tax was passed, and the wealthy boycotted the items until Congress repealed it a few months later under pressure.

[Robert Oak]

9. there already is a massive underground economy

fake social security numbers, obtaining houses, benefits you name it
plus no taxes on income.

Illegal alien network...23M in this country, an underground economy and system already in place and chugging along.

but yet we have our policy force stopping drug imports at the airport...some old person on a fixed income is getting their prescriptions seized at the border...all because they didn't
pay the US extortion fee on prescription drugs, which if they do, means they cannot pay for housing and food.

so no doubt, since seemingly the middle class and poor don't have
the requisite payola money and voice...our "new world order ruling elite" will get the national
guard out to imprison anyone who barters to avoid this regressive
tax...

and since there are so many in debt and breaking the law...well,
we have the prisons now privatized and ready to go to put those
new criminals in jail. After all forced labor in both China and Russia built those countries so if they can do it in order to keep
America a 1st world economy...we can do it do...plus those
stockholders of thos private prisons need to make sure their profits
keep rising!

I'm writing this being sarcastic on some of it...but more and more
these seemingly inconceivable ideas that happened "in other countries"
seem more probable in the US.

[dcfirefighter]

10. I suppose I may be flamed for this...

But I'm very familiar with the FairTax (HR25,S25) and I support it.

Most people would pay about the same in taxes. Those that would pay more are those who fully take advantage of the tax code. Those spending below poverty level wind up, net, receiving additional money.

Deductions and loopholes tend to make the marginal rates about half as high as they seem to be, e.g. someone in the 35% bracket tends to pay about 17.5% in taxes.

The rebate, ~$2100 per adult, ~$700 per child, evens out the tax burden at poverty level spending. Another way to look at it would be as a flat income tax of 23% on income above the poverty level + unlimited tax-free personal savings accounts.

Still another way to look at it would be as a 23% on gross retail income, coupled with a ~$2100 basic income grant.

The positive effects of this would be:
Reduce pre-tax prices, which would increase exports, which would lower deficits and debts, while increasing employment and wages.
Eliminate K Street NW favoritism, though this could be done with a progressive income tax as well.
Influence a decrease in federal spending, leaving reds out of blue state business, and blues out of red state business.
Massively increase saving and investment, somewhat stabilizing business cycles.
Encourage the Federal Gov't to recoup full market value for the rights it gives away.

The negative effects of this would be:
to encourage a black market, though it would take two to cheat, and would probably be recouped in the capture of spending by current illicit incomes.
Higher and higher real estate prices, which are a tax on the purchaser and the renter.

My only caveat is that the states should not follow, they should tend to shift their property taxes off of improvements and onto land, and then shift their sales & income taxes to land as well.

[happyslug]

11. Only Problem, it will NOT be a 23% tax rate, but 30- 60% tax rate:

The 23% number is based on the tax being paid will be only 23% of total money paid. Let me give an example of this:
I buy a $100 bike,
I pay a Sales tax rate of 30% (i.e. $30.00)
That $30 is only 23% of $130 i.e. 23% of the TOTAL of the sales tax AND the price for the item.

Also remember the 30% tax rate will be OVER and above whatever the state tax rate is (and this was with NO exceptions).

The best way to kill this economy of ours is to add 30% to the cost of buying something. People will not buy, which will lead to layoffs, which will cause the economy to go downhill even more, leading to even more layoff (You get the picture?).

The devil is in the details, and the details is that the only source of tax revenue that can produce the money needed to run the Government are Real Estate Taxes and Income Taxes. You can NOT run a good economy if your main source of revenue is a Sales Tax.

