Is the fair tax a realistic replacement for the income tax?

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OCALA, Fla., February 13, 2014 — If the question were put on a national ballot, most Americans would probably vote to do away with income taxes.

While professional politicians, accountants, and certain partisan activists might disagree, it is difficult to imagine the average Jack or Jane standing in favor of our current tax system.

America is then left with a question: How should the federal government raise funds? Uncle Sam has to live somehow, and while reintroducing protective tariffs is a wonderful idea, they can only go so far.

This is where the fair tax comes in. It would be levied on purchases made within the United States, much in the same way that state and local sales taxes work. There is far more to the fair tax than this simple definition, though.


If a fair tax system were instituted, would the federal government realistically be able to ensure that all due taxes are collected and reported?

“Given that the current tax code is complicated beyond comprehension and rife with loopholes, subsidies and potential abuse, compliance with a simple consumption tax will be significantly easier, less costly and more reliable than what we have today,” former New Mexico Governor Gary Johnson explains to Communities Digital News.

One of America’s foremost libertarian voices, he stood as a candidate for the 2012 Republican presidential nomination. He ultimately left the GOP to run as the Libertarian Party’s standard-bearer. Today, Gov. Johnson continues his advocacy for individualist public policy. 

He continues: “In fact, the Fair Tax will allow us to abolish the IRS.  State and local governments across the country have been collecting and administering sales taxes for decades.  They know how to do it, as do businesses.  In short, I am confident that reporting and collection will improve a great deal under such a simple and transparent system.”

Dan Mastromarco is an Annapolis-based attorney who has been leading the charge for years on fair tax-related matters. He tells CDN that “(a)fter examining approximately 1.4 million returns, it is evident that despite heavy-handed enforcement, an estimated $353 billion in taxes is not paid, and this “tax gap” is growing due to complexity, taxpayer volume, evasion opportunities, the lack of visibility and high marginal tax rates. The gap represents about 3.5 percent of the economy – a year of economic growth that could have headlined the State of the Union.

“The FT addresses this unsustainable tax gap by inspiring greater compliance with fewer resources. Mistakes would vanish, as one cannot feign mistake or confusion under a system that creates no exemptions, and asks only one question of retailers, ‘How much did you sell?’ In contrast, nearly 20 million calls to IRS ‘customer service representatives’ went unanswered in 2013. Non-filers would nearly vanish, and willful noncompliance or evasion diminishes because the reward (the tax rate) and the opportunities (number of audit points) decline.  Indeed, state sales taxes are enforced at a higher compliance rate than the income tax with lower overall administrative and compliance cost.”

Right now, is there much support on Capitol Hill for the fair tax?

“A version of the Fair Tax was first introduced more than 20 years ago,” Johnson says. “Today, the Fair Tax has more cosponsors in Congress than ever before.  Obviously, such a dramatic reform takes time and does not happen overnight. However, with growing awareness of IRS abuses, the inherent unfairness of a tax code that designates winners and losers, and the dampening effect of the current system on the economy, the idea of a simple, fair tax is gaining more support every day.”

Mastromarco claims that “(t)he FT is the nation’s leading tax reform plan. Rep. Rob Woodall is the sponsor in the House (HR 25), – there are 73 co-sponsors. Sen. Saxby Chambliss is the sponsor in the Senate (S 122) there are 8 co-sponsors. Per Rep. Woodall, the Committee on Ways and Means will vote on HR 25 during their tax reform deliberations. Additionally, there are a significant number of Members who have stated privately that if the legislation comes up for a vote, they will support it.

“The real challenge is convincing the American people who are supposed to sit as Congress’ board of directors to impose their will upon those Members who have become part of the problem.”

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  • jimd

    2013 marks the 100th anniversary of the passage of the 16th amendment and imposition of the income tax. Since that time our tax code has grown from 400 pages to over 75,000 pages and counting. For 100 years Americans have been discouraged from working. How many times have you said or heard “I don’t want to work overtime because I’ll just pay more taxes…” Our economy and the American people lose almost a trillion dollars a year in productivity and real money spent on taxes due to our overly complex tax code. The IRS is the most feared institution of our government.

    It’s time for change.

    The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level,
    dollar-for-dollar federal revenue neutrality, and, through companion legislation, the
    repeal of the 16th Amendment.

    The FairTax Act (HR 25, S 122) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

    The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

    The FairTax:

    1. Enables workers to keep their entire paychecks
    2. Enables retirees to keep their entire pensions
    3. Reduces the cost of American products shipped overseas allowing them to compete fairly with products made elsewhere
    4. Ensures Social Security and Medicare funding
    5. Closes all tax loopholes and closes the door on our elected officials trading tax preferences for campaign dollars
    6. Brings transparency and accountability to tax policy
    7. Is Progressive, NOT Regressive because it refunds in advance the tax paid on purchases of basic necessities to the poverty level. FOR EVERYONE.
    8. Abolishes the IRS

    Passing the FairTax would:

    1. Result in tremendous economic growth in the United States promoting free enterprise and capitalism as companies come back to the US to produce products tax free on US soil

    2. Result in smaller government by abolishing the IRS’ 100,000 employees and $11.7 Billion dollar budget. (We don’t need to be subsidizing their jobs and with the economic boom created by the FairTax they can find another job in the private sector.) Not to mention eliminating
    the Hundreds of Billions of dollars American’s spend on Tax Compliance

    3. Reduce government intrusion into our private lives. No more invasive federal tax forms to fill out. You pay your tax at the cash register

    4. Tax the shadow economies such as drug dealers and prostitution – or any persons doing a strictly cash business. These people currently pay NO Federal Income Tax because they don’t report the income. They do however buy things – which is where the FairTax would capture
    their portion of their tax

    TO BE CLEAR: The FairTax is not a Flat Tax, nor is it a VAT. Please don’t get them confused. A Flat Tax is still an income tax and, it leaves in place payroll taxes and would do virtually none of the above. It also leaves the code open to manipulation by lobbyists and Congress. A VAT (Value Added Tax) like in Europe applies tax at each stage of the manufacturing in business to business transactions and is in effect a hidden tax. A VAT is bad. The FairTax only taxes transactions at the FINAL POINT OF SALE.