Here a site that says the rate has to be 45%:
http://www.ctj.org/html/nytsales.htm

Another site that says the rate will have to be 60%
http://www.brook.edu/views/papers/gale/20040812.htm

Here's a Site for the 23% rate, note the 23% includes the price of a NEW HOME. i.e. if you buy a new home you pay the 23% sales tax over and above the price of your home.
http://www.youdebate.com/DEBATES/TAX_NATIONAL_SALES.HTM

Here is another site saying 23-27% (also attacks the author of the article on the 60% tax rate but ignores his actual statements as to WHY the rate has to be 60%). Also assumes a substantial decline in expenditures to make the 23-27% rate:
http://www.salestaxusa.com/taxrate.shtml

This topic Discussed previously at:
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=13789#13802

[dcfirefighter]

14. OK

Suppose we take the 30% at the counter / 23% inclusive number as gospel, that it will raise the ~$2T in taxes it replaces.

If almost all income is spent in the same year it is earned, why can sales taxes not support a country as well as income? One taxes commerce which is required to pay for land, labor, and capital; the other taxes income, which is required to pay for land, labor, and capital. Neither one is particularly good for the economy.

I would agree on the real estate taxes, more particularly, the land portion of real-estate taxes, and would prefer them to either an income or a sales tax. Which is why I want states to take up Land Value Taxes, probably the only tax that BENEFITS an economy, while I'm quite happy with a Federal tax who's revenues, with all probability, will decrease with time.

For me, and most of the supporters, one of the chief benefits is that the tax is perfectly transparent. It's supporters WANT the rate to come down, and with it, Federal spending. The government things that are 'good' for people are largely state & local programs anyway. Nearly half of the discretionary budget is defense related.

Keep in mind also, that this movement was started by relatively small businessmen who wanted to level the playing field against big business and foreign competition.

[happyslug]

17. I also would like to see Defense Spending drop but

There is no way Congress will eliminate ALL Military Spending and even if Congress does you are still looking a huge budget that can NOT be paid out of a Sales Tax. Most states that provide anything more than the bare minimum services to their citizens have an income tax for the same reason the Federal Government has a Income Tax, sales taxes can NOT provide the needed revenues.

For more on the Budget see this Budget Simulator:
http://www.nathannewman.org/nbs/

The 2004 US budget is $2672 billion in Spending. Gross Domestic Product is 10.99 trillion (See http://www.cia.gov/cia/publications/factbook/geos/us.html for GDP estimate).

Gross NON-Governmental Product (GDP less US Government Spending is:
10,999 Billion
-2,672 Billion
or Approximately: $8,327 Billion Dollars from which the $2,672 Billion in US governmental Spending must be derived from (I am ignoring State and Local Government expenditures, this is a great error but I can not find a good web site for such data on a national scale through I admit I only serach briefly).

If the Income tax has to be replaced with a Sales Tax the Sale Tax rate has to be 32% on EVERY ECONOMIC ACTIVITY IN THE US (Including sales from Businesses to Businesses and sales to the Government, both of which do NOT happen in a real sales tax AND sales of homes, which are NOT subject to a Sales tax in most states and including State and Local Government expenditures as being taxable which they are not).

If we eliminate Defense Spending (A complete impossibility) you save $446.1 in the budget. Billion Dollars so the budget is now $2114 Billion out of a 10,999 Billion Budget leaving you $8,885 to work with but the tax rate will still have to be 20%.

20% sounds nice, but that means you tax EVERYTHING, food, cars, homes, business to Business sales, gasoline, etc. Please do not forget my "great error" of includeing State and Local Government purchases and expenditures as being subject to the tax, something that will not happen for if it does the following will also occur:

"Here is your $174 Welfare check, less the 30% Federal Sales tax so the total you receive will be $122.00"

"Here is your $1500 DUI Fine, it is $1950 including the Federal Sales Tax".

"We have had to raise your local Taxes to pay the Federal Sales Tax on the salt we used on the roads last winter".

"The school lunch program will be include the 30% Federal Sales Tax".

"The State has to increase its Sales tax rate to raise Revenue to pay the Federal Sales Tax on the items it purchased over the last year".

As I said the assumptions behind a National Sales Tax is that ALL economic activities in the US can be taxed at the rates stated. The above are Economic Activities that will NOT be covered by a Federal Sales Tax (and if there are will FORCE drastic State and Local Tax Increases to pay the tax).

If we go into the problems with Business and a Sales tax on their Activities all that you need to see if the sales tax rate on items as it goes through the Chains of Commerce. If I build a widget and sell it to a business that buys widgets I pay the 30% on my sale (goes to his costs). He sells it to a distributor of Widgets (who pays 30% Sales Tax). The distributor than sell it to a dealer who sells it with his 30% sales tax (Two more 30% taxes). Pretty soon you are paying over 100% of the value of the Item in Sales taxes.

Even Europe which uses a Added Value Tax (which is a Sales tax designed to work around the problem of a National Sales Tax) do NOT raise most of their Revenues from the VAT. In a VAT each party in the chain of commerce pays the VAT tax on the difference between what he paid for the item and what he sells it for (Thus it is a tax on Value Added NOT on the total price of the item).

States which uses Sales tax get around the above problem by taxing only the end buyer of an item, but thus misses most of the transactions that occurs in the Economy forcing even higher rates on the transactions that are caught in the net of the Sales Tax.

Remember many transaction in our economy are NOT sales, for example Dividends received, debts paid off etc, property swaps (where two people exchange property) and gifts (Through the gift giver gets to pay a sales tax) and even inheritance.

My point here is to show you how much revenue any tax HAS TO BRING IN.
Sales taxes can NOT bring in the needed revenue, you have to tax wealth. Sales taxes because they do NOT tax wealth are a poor source of Tax revenues, Land Taxes and Income Taxes tax Wealth and as such much better sources of tax income.

[Clark Bayh 2008]

35. Income tax is still necessary for the wealthy....

With a 20% sales tax along with a progressive income tax on those top 5% of income earners in the U.S. we should be able to string out enough money.

So if you make less than $100,000 a year you pay no income tax.
For every 100,000 you make you pay another 10%, or whatever up to 40%.

[sendero]

13. While I agree that out tax system...

... need some serious work, this sort of regressive great for the rich. screw everyone else would not only be unfair it would probably not work very well.

But the bright side is - it has about 0.000000001% chance of ever becoming the law of the land.

[dcfirefighter]

15. It's no more regressive than...

...our current combination of payroll and income taxes.

For a guy who doesn't save:
One guy who makes $25,000 today will pay 17% / $4185 and spend $20,815
Under FairTax, he'd spend $27,141 of which $6,242 will go to taxes and spend $20,899.

So his spending power after taxes actually goes up, just a little.

His net tax bill goes from $4185 to $4101, as I said, about the same.

This does not count the fact that his income should go up, for lack of payroll taxes, nor that he may save some of his income.

The benefits are even greater for families.

And, if we are to believe the economists, reducing taxes on companies would reduce pre-tax prices by some amount. Furthermore, employment in the US should rise, and with it, labor becomes more scarce, and therefore wages increase.

I've looked at this from a lot of angles, and the only people this really hurts are manufacturers in other countries. It's still not as good as simple land value tax though.

Another benefit of it, is that it opens the door to a basic income grant, or a Citizen's Dividend. Call it politico-economic judo.

http://en.wikipedia.org/wiki/Land_value_tax
http://en.wikipedia.org/wiki/Citizen's_dividend
http://en.wikipedia.org/wiki/Basic_income

[sendero]

16. It's regressive....

... in that poorer people will always spend a higher proportion of their income because they have to.

I'd much rather go with a "progressive flat tax" that dumps the vast majority of deductions but retains a steeply progressive (rising) marginal tax rate after about $80K or so family income.

[jmcon007]

18. the revenue exists to balance budget and pay down debt....

This money is in the coffers of the largest corporations in America today. Oil companies are releasing quarterly reports indicating obscene increases in profits throughout this industry alone and it's happening without any new oil reserve finds, etc. It's just these huge tax cuts Bush has been handing out like the big shot he has always wanted to be. He doesn't care much for the middle class, because we can do nothing for him or his buddies.

For starters, raise the taxes on these vultures along with increasing the minimum wage for workers. The corporations like for people to think that they create wealth, but this is not true. They only manipulate it. The true wealth creators in this country work on the factory floors, probably with no health insurance, or otherwise punch a clock.
I don't want to wring every last nickle out of these corporations....but, there has to be fairness.