    • Yankee

      This writer repeats a lot of propaganda directly from the FT propaganda machine. It is misleading and wrong.I will focus here on just a few of their deceptions.

      point 8. Abolishes the IRS (their favorite cry). It’s a iie – the NEW IRS (i.e., the STAA) will likely be far worse when they audit consumers.Those audits could easily be more invasive than IRS audits, which would review ALL of your finances.

      You may well be required to file an “Annual FT Summary”

      We will not save any money as these IRS people (plus new hires) will be transferred to other agencies (SSA , to audit SS Wage filings, CMMS to audit the ACA).

      Grand economic benefits? – They can Predict NOTHING. All Hype & Change!

      Shadow economy: 2 UT econmists wrote that criminals would pay no more in tax – they pay “embedded taxes” today which would be replaced by some FT. I add that we would also have 320MM new tax criminals trying to evade 40-70% sales tax at every opportunity.

      My very Flat tax would not (AND SHOULD NOT) replace SS/Medi taxes. People should pay for THEIR OWN personal entitlments – the FT has someone ELSE providing free SS/Medi to the poor, PLUS an extra tax welfare check. Sorry, Comrade, more Progressive-Socialist wealth redistribution is NOT for everyone.

      • jimd

        Yankee is the one pushing his propaganda. The FairTax absolutely eliminates the IRS. Yes, there is compliance but it’s moved to the Dept of the Treasury. No it will be NO WHERE CLOSE to the IRS in terms of invasive or power. There’s no Auditing of consumers – that’s complete BS as is pretty much the rest of his picture that he is painting. Need to file a “Annual FT Summary” WHAT? Completely made up by “Yankee”. Business will need to file a simple form reporting their sales and collection of the FT and will receive a 0.25% fee for doing so. Yankee’s flat tax doesn’t eliminate FICA so add 15% to his 10% and you are at a 25% tax rate. Add on top of that State and Local Sales tax and you’re back up in the 40% range he claims is so bad with the FairTax. Consider that his FlatTax still discourages people from working and does NOTHING to collect tax from those who don’t report income. Also keep in mind that he’s spent his whole life making money off the income tax system. Sounds like he’s still lobbying for his tax lawyer buddies and industry to keep suckling off the income tax system. Don’t believe a word he says.

        • Yankee

          jimd,

          Sorry to expose the FT fantasy world to the real world.

          You ay there “will be no auditing of consumers” – Where is your proof that they won’t. I say (and was not challenged by the FT people) that the STAA CAN audit consumers and in my professional judgment, they MUST audit consumers in order to minimize FT revenue loss.

          Next, it seems to me to be a no-brainer that the next step is to require every consumer to fle a 1 page “Annual FT Summary” – if you don’t see that coming, you probably believed ‘If you like your doctor, you can keep your doctor”.

          My Flat tax DOES NOT (AND SHOULD NOT) replace the SS/Medi tax.
          FT reuires us to pay for the pooor’s SS/Medi AND give them an extra tax welare check. Sorry, Cm rade, I am not a Progressive-Socialist like you.

          What you are missing is that people will see that 40-70% combined fed+S/L sales every time that spend thir hard earned money and will rebel, destroying our retail-sales-sensitive economy (AND fail to deliver the FT’s target revenue).

          UT economists wrote that criminal pay no more FT than “mbedded taxes”.

          Jim ends with baseless FT’er nonsense. He ignores (or just can’t read) that I am RETIRED and have ZERO cintinuing stake in ANY tax system – in fact I might pay less in FT than Income Tax and should thus favor the FT but DO NOT. Sorry if that reality os too difficult for a FT’er to deal with, but hen again, they usually can’t deal with reality at all.

          Notice that instead of substance, Jim resorts to Akinsky insults and mere FT rhetoric which does not stand up to the facts – he has to beg you not to believe a word I say (how pathetic).

          • jimd

            I am FAR from a Progressive Socialist but thanks for the name calling. Funny how that happens often in your responses… The FairTax ensures that NO American pays tax on spending to the poverty level. That’s not socialism. You also admit that the whole idea of a consumer audit is made up in your mind. Good to know that – makes us all understand that a lot of what you say is stuff made up in your own mind. Bottom line though is we both want to eliminate the IRS – at least we have common ground.

          • Yankee

            jimd,

            No, I do not engage in ad hominem name calling, I just call a spade a spade. What you are proposing is more wealth redistribution (I.e. Clowardd-Piven Progressive-Socialism. This is what your beloved FT ACTUALLY accomplishes and thus it deseraves my description of it.

            Next, I call your claim that the FT assures that no-one pays any FT on poverty level purchases a very deceptive half-truth, which IMHO makes it a lie. Beore I explain that, I say, Comrade, that those of us who are NOT Progressive-Socialists do not agree that “people should not have to pay a dime in taxes for govt services AND get free SS/Medi until they earn enough money to take care of their families” – that was part of FDR’s FAILED 2nd Bill of Rights.

            The FT goes well beyond making sure that the poor pay no FT on poverty level purchases (a goal I do not believe in as noted above) –
            it ALSO gives them free SS/Medi AND a nice big tax welfare check IN ADDITION.

            As bad as that is, it is NOT the biggest problem. That is, that the FT leaves all Americans getting a monthly check from the fed govt – a very bad idea for us NON-Progressive-Socialists. The poor will be dependent upon this check for their necessities and will this be thoroughly obedient to the fed govt – only a Socialist could love this.

            Yes, I use my head, my lifetime of professional experience to see the obvious tactics the govt would abslutely have to employ in order to minimize the loss of FT revenue – i.e., audit consumers (which the FT permits), require an Annual FT Filing, etc. If you had the requisite professional background you would understand this.

            While I would like to get rid of the IRS, as a mature realist, I understand that there will always be a need for some “IRS”. The FT’s NEW IRS wil likley be worse than today’s IRS. My Very Flat tax will neuter the IRS – it will very little to do; 1 page tax filing, everyone with income pays tax and this has an interest in how Congress spends our money.

          • Robert M. Buckley

            I have to agree with jimd. He makes a very compelling case for the FT and debunks your arguments totally Yankee. Your cuteness in calling him “comrade” and a “progressive socialist” really makes your arguments weak. There is nothing progressive or communistic in the FT which any clear thinking person would see if they would only read the bill and the 3 books explaining the FT. You never addressed jimd’s observation that you certainly do have an interest in stopping the FT. I’m sure you’ve made a good living consulting on our present income tax system as have your buds in the industry. What say you?