[dcfirefighter]

19. Why I like it.

I'll agree that wealth creation happens due to the labor of low-level employees. There are great economic reasons to cut taxes on corporations, income, wages, dividends, etc. The question of how to pay for government services remains. A sales tax is still a tax on corporations, income, wages, dividends, etc, it's just collected at a different point in the chain. A sales tax as proposed, is nice because it's simple, and because it gives people a monthly check to pay for the taxes they'll pay that month on spending at the poverty level.

I like the bill because it will almost certainly mean a short term economic boom, and a long term decline in Federal spending, which typically means a long term decline in military spending.

The programs that progressive people like, such as education, healthcare, social insurance can easily be funded at the state level, preferably by a land-value tax.

Every improvement that a state makes in education, healthcare, etc, increases their ability to raise revenue.

If the hillbilly's want to beleive in creation, they can do so in their own states, but with the Federal government, they have the power to ensure that such teaching occurs everywhere.

[FormerDittoHead]

20. This would be GREAT!!! (Sarcasm)

So, now that the baby boomers spent a lifetime earning money and paying income taxes, things turn around and you'll have to pay 23%-30% on what you spend!

But don't worry! Just don't spend more than $2,400 a year!

But EVERYTHING is taxed, right? No more corporate taxes or capital gains tax, so everytime a share of stock is sold - tax right??

WRONG. HEY! Take a little guess at who makes the most from capital gains!

Used items won't be taxed. We'll end up driving around 40 year old Toyotas.

But what about USED things like this:
http://tinyurl.com/6j9qr

Hey! Biff or Buffy would LOVE this! And by having shift all tax burdens to those suckers spending more than $2,300 a YEAR for crying out loud, we can afford so many more toys like this "USED" IMPORTED car.

Weee! HEY! JUST TELL 'EM THAT IT'S EITHER THIS OR FAGS WILL TEACH THEIR CHILDREN!

This whole subject pisses me off to no end because those who think it's a good idea can't think their way out of a wet paper bag. I don't mean to be insulting, but it's so OBVIOUS...

[dcfirefighter]

21. I'm pretty good at thinking my way out of a wet paper bag

1) well, the baby boomers put us in the hole we're in now.
2) The government gives you $2100 a year, which is the taxes on poverty level spending. Spend more, pay more. Spend less, pay less. The break even point is about $10,000.
3) Investments are not taxed, this is a good thing, even if it's better for the rich.
4) Most capital gains arent taxed anyway, there are loopholes and loopholes.
5) Used items won't be taxed, well reduce, reuse, and recycle
6) It's obvious that you enjoy knee-jerk reactions.

There is no way around the fact that our current system of taxation sucks, and creates incentives to move business and jobs elsewhere.

The only thing i'd change about it, would be that I would retain a revised Estate Tax.

I'd also auction off all the business rights the US currently gives away, and split the proceeds among the people. The FairTax would already have the mechanism in place to distribute the money. There's several 100 billion dollars worth of mining, drilling, fishing, timber-cutting, broadcasting, water, and patent rights given away each year. Even more if you include pollution 'rights', FDIC insurance, and corporate liability protection.

[happyslug]

22. Used items NOT subject to a Sales Tax, Not in most states.

Now most consumers do not collect or pay a sales tax on used goods, but NOT because such goods are exempt but the state have a hard time collecting the tax (Just like the States have a hard time collecting the sales tax on items bought on line). Remember just because the tax is NOT collected does not mean it is not owned.

The same with used Cars, Sales tax are collected and paid. My home state of Pa will NOT permit a transfer of the title of the car without the sales tax being paid first.

As I said in my previous posts, ALL transactions will have to be charged the National Sales tax for the tax to collect anywhere near what the Federal Income Tax brings in AND even than the Sales tax rate will have to be about 60% (with the state's sales tax of 6%, for PA, added to that level).

Think about it, for every Dollar you spend you will have to give the Federal and State Government 66 cents? Sales tax are NOT a viable option to raise revenues.

[dcfirefighter]

23. Well, but...

Right now, a portion of every dollar you spend goes to pay taxes. FairTax says ~20%. With competition, prices will drop by that much. Seeing as how we have imperfect competition, I think prices will drop by only a portion of that amount, say 10-15%.

Also, right now, a portion of what you earn goes to pay taxes. 6.2% for you and your employer goes to payroll tax. Another amount goes to income tax. So, if your employer is willing to spend $20/h on your labor, you get to keep maybe $15 of that. Under fairtax, you'd probably keep $19, unless the economy picks up, which it should, and jobs become plentiful, in which case you will have your choice of jobs at a higher wage.

So, the rate would be ~30% at the counter, less the decrease in prices, and in view of higher wages.

I would recommend that states shift their taxes from built property, income taxes, and sales taxes to land taxes.

[happyslug]

25. What you gain in Income you lose when you spend

And the poorer you are the more of your income you spend (Thus all sales taxes are regressive). The Federal Supplemental Security Income amount for 2005 is $567 per month (Most states supplement this by various amount for example my home state of Pennsylvania adds an additional $27.40). Under present law this income is NOT taxable, but such a person will have to pay the FULL VALUE OF THE SALES TAX. People on Welfare gets $174 per month for one person in Pennsylvania (In my home County of Cambria County, $206 in Philadelphia). Such people pay no payroll taxes NOW but will pay the sales tax.

In the US approximately 10% of the population annual income is less than less than $12,000 a year (This is 100% of the "Standard of Need" what the Federal Government has determined you need to earn to survive). It is to these people the tax burden will shift to in a Sales tax, for such people spend 100% of their income every year. Presently they are excluded from paying taxes (Except Social Security Taxes) for it would be an acute hardship for them. How do you handle this shift? Do you increase the SSI amount to provide the money needed to pay the sales tax? Do you force the states to increase their welfare amounts so that the net buying level stays the same? Do not tell me that such poor people can "Save" their receipts and get their sales tax back to them, that is a bureaucratic nightmare, I can see welfare workers typing in two to ten dollars purchases so to determine how much to reimburse the person on welfare.

Furthermore if you EXCLUDE the transactions of the poor the rates start to get nearer the 60% rate for everyone else and remember we are including in the "Fair Tax" system purchasing of home and even payments of rent.

As I have said before the problem with a National Sales Tax is in the DETAILS. What to include and exclude, how to collect, etc. Once you look into these problems you come to the same conclusions FDR did in the beginning of WWII (and Wilson in 1917 and Lincoln in 1862) the only way to provide money for a Modern Country with an substantial government is by an Income tax NOT a sales tax. When the Civil War debt was paid off in 1874 Congress did abolish the Civil War Income tax, but the US had one of the highest Tariffs in the world at that time so you had another source of Income to all back on, a source that by International Agreement the US can not use today.

People forget the US main source of Revenue before the Great Depression was the Tariff and the big debate between the two parties was how high should the Tariff be? The Republican wanted a high tariff to protect American producers, while the Democrats wanted a LOWER Tariff that permitted in more goods and brought in more Tariff revenues. I bring this up to demonstrate once again that you can set a tax so high that it hurts your economy and bring in LESS money than a lower rate. US Tariff rate (1862-1932) were THAT HIGH when the GOP controlled the Government (and the GOP hated that when the Democrats obtain control of the Government, the Democrats had money to spend).

No one today wants the US to go back to the level of Federal Government Spending of the 1920s, the Country can not afford it. Remember prior to 1932 there was NO Federal Support for Highways, Dams, Education, Rivers, Pollution, Social Security, Welfare, or even a sizable army (The Army in 1939 was less than 100,000 men) or Federal Law enforcement (Prohibition failed because the Federal Government refused to hire the federal agents needed to actually enforce prohibition and when the States all cut their efforts to enforce Prohibition do to the Great Depression Prohibition had to go).