          • Yankee

            Robert,

            I call the FT what it is and what it does. Because it promotes MORE wealth redistribution, because it 1) puts everone in the position of getting a monthly check from the fed govt, 2) gives the poor free SS/Medi, 3) completely “untaxes” the poor, 4) gves the pooor an extra tax welfare check – IT IS PROGRESSIVE-SOCIALIST!

            If you think I never addessed Jim’s onservation, you either can;t read or are just entirely closed minded. Please explain to all of the readers, exactly how I can have an “interest” in keeping the current tax system when I explained clearly that I 1) am RETIRED, 2) have NO continuing revenue that depends pn the continuation of today’s tax system, 3) proposes a Flat IT that does away with tax preparers, and 4) I would likely pay LESS FT than I would pay IT?

          • thisistheguy

            Yankee, one would think if this bill were progressive socialist, that progressive socialists would be the supporters. That doesn’t seem the case as many conservatives are the ones supporting it and see the fair tax as the first large stepping stone to government reduction. I am a very conservative thinking person. Are there going to be some that misuse this system? yes. No piece of legislation is going to be a cure-all end-all otherwise we would have had it already. Your main point in all of your ramblings across fairtax articles all over the internet seems to be that the poor are reaping every single benefit with doing absolutely nothing. You hate the prebate and call it “another welfare check”. I have thought long and hard about it. I still can’t see how it could be used in that way unless a person is starving themselves or depriving themselves of basic needs that they pay for. Like I said, no system is perfect. They could not buy the food and necessities that congress deems is required and actually get money out of the fairtax. However, I see the fairtax just being the beginning. With more jobs going to be available (a good chance with higher wages/salaries) under the fairtax, it seems likely to me that the US would finally have the welfare state decreasing. Less on unemployment and foodstamps and other wasteful programs. We could then reinvest the money that used to go to waste into things that would be more productive, like education, medical facilities, and infrastructure. If I had it my way, there would be no social security or medicare. I’m a big free market guy. The “no corporate tax” part will increase competition (you can say corporations would not change prices and keep money saved from no corporate tax, but any understanding of economics will show that once one company decides to increase competition by passing that savings on, that others will have to follow or face losing customers/profits). I can understand why you try to opposed it for the the reasons you state, but in your justification, the tax system is the only thing that is changing. This tax plan changes the economy, and it’s what I think you fail to realize. Corporate greed could occur on some levels, but free market competition will ensure that is is the exception rather than the norm.

          • Yankee

            I do not know exactly why Progressive are not supporting it – ne, foeme W&M Chmn Rangell nearly choked on the giant new entitltment – it was apparently too much even for a big welfae DEM.

            The GOP is supporting it but not for the reasons you state. Most have no clue how it works, but signed on merly to start a discussion of tax reform (and to quiet boisterous FT advocates – 1 said he signed on just to trade for a favor).

            The welfare aspect is only 1 of the reasons I think the Ft stinks.
            You do not understand yet how the Prebate works – I will try to show you some aditional material (call me 423-532-7337). The Prebate overpays any FT the poor would pay even if they do not starve – you need to go through the details If you go on the Advisor & Source newspaper site there were 6 FT discussions, recently. One was my “The FT INCREASES WELFARE in which not 1 of the FT peddlers challenged a single specific comment I made, whining ony that we should give the poor more welfare.

            Yiu do not discuss all of the other financial reasons that I state for disapproving of the FT. How would you address those?

            You seem to believe that the FT would do wonderful things for our economy – I see just the opposite. We can get into specific issues.

            Did you see my Article in CommDigiNews?

          • thisistheguy

            I did read your article, and I’ve been quietly following fairtax news and comments on it for quite some time. Like I said in my earlier post, I believe the fairtax is a stepping stone that will reduce other welfare programs almost entirely. One of the reasons I like the fairtax is the room for upward mobility. If everyone is treated the same across the board, and we have a good estimate of what it costs to live, I don’t have a problem with the prebate. You can call it welfare if you want, but if everyone is getting the same check no matter their economic situation, I wouldn’t call it that. If a family wants to tighten their belt in order to save money from fairtax then they are doing what they can to raise themselves out of poverty (not all of that money that they are not spending or are gaining from the prebate is going to be spent on black market goods as you seem to assume, since we are assuming). Even if someone saves money, it eventually has to go somewhere. Savings will eventually go to an investment (house, stock exchanges, cars, education, health care). Savings do not stay in one place forever, and wherever they are spent (whether they are spent on used items or retail), they will eventually be put towards a good or service under the FT.

            I don’t see eye-to-eye with you on your estimated amount of evasion through a black market system. You predict doomsday for the economy with underground transactions booming to dodge the tax. As there is sure to be some, I think you overstate it. Retailers who make a profit of selling goods and services aren’t likely to want their inventory lost to black market. Suppliers would have to account for goods that “went missing” before they supplied them to a retail level. The “black market” will be less of a new item market and more of a used item market that is not taxed. But people still want new stuff, not all will be content with purchasing used items. Which is why people who want newer items and luxuries pay what they do under the FT. Even if the FT rate was raised, let’s say to 30% inclusive, I still think it works better for the economy. Can you deny that no corporate tax will bring more businesses and industry to the US? I mentioned before that the money that they save on tax has to go somewhere. Economic competition would tell us that most of it would go to consumer savings and employee benefits. With that said your “everything will cost 170% more at the counter than what we are paying now” claim loses substantiation. I would estimate in the 115-118% range, noticeable, but not so much as to cause rebellion as you claim, especially with people bringing home quite larger paychecks.

            Am I missing any of your financial concerns or are we deadlocked, set in our own ways about our opinions on how the government should be run?

          • Yankee

            You said you read “my article” – which one. I have an overview article that simply outlines the welfare and financial problems and there are several others that get into the explanatory detail.

            Have you read my detailed explanation that I posted here for you on how the FT INCREASES WELFARE so that you now understand that the poor will not have to starve to get more cash welfare – the Prebate hands it to them (you really do need to read my post, the FT INCREASES WELFARE, above to understand).

            From where do you get your “expectation” that the FT will reduce welfare. Has giving more welfare ever reduced welfare? If you think the economy will reduce welfare, that is just your personal hope with which I thoroughly disagree.

            You obviously did NOT read th material I posted right here for you.
            You have fallen for the superficiality of the “everyone is treated the same” line. The BOTTOM LINE effect of that is that the poor are big NET NEGATIVE Tax RECEIVERS while the middle & upper classes are still NET POSITIVE taxpayers , so we are NOT all treated the same.

            Treasury used 2 illustrative rates for evsion/avoidance 15% & 30% because an accurate estimate is impossible to calculate. Most economists foresee substantial evasion/avoidance.
            Treasury thought the FT rate alone neeed to be 55%.

            While a little bit of industry may come to the US, the US is still a very inhospitable environment; high labor costs, inefficient labor, unions, oppressive govt regulations, hyper-litigation, etc.

            I did not ever say things will cost 170% more at the counter – you misunderstood completely. I said people will see a marginal 40-70% combined FT + S/L sales tax at the register and will explode (notwithstanding that prices will first come down by 3 to 4% – 12.5% according to AFFT, and that my sample 10% S/L sales tax is also aleady in the equation). It is that sticker shock 40-70% that marginal sales tax will cause a revolution – people will not be aware of the relatively minor offsetting price decline.

            You never addressed any of the several significant HIDDEN TAXES.

            You never addressed my warnings about he IRS auditing consumers and requiring the filing of an “Annual FT Summary”.

            You never addressed my warning about the effect on new home sales – the big price increase and the much higher required down payments because lenders will not finance the FT.

            You did not respond to my 3 part response point-by-point as I have tried to do with your comments.

          • thisistheguy

            I’m sorry that I haven’t followed your preferred method of rebuttal of point by point, separated by paragraph thoughts. I will do my best here.

            Your article that I read was “FairTax is wealth redistribution to the poor and anything but fair” on DigiNews posted February 14th 2014.

            I used the term “tighten their belts” as a metaphor for all aspects in which money is spent. Surely someone can spend below the poverty line, and save their money. However, money that is saved will eventually be invested (housing, cars, education, stock exchange etc.). The money has to go somewhere eventually. If they spend the money on retail items, then the FT will be taken out and they will not net a profit on the prebate. The reason I do not qualify it as welfare, is because everyone is getting the same money. There are no exceptions to the poor so that they get more ore less. Everyone is treated the same.

            As I have already said, I do not classify the prebate as welfare. The reason I believe that welfare will reduce is for 2 reasons: 1) the improved economy with more jobs, and higher paying jobs, and 2) the upward mobility FairTax provides. The people who are bound by the situation they have been born in have the chance (If they have the desire and work ethic) to rise out of those circumstances with less help from welfare.

            You are correct that the poor are net negative if the choose not to spend. Everyone is treated equal, you just fail to see it. Under the FT you choose what you pay in taxes. By having a new car, new home, and going to nice restaurants, you choose to pay more taxes. I strongly believe that it is the fairest way to charge a tax.

            Right now the treasury may use 15% and 30% as calculations for evasion, but use common sense. When you have 100 million or so tax payers, do you think it would be tougher to track down every dollar they owe compared to the 800,000 or so payers that would be submitting the FairTax. Of course this will be substantial decreases in evasion! There will be .8% of the collection points as compared to the income tax. 0% is hopeful, but I do not think it would be unreasonable to use an estimate such as 3% evasion rate.

            We simply disagree on how much industry and jobs will be created. I have said before that the FairTax is a stepping stone to a smaller, more transparent government. The influx of jobs I believe would have an strong positive effect on our economy, which would lead to deregulation and even more industry. The U.S. is a large country in terms of area, and we need more infrastructure all across the country. With more industry coming in means more paychecks and more FT being paid, and more investment in infrastructure, education, and medical facilities.

            The thing about your “sticker shock” that bugs me is that people are already paying S/L taxes. They see it today, why would they expect it to go away under FT? 140-170% more at the counter is the same as what you were saying (100% item price +40-70% tax). Your estimations are just exaggerated. Your assumptions rely on strong corporate greed and ignore economic competition. 10% reduction in retail prices, with a 25% fair tax (I adjusted for a small amount of evasion) is a net of 115% price increase (state and local stay the same because they are already there). With people taking home 125-130% of what they are taking home now from their paychecks. You will NOT see this mass revolt/rebellion of which you claim is inevitable.

            The hidden taxes you claim I do not think would be significant. Pair this with the repeal of Social Security (which must happen), and it will become a non-factor.

            You’re warnings about an “annual FT summary” have no standing whatsoever. Such a thing would serve no purpose. What the FT is going to accomplish is a smaller more transparent government. Why would such a government expand from taking the 800,000 FT payers and try to go back to 100 million? It would be incredible waste of a proportion that no one would stand for. You are correct that I have not found where is says in the bill “there will be no Annual FT summary” but neither does it say that there is a possibility that there would be one. The whole idea of it seems to have been fabricated by you, as you are the only person who I have ever found to mention it.

            The new home market and the auto industry are the ones likely to see the largest reduction in price. The cost of raw materials will drop fairly dramatically. It will be far easier for people to save up for houses and cars, because when they save, they will pay less taxes. Those that want to buy new will always buy new. With the decreased cost through all stages of production of these items, there is better chance of the market booming rather than collapsing.

            I do not see the FT as the end game. I see it as the starting point. I ask you, if you saw it as I do, a starting point that would lead to the repealing of SS and medicare would you support it? Economic competition will play a far greater part than corporate greed with the implementation of this plan. I know you have been clinging to these numbers for a while, but can you not see how they are over exaggerated and further from the actual cost than what I have presented?

          • Yankee

            Part 1 – Prebate – Welfare

            Thank you. I prefer this method because IMHO this is the logical, rational way to discuss a topic back and forth.

            In the first part of your response here, you discuss the Prebate and my welfare comments.

            While you explained that you read my main Article (which is an overview) of all of the FT’s fatal flaws, it des not appear to me that you have read my explanatiory detail that I posted here in this discussion, entitled “The FT INCREASES WELFARE” in which I made 6 specific numbered points which explain how the Prebate OVERPAYS – until you study that, we cannot make any progress on this issue.