Now the Government we had in the 1920s could be supported by a National Sales Tax (The Tariff and various Excise taxes of the time period would approximate what a National Sales Tax would bring in today) but you also had no effective enforcement of any Federal Law that any State did not also want to enforce (that included not only Prohibition but Civil Rights). Most other countries were out of the Depression before the US (The bottom of the Depression was in 1938 with the US coming out of it by 1939). The reason for this is the US Federal Government did not have the FINANCIAL RESOURCES to pull the economy out of the Depression (Unlike Germany and Japan that raised taxes and ran huge deficits to get their countries out of the Depression). When the US faced going to war with Germany after the fall of France in 1940 FDR and Congress (Including the Republicans in Congress) realized that a huge increase in revenue was needed and the only way to raise such revenue was with an Income Tax. A national Sales tax, like the Tariff has limitations as to how much money it can raise, and that limit is way below what you can raise with an Income Tax. It was the Income tax that gave the Federal Government the money needed to fight WWII, the Cold War, to Address the Civil Rights problems of the 1950s and 1960s, to address the problem of Pollution and the environment, to help the inner city (and to expand Suburbia). All of these programs would have to be eliminated if you go to a National Sales tax simple based on the Sales tax inability to raise the needed revenues.

[dcfirefighter]

26. The rebate is universal.

The rebate is universal, if you are single you get $2100, if you are a single parent you get $2800, if you are Married you get $4200, Married & 2 kids = $5600.

So, A single mother who earns $12,000 a year, currently pays 6.2% payroll, $744. Her employer pays another $744, of which some would go back to her. She winds up being able to spend $11,256 + whatever direct aid she gets. Under FairTax, she gets to spend $14,800, of which $3404 goes to taxes, giving her the purchasing power of $11,396 + whatever direct aid she gets. Plus, pre-tax prices will drop by some amount, and jobs will increase, if merely by reducing the price of exports.

There's nothing magic about an income tax, except that it keeps people out of work, and treats people in different parts of the country differently: A firefighter in DC might make $40,000, while one in Louisiana might make $20,000, for the same cost of living. But the guy in the expensive area has to spend more on taxes.

There is a tax wedge with income taxes, it keeps people out of work.
Taxes on capital (real capital: buildings, factories, offices), keeps people from investing.
Taxes on commerce, such a sales tax, are an indirect tax on labor and capital.
Taxes on land have no wedge: the land is there or it's not. The only alternative to use, is holding it out of use, which will be expensive if the value is taxed. However, land taxes are constitutionally the purview of the states, which is fine, because I prefer a decentralized, locally controlled government. A PROGRESSIVE National Retail Sales Tax with Universal Rebate is a good interim step for taking the power back from washington and putting it to the people.

[happyslug]

27. That is NOT a rebate but a CASH GRANT.

And you seriously think Congress will pass such a grant???? Nixon proposed such guarantee national Income in the early 1970s and the rest of the GOP killed it.

As to cost of living difference, so what, sales tax has no affect on the cost of living. The Chief reason ares have a high cost of living is because it is an are of high income. If the costs are to high people will move to low costs areas IF POSSIBLE. The problem is often the reason some areas are high costs is that it is where people can make the most money. If I have a gas station at the intersection of two main road I will make a lot more money than if the gas station is on a side street. The intersection is and will be a High Cost area because it is an area where I can make a lot of money. The side street will be a low cost area for the opportunities are low in that area.

In any case Sales tax does not even address that problem, in fact makes it worse for the high cost area while paying more in total taxes with a sales tax than the side street location, both are paying the SAME RATE. With an income tax or land tax the intersection gas station will pay more than the side street for the location can produce more income.

Notice the extra wealth is a product of location NOT the type of tax, this is your Georgian argument for land taxation based on the value of the land based on its location. To a degrees a progressive Income tax does the same by taxing higher incomes at higher rates, thus the affect of location is minimized.

On the other hand sales tax collects the same rate no matter the location and the location's ability to pay. Given this limitation Sales taxes have to be so low NOT to force low income areas out of business (60% Sales tax rate can be arrived by the Gas station at the corner given the volume of gas sales, but the side street gas station will be driven out of business do to lack of SALES to produce the needed money to pay basic bills do to affect the 60% sales tax has on total sales.