            You say excess welfare ebentually does the economy a lot of good. IMHO, your logic is fallacious. Why then don’t we simply triple all welfare payments.

            Your expected improved economy as a result of FT is IMHO dead wrong. I think FT will destroy our economy. Neither of us (nor any army of PhD economists) can predict the effect on the economy.

            Again, using YOUR logic, if we give them even more welfare, they will climb out ouf povery even quicker. We can see welfare atttracting more wefare recipients who find it easier (and more profitable) to live on welfare, which is often more attractive (pays more) than work.
            I must reject such Progressive-socialist rationalization for giveng ever more welfare.

          • Yankee

            Part 2 Evasion

            I see you misunderstood what I wrote .

            IMHO, your analyis of evasion/avoidance is superficial.Treasury (and economists) expect gigantic evasion at such high sales tax rates. Treasury’s 15 % 30% are SAMPLE illustrative rates because they cannot predict that rate accurately. THIS 15% & 30% evasion rates are with respect to the FT (not to the current IT as you appeared to misunderstand).

            Treasury thought the FT rate needed to be 55% (not 30%). Are you saying that Treasury and many economists do NOT use common sense and that only YOU are using common sens?.

            You use the suerficial deceptive FT talking point of the reduced number of tax collection points. The Black market that will develop will create countless new FT evasion point possibilities.

            ny dollar of FT evasion.avoidance will cause a shortfall in FT’s advertised reneue-neutrality, because the FT assume ZERO evasion/avoidance.

          • thisistheguy

            1. back to the welfare argument.
            The reason I argue about the extra prebates going into the economy is when the money is spent, tax is paid. That is not true in the current system. People receive money and are not taxed on it whatever they spend it on. I do understand and have read your posts on how they become receivers instead of payers. Think of it this way, right now if people do not use their welfare, they lose it. they spend the money that they get on what they need and what they don’t need for fear of having that amount go down. Under the prebate, the amount stays the same for everyone whether it is spent or not. Money can be saved to be reinvested in the person to raise themselves out of poverty. There will always be some who abuse it, no matter what system, you can’t change the hearts and desires of some people. But as I have mentioned before, I am confident that the passage of the FairTax will lead to less foodstamps and welfare programs.

            2. the economy

            You keep beating the dead horse with this idea of a vast underground black market that will supposedly appear. Retail businesses bring in goods to sell at retail, they come from a supplier. This underground economy that you say will come to fruition assumes that we will simply “miss” items that the suppliers have before they make it to the retail market, or that the retailers will try to sell them tax free. The products have to come from somewhere and a supplier business has to prove that their items coming in and going out are not for retail use. Broken or used or stolen goods are the only thing that could comprise an underground economy. While this may suffice for those who are already exposed to such a system, most will avoid it. Those who buy new and full retail now, will always do the same, because that is what they want.

          • Yankee

            Welfare

            Pay 1 WELFARE

            I just added my FT EXPANDS WELFARE to then end my reply # 1 – I do not think you have yet had a chance to study it.

            I find your logc puzzling. You say that when the Prebate gos back into the economy (i.e., whenit is sent, more FT is paid. That is money going to the TREASURY NOT into the economy.

            All you are saying is that we get back SOME of that extra welfare we pay. You would then say, we should pay even higher Prebates so that we get even more back in FT – I hope you can see the silliness of your argument.

            Your thought process is confusing me. You say ” if prople do not use their welfare, they lose it.” Waht do you mean Medicaid? If they get cash, they keep it. I do not see what point you are making.

            You say. “they spend the money that they get on what they need and what they don’t need for fear of having that amount go down.” So what point are you making? How does this relate to to the Prebate OVERPAYING any FT they pay?

            You say, “Under the prebate, the amount stays the same for everyone whether it is spent or not. Money can be saved to be reinvested in the person to raise themselves out of poverty.” So you would say, let’s givethem bigger Prebates so they get out of poverty even quicker. This IMHO is nothing but Progressive-Socialist drivel to rationalize why we should keep increasing welfare. Give the poor more of YOUR OWN money.

            You say, “There will always be some who abuse it, no matter what system, you can’t change the hearts and desires of some people.”
            Comrade, giving away more welfare is NOT the right answer IMHO – welfare is already way too high – too many people have been enslaved in the cycle of poverty because today’s welfare is way too generous.

            You can be as confident as you like ” that the passage of the FairTax will lead to less foodstamps and welfare programs.” but that is your Progressive-socialist dream that has no basis in reality.

            All you have done is rationalize gving away more welfare – No Sale, Comrade.

          • thisistheguy

            You speak in circles and draw conclusions out of nothingness. It is impossible to have a productive argument with you.

            Never will you hear me say “raise the prebate so someone can make money faster”. NEVER. Under the FairTax, personal choices decide 100% of the time whether you are in poverty or not.

            When prebate is spent, 77% goes into the economy, 23% goes to the tax. That is pretty simple but you seem to miss it.

            Worst of all your debate, if you ever get puzzled or put to a point where your arguments carry no weight, you resort to calling me Progressive-Socialist and Comrade. My 5 year old niece shows more maturity. Please review all of my remarks again and put them together as a broad idea instead of contradicting yourself by separating them out. It may prove worth your while to see everything at once.

          • Yankee

            You are confusing yourself.

            First, of all have you read the correct article that I added in to one of my replies – the one in which I list 6 points of how the PREBATE OVERAYS ANY FT the poor might pay? Since it appears that you haven’t (or simply don’t WANT to read it, I will try one last time by pasting it in here for you.
            This reply will continue, at the end of this article.

            The Fair Tax (“FT”) INCREASES WELFARE, by Stephen C. Eldridge

            The FT’s Prebate is a WELFARE check that leaves many dependent upon the govt for a large portion of their monthly income – a very bad idea. The Prebate is not a refund of FT paid, but a new independent $600B ENTITLEMENT, that will only increase in the future – the very last thing we can afford.

            The Prebate is advertised to insure that the poor pay no FT, merely assuming that we all agree with that goal. Further analysis exposes that the Prebate goes much further – it gives the poor a large FT PROFIT.

            The Prebate gives every family a monthly check purportedly to cover the FT they would pay on “poverty level purchases” as defined by the US HHS Dept.’s Poverty Guidelines and makes “adjustments” to them. The Prebate next “assumes” that EVERY family of each size spend a certain amount of dollars (For 2014; $11,670/adult, $4,060/child) which is then multiplied by 23% (the tax-INCLUSIVE rate) to yield the Prebate that will reimburse all the of the FT ($2,684/adult, $934/child) that is THEORETICALLY paid.

            To illustrate, assume there is a family of 5; Husband, Wife, 2 kids, and the Wife’s Sister lives with them. They would be “assumed” to spend a total of $43,130 ($11,670 x 3, plus $4,060 x 2). Their 2014 Prebate would be $9,920 ($43,130 x 23%, the “tax-inclusive” FT rate). The $9,920 Prebate is calculated to pay back 100% of the FT THEORETICALLY paid by the family, but as shown below it greatly OVERPAYS the amount of FT ACTUALLY paid by the family.

            Point 1. The FT corrects for the “Marriage Penalty”. The problem is that there IS NO “Marriage Penalty” in the underlying HHS Guidelines – they were developed as impervious to the age (or the marital status) of the person. They provide $11,670 in spending for the 1st PERSON in the household and $4,060 for the 2nd PERSON (the 1st PERSON gets more to pay the rent) – it does not matter whether the person is an adult or a child or whether the adults are married or not. What the Prebate does is “make believe” that the HHS Guidelines say “Adult” & “Child” and then is more generous to marrieds – the Prebate is generous in giving away more money, YOURS.

            RESULT: The Prebate assumes this family spends $7,610 MORE and overpays them by $1,750.

            Point 2. The Prebate’s more generously defines “family”. FT’s more-limited (than the HHS guidelines’) definition of “Family” allows for more FT “families” in a single physical household than the underlying HHS Guidelines would allow. A FT “family” includes only lineal ancestors/descendants (plus adopted). Thus, the Wife’s Sister would be treated as a separate family under FT, and thus as an adult (this would NOT occur if the HHS Guidelines were followed).

            RESULT: The Prebate assumes this family pays $7,610 MORE and overpays them by $1,750.

            Point 3. The Prebate “assumes” that ALL spend AT the poverty limit. If the family ACTUALLY spends LESS than the maximum amount a family can spend and still be at the HHS Guidelines’ limit, they will be overpaid. This family is “assumed” to spend $43,130.

            RESULT: If ACTUALLY spending is only $40,130, the Prebate will OVERPAY them $690. RESULT: For Points 1-3, The Prebate assumes $18,220 MORE spending and overpays by $4,190.

            Point 4. The Prebate OVERPAYS for USED goods. If the family buys some goods USED (and can prove the seller paid FT) they will not have to pay FT. Yet the Prebate “makes believe” that they DID pay FT.

            RESULT: If the family bought $5,000 of USED goods, the Prebate would overpay them by $1,150

            Point 5. The Prebate OVERPAYS for Black Market purchases.

            If the family buys some goods on the Black Market, they will pay no FT. The FT “makes believe” that all of the money is spent legally so that full FT is paid.

            RESULT: If the family spends $5,000 in the Black Market, the Prebate overpays them by $1,150.

            Point 6. The Prebate OVERPAYS for In-Kind Welfare

            If the family is on Welfare, a substantial portion of their support will be paid IN-KIND (e.g., Medicaid, Housing Assistance). The poor will NOT receive cash for these items and pay FT – WE DO. Thus, the FT “makes believe” that the poor actually paid the FT and repays THEM for FT WE paid.

            RESULT: If in-kind welfare is $6,000, the Prebate overpays by $1,380.

            RESULT: For Points 4-6, Prebate assumes FT paid on $16,000 of purchases and overpays $3,680.

            RESULT: For Points 1-3, Prebate assumes $18,220 MORE spending and overpays by $4,190.

            RESULT: Grand Total overpaid Prebate; Points 1-6 = $7,870 (i.e. $9,920 minus $2,050, total actual amount of FT paid on actual spending on which FT is paid in this illustration ($8,910). PLUS, the poor get free SS/Medicare.
            ————————————————————————————–
            What your arguments say to me is that YOU believe that is OK, because if the Prebate overpays the poor for any FT they pay, some of that money goes into the economy 77% and another 23% goes back to the Treasury (and that will also help the poor climb out of poverty. To me that is a silly excuse for giving away the 100% in the first place (in my ilustration above, a $7,870 extra tax welfare check + free SS/Medi) and it does not help the poor climb out of poverty, but keeps them locked in poverty.

            To demonstrate the absurdity of your point, I offer that based on your ptently silly logic, we should triple the Prebate – using your arguments, it would help the poor get out of poverty quicker, put more money into the econoy and get more money beck to the Treasury (what’s not to like?)

            No, it is the patent silliness of your philosophy that tries to to rationalize giving out more welfare that makes you a Progressive-Socialist – I call a spade a spade. If you are pushing more welfare (the Prebate) then you ARE a Progressive-Socialist (remember, it is YOU who is telling us how wonderful welfare (Prebate) is.

            BTW, you haven’t yet rationalzed why giving the por free SS/Medi is such a good idea AND why it’s a good idea to have all the poor dependant on a new monthly check from the fed govt that can be increased at will by the fed govt.

            You are upset because I have exposed your arguments to be exactly what they are..

            If you want to help the poor even more than our current over-generous welfare system, you can give them YOIUR OWN money.

            Your final comment demonstrates your deceptive approach to understanding. In order for people to have a rational conversation, they must addess each issue separately and thoroughly. What you are asking is to jumble them all together for some big picture discussion – WHICH DOES NOT GET INTO THE DETAIL NEEDED TO TRULY UNDERSTAND EACH COMPONENT IN DEPTH, WHICH WOULD THEN LEADS TO A RATIONAL BROAD CONCLUSION.

          • thisistheguy

            You are either not reading or completely ignoring what I am saying.