[dcfirefighter]

28. OK, a cash grant.

I look at it as a theoretical exercise. I don't think it has any chance at all of becoming law, but I like people thinking about change. I dislike people having knee-jerk reactions "this is a repub thing, this is a dem thing", I like people who come up with solutions to problems.

The theory, as presented, is an improvement over the current scheme. Whether or not the numbers are correct, I don't know. Using CBO data, I came up with similar numbers.

I would like progressive thinkers and economists to come up with a tax reform alternative, something kind of radical. I like the idea of, say (on an estimated national income of $12T)
A tax of 25% on all income, with an annual rebate of $3500 per adult and $1167 per child. This makes an income for a single adult of $14,000 tax neutral (0%).

Edited to add: I like having this on the table for discussion, because I believe that any in depth analysis of taxation will lead to the inevitable conclusion that taxing the use & abuse of nature is not only economically sound and just, but would actually boost the economy while raising wages.

[happyslug]

29. The problem is taxation has been studied for 2000 years

In the last 200 years taxation and economics have been studied and basically sales tax have been found to be wanting (both as to raising revenue AND tax fairness). Land taxation and Income taxation are the form of Taxation that produces revenue and provide tax fairness for it concentrates taxation on those who can afford it. Do some research on economics before you embrace a sales tax.

Here are some of the dominate economists of the last 150 years. While Marx theory as to how to organized a society failed, his observations as to how an economy works dominated economic theory till Keynes came up with his theory (and saved Britain in WWI). The only other economist of any note doing this period is Henry George whose theory as to land taxation has show to have a lot of merit to it. For more information see the following sites:

Henry George:
http://www.progress.org/books/george.htm
http://www.henrygeorge.org/
http://www.henrygeorge.org/hgi.htm
http://www.nypl.org/research/chss/spe/rbk/faids/george.html

John Maynard Keynes:
http://online.bcc.ctc.edu/econ100/ksttext/keynes/keynes.htm
http://cepa.newschool.edu/het/profiles/keynes.htm
http://www.bized.ac.uk/virtual/economy/library/economists/keynes.htm

Karl Marx:
http://cepa.newschool.edu/het/profiles/marx.htm

[dcfirefighter]

30. I think you're missing my point

1) I don't think such a tax would be as bad as you do, though perhaps for different reasons.
2) The nature of the tax is that it will be reduced, hopefully with corresponding reductions in expenditures.
3) Which is good for democracy and local control, as states would have to pick up the slack, some would retain income taxes, some would rely on real-estate taxes, and hopefully a few will experiment with land taxes.
4) But these states WONT be spending more than half a TRILLION dollars each year on an offensive DoD. I'm not afraid of Terrorism, nor of an Invasion. I figure $105B, more than the next two countries combined, China and France, ought to be enough for our security.
5) And if they cut education, they have to keep their creation myths to themselves. They only pay about <10% anyway.
6) SS isn't going anywhere for this generation
7) Switzerland has universal healtcare, funded by the cantons. The cantons have an average population of about half that of Wyoming, our least populous state. The swiss spend less per capita on healthcare than we do.
8) So what, exactly, do we need to greatly fund the Federal government for? Absolute power corrupts, absolutely.
9) I am a huge fan of Henry George
10) I don't believe Keynes's theories are sustainable, I haven't read much Marx

If you're a fan of HG, try this http://www.etes.ucl.ac.be/BIEN/Files/Papers/2004Smith.pdf

[happyslug]

31. You should read more on Keynes

The reason he is attacked is his system works, basically he is the first economist to realize that an economy is NOT the product of its wealth or investment but the number of transactions that the economy produces. The more transactions the better the economy.

This finding directly leads to methods to maximize transactions. You quickly realize that the poor spend almost all of their money, while the rich spends so much and saves the rest. It quickly becomes clear the way to maximize your economy is to give more and more money to the poor and less and less to the rich. The poor will spend all their money and this will go to other poor people, than work it way up to the rich.