            SS/Medicare needs to be out, done with, over, not a part of our government programs any longer under the FT. I have stated this over and over and over again yet you still try to say that I want to give the poor SS/Medicare. I DO NOT. I’m not sure how to make it any more plain. Tripling the prebate would do nothing as you know, because inflation would cause that to be a non-factor. I am not arguing that every single person will be able to rise out of poverty. I’m saying there is room for upward mobility. And if the FT overpays the poor, it overpays the middle and upper class as well because EVERYONE RECEIVES THE SAME CHECK. There will still be poor people, there will still be middle class, there will still be upper class under the FT. What the fairtax does is allow more for spending, therefor increasing mobility between the classes. Please see my latest comment for my argument for no SS/Medi under the FT.

            You also so graciously brush off any growth to industry in America as saying “the little amount of industry that will be brought it will not even be noticeable to price increases”. I’m going to build for you an equation, let’s see if you can follow

            0 corporate tax=more industry=more jobs/better paying jobs= more tax being paid into FT=more $ available for infrastructure/education/medical facilities/innovation=more jobs=less unemployment and other wasteful welfare programs.

            I have said it before in this thread, I will say it again. The FairTax is not the endgame. It is merely the first stepping stone to a smaller, more transparent government.

          • Yankee

            I understood and said that we agree that SS/medi needs to be privatized 100%.

            The FT gives the poor free SS/Medi NOW – AND there is no privatizarion of SS/Medi on the horizen. If you are telling me that I should hold my breath because SOMEDAY in the distant future SS/Medi will be privatized (but we must give it to the poor foor free today) then I say to you sir, that while some naive FT’ers believe such fairy tales, most of us can tell fantasy when we hear it.

            I do not understand you point about tripling the Prebate – please be more explicit. Again, my suggestion of tripling it was to emonstrate the absurdity of your comment that it’s OK for the Prebate to overpay any FT paid because that helps the poor climb out of poverty and the money comes back into the economy and to the Treasury – It was not a serious suggestion to triple the Prebate, but just the opposite.

            What you are still missing is that the poor get a NET BOTTOM line check, while the middle & upper classes are still NET FT PAYERS, so that the net effect is to ttransfer more welath to the poor.

            You say, ” What the fairtax does is allow more for spending, therefor increasing mobility between the classes.” In other words, “elfare is a good thing” – No Sale, Comrade. Welfare enslaves the poor.

            You say, ” Please see my latest comment for my argument for no SS/Medi under the FT.” I have seen your comments here – where else do you mean?

            Your formula is way tooo simplistic. Zero tax does not autimatically bring in more jibs, etc. The US is still a very unattractive place to do business,high labor costs & unions, excessive givt regulations, litigation, etc.

            We would not survive your FT “stepping-stone”. We do NOT need more tax welfare, we do NOT need an in-your-face 40-70% sales tax,
            we do NOT need several hidden taxes, we do not need the FT AND a NEW income Tax.

          • thisistheguy

            I simply disagree in principle. Progressive tax systems will always favor the poor. Regressive tax systems will cause an even greater gap among the classes. You still spout the exaggerated and tired “sticker shock” slogan which I have shown is inaccurate.

            Your 10% tithe tax will be just starting over on the income tax, with exceptions and changes to the numbers in years to follow. Furthermore, it will cripple the lower and middle-middle class, removing them further from markets in which you wanted to see progress (home and auto).

            If I think it were more likely that SS/Medi would get repealed under the current system, I would pause my support of it until such a time when they are gone. I think that I have given sufficient argument above as to why the path is laid easier by passage of the FT.

            Again, everyone gets the same prebate check. If the poor are overpaid, then the middle class and upper class are overpaid. It is how it is chosen to be spent that determines the tax on it. (It’s not welfare and your arguments do nothing to sway me to that point).

            I believe that a consumption tax is the best thing for the economy and a reduced government. You are 100% correct that we do not need both a FT and a income tax, I’ll fly your “mass rebellion” banner on that point.

            You seem to be under the impression, of “they way things are run now in the government is how things will always be run, so might as well put a system in place that favors me”. Sorry but it’s time for change. The FairTax is a first step to less wasteful government programs.

          • Yankee

            What exactly are you disagreeing with? You follow that by saying Progessive taxes favor the poor – I agree they do, but I do not believe Progessive taxes are fair to all earners.

            I think taxes should be fairly applied (like a Flat tax with no exemptions) even if that is regressive- regressive taxes may lessen the wealth gap as the poor have that much more incentive to grow (less disincentive than a Progressive Tax).

            Excuse me, but only in YOUR own mind is my 40-70% sales tax sticker sticker shock is inaccurate. It’s 40-70% which will shock most buyers.

            I see you have a crystal ball – which stocks should I buy? I think the poor have been hurt by this excessive welfare coddling. My simple 10% tax would entice everyone to work and rise through the economic ranks.

            You are telling us that this FT disaster (which) advertises itself as a stable source of funding for SS/Medi) is a smart move so that someday in the future this MIGHT lead to privatization of SS/Medi is, IMHO, way way out there in fantasyland – far too much of an unfounded dream for me to make a decision to enact this FT welfare expansion and financial scam.

            You still don’t get it. Bottom Line: the poor RECEIVE a BIG FT check (& pay zero for SS/Medi) while the rest of us are NET FT PAYERS.
            Bottom Line: WE give the POOR more money = wealth redistributuon.

            When Congress enacts the NEW income Tax to supplement the FT, the govt will drive over you while you hold your banner.

            I have no idea where you got you mis-impresssion of my attitude. I want to simplefy tax filing and make tax paying less unfair, while getting everyone with income to pay something into the Treasury.

            BTW, the FT will result in MORE govt. There will be MORE auditors even under the FT and yet more when Congress enacts the NEW income tax.

            At the end of the day, you are happy too pay more welfare and try to rationalize doing so. IMHO, this is thinly disguised Cloward-Piven march towards ever more welfare until the system collapses. No Sale, Comrade.

          • thisistheguy

            I can no longer attempt to reason with you. You have little to no understanding of economics, very little common sense, and an ignorance of stances that oppose what you are set out to accomplish. You skirt my points by thrusting your opinions of a double FT and income tax, thinking people will be shocked that they still have to pay S/L taxes, and logic that only taxing people when they work is an incentive people to work.

            IMHO you should take an economics course or two and get back to square one with your tax plan, because taking a portion of what people earn when they work before they can even choose how to spend it does not sound like an incentive to get off of welfare to me.