Thus if you want a healthy economy do NOT tax the poor, if you need tax money tax the rich, such taxation does the least damage to the economy.

Traditional "Liberal Economic Theory" (Which is what conservatives advocate and liberals oppose) says leave the economy alone. This just permits the richer to get richer and the poor to get poorer (Read Marx for details on how this ends up).

Keynes is credited with saving Capitalism, his economic findings solved the problems of liberal economic theory shown by Marx. Keynes's finding of the transaction basis of the economy permitted Europe and the US to get out of the Great Depression. This was further emphasis by Keynes push for deficient spending during recessions AND government Surpluses during economic booms (Thus the saying that the US was Keynesian during recessions, but went back to liberal economic theory when the economy recovered). Please note while such deficient Economic theory is generally called Keynesian and Keynes supported such spending but it had already been the practice among Economist since the late 1800s. Thus Keynesian Economics include deficient spending but such spending predate him and is not original with him, Keynes big findings is the concept that transactions are more important than money. The key is making sure whatever you do, maximize the number of transactions. That is the key to Keynesian Economics.

You should read more on Keynes and Marx to understand the full affect on taxation and economic policy. Henry George does a good job on the same angle but ignores the affect of increase productivity (an important concept in Liberal Economic Theory, Keynesian's and Marxist economic theory.

[dcfirefighter]

32. Fair'Nuff,

I'll read more on Keynes.

I think it may be a bit overconfident though, to say 'understand the full ffect of increase productvity' as economics as a science seems, at best, imperfect.

I would tend to put myself in the Georgist camp, with increased productivity taken care of in a combination of two ways: more leisure time, and more money. I just think that the more money should be created by (and for the benefit of) the people, rather than the banks.

That is, if increased productivity problem you refer to is a velocity problem.

Either way, I like the land use patterns predicted under a Georgist tax. I also like the idea of maximising returns to people, labor, and constructive investment, rather than exclusionary 'investment'.

It's precisely because the FairTax is a 'bad' but not ruinous tax that I support it.

[unblock]

24. what is this "eliminate k street" idiocy?

on the contrary, lobbyists will always put pressure on congress to find new loopholes. starting from a clean slate merely hands lobbyists 40 year project.

oh, there won't be exceptions, right? riiiiiiight.

lessee, for starters, will every single stock, futures, and options trade be taxed as a sale? of course not, the liquidity of the futures markets, at a minimum, rely on the ability of enough traders to trade freely multiple times a day.

how about housing sales. 23% tax on the sale of your house? of course not. what about vacation houses? mobile homes? winnebagos? hummers? toyotas? bicycles?

it may take years, but trust me, ANY tax system in place for long enough will be gamed.

[RPM]

33. end the IRS

I have bad news for the simpletons out there.

Killing the income tax does not equal killing the IRS

someone will still have to collect the tax, reconcile what is paid and audit those suspected of not paying the proper amount

Killing the IRS makes a good sound bite, but its a technical impossibility. Even if you kill the IRS, someone else will become responsible for revenue collection, just under a differnt name :eyes:

[happyslug]

34. Yes their can

In the late 1960s the Pennsylvania Highway Department was so corrupt that the State Legislature abolished it. Of course the State Legislature transferred all of the power, people and Corruption to the than new Department of Transportation but at least we abolished the Corrupt Highway Department.

Under Governor Ridge, Pennsylvania did the same with the Anti-Business and Environmental Wackos at the Pennsylvania Environmental Protection Agency (Pa EPA). Now the State than formed two new Departments, Department of Conservation and Natural Resources (PA CNR) and a Department of Environmental Protection (PA DEP) and the powers of the old Pa EPA was given to these two agencies, but the anti-business PA EPA was no more.

As you can see such evil organizations can be abolished by the State Legislature any time the State Legislature wants to....
(Sarcasm off)

For more on Pennsylvania Department of Environment Protections:
http://www.dep.state.pa.us/

For more on Pennsylvania Department of Conservation and Natural Resources see:
http://www.dcnr.state.pa.us/