          • Yankee

            Would yoi please explain what are your professional credentials that are RELEVANT to this subject?

            While I am not a trained economist (economists can predict NOTHING), I do have a BBA (and was a CPA) JD, LLM (in taxation) an practiced taxation including designing tax & financil structures. I have a decent economics understanding and my principal colleage is a trained economist. I have not asked him what he thought of your economic reasoning, but I suspect that he would find it to be bizarre .

            Your thoughts are alaso jumbed and confused. E.G., I explained my very realistic scenrio of winding up wth BOTH the FT and a NEW Income Tax IN RESPONSE to you – what do yu meanthat I skirt your points. Tell me which point I “skirted” and I will address ir directly.

            E.G. you say I thnk people wil be shocked that they still have to pay S/l sales taxes. I nevr said that – you distorted what I wrote. What I said was taht people will be shockd when they see that they are paying 40-70% sales taxes (it is irrelevant that say 10% of that is S/L salea tax tthat they were paying before).

            E.G. You twist what i say. I say that giving people more welfare is a DIS-incentive to work, We must re-introduce a work requirement to get welfare. Having to pay a 10% tax is a burden, but that [lus the obligation to work will spark people to working harder and getting ahead – NOT JUST GIVING THEM MORE WELFARE.

            If people know that they must work to get welfare (and phase down welfare – make it temporaray) AND that they must pay 10% tax (and no higher rate no matter how much they earn), they will be incentivized to work harder and advance.

            I suggest that you need some real life training.

          • Yankee

            Part 2 – The economy (I will get back to this later tonight or tomorrow)

          • Yankee

            Part 3 – your part 3 (I will get back to this later tonight or tomorrow)

          • Yankee

            Part 3 40%-70% sales tax Sticker shock

            Yes, people are paying 5-10% NOT 35%-70%!

            I don’t understand your next sentence and thought I addresses that subject. it is not 170% more. It will be almost 40-70% more (less some minor price reduction which they will NOT see – people do not know the price of every item and prices are not the same at every retailer today). My point is that, at the margin, people will see 40-70% SALES TAXES and will revolt , destroying our retail-sales-sensitive economy.

            You say my “estimations” are exaggerated. 30% Ft and 10% S/L are not exaggerated. the 30% ILLUSTRATIVE evasion rate is not an exaggeration by merely an ILLUSTRATIVE rate, just like one of the rate used by TREASURY to ILLIUSTRATE.

            You say, “Your assumptions rely on strong corporate greed (they are
            greedy AND buyers will be outraged at those high sales taxes) and
            ignore economic competition.” (exactly what do you mean by that? There will be IMHO only small price reduction because there is only a small POTENTIAL pric reduction – see below.

            You say “10% reduction in retail prices”. Where do you get your figures from. I use AFFT’s own Dale Jorgenson who said 7% MAXIMUM price reduction. About half of that is the employer share of SS/Medi which some economists beleive would fund employee raise and thus would NT be available for price reduction. I would use 1/2 of the
            7% as a sample price reduction.

            You go on to say, “.. with a 25% fair tax (I adjusted for a small amount of evasion)” – The FT add-on rate is 30% NOT the 25% that you used.

            You continue… ” is a net of 115% price increase (state and local stay the same because they are already there).” Using my figures that’s a 125% net price increase. AGAIN, this pint is NOT the net increase but the sticker shock combines sales tax rate of 40% – that might well go up to 70% (or higher) to make up for evasion/avoidance- people will NIT be calmed by the fact that their take home pay is higher.

          • Yankee

            Part 4 Hidden taxes

            I fail to see how you can say that you do not think would be significant.

            A simple calculation shows that the FT’s 30% INITIAL rate would need to be 42+% to account for the FT that must be paid by the fed + S/L on their purchases as required by the FT.

            Secondly, while I have not run calculations, I think that a 25% COLA for SS and all federal pensions is a very big number.

            Thirdly, While I have not attempted to run calculations, frauduent SS benefits “Invited” by FT’s elimination of the tax “penalty” for reporting SS Wages.

            You merely dismiss these substantial items with an offhand opinion, nit with any sustantive counter-arguments.

          • thisistheguy

            I think my substantive counter argument is made clear by the fact that I strongly feel that Social Security Benefits and Medicare need to be removed after the implementation of the FT. I have made very clear my remarks that my support of this FT idea has those two things as direct results after..

          • Yankee

            Sorry, but you are still not clear to me.

            Are you saying that after the FT is enacted, that the fed govt will stop paying out SS & Medicare benefits? and as a resut if the FT?

            If this is what you are saying, please exlain this further – explain your support and basis for making this statement..

            Talk about something that is NOT in the FT statute, I see NOTHING in the FT statute, nor in any FT propaganda that has ever sugested that the FT will result in th fed govt stoppong SS & Medicare benefit payments.

          • thisistheguy

            Your reading comprehension skills must be very poor. I have stated in almost all of my replies about how my support of the FT is that it should be followed by the repealing of SS and medicare (Yes, there would be dissent, which I would propose such a thing as grandfathering in those who have paid into the systems). Once the FT is present, these benefits are disproportionately administered, as you have so valiantly argued. With an imbalance of how much each person is paying in, there is no fair way to distribute programs like these. As I said earlier, I’m a free market guy, I believe that people should be in charge of their long-term benefits, not the government. You are correct in that I formulated this opinion on my own, not by the Fairtax people, but I see it as a logical result were the FT to be passed.

          • Yankee

            Over many years of explaining very complex tax & financial matters to a sohpisticated audience, I have come to the realization that if your audience does not understand clearly what you said, that it is my own fault for not be sufficiently clear or explaining it the way the audience needs to hear it to understand. So, maybe your communication skills are nowhere near as good as you think they are and you need to be clearer.

            Now, if you base your support of the FT on the immediately following repeal of SS/Medi benefits you are truly in fantasy land – you are gullible beyond belief. That repeal is not even suggested by the AFFT?

            I hope you are least saying the complement of that – specifically, if the repeal of SS/medi benefits is NOT part of the FT, then you should be AGAINST the FT.

            IN FACT, the FT is touted by AFFT as the way to provide more stable funding for SS/Medi benefeits So pray tell, what in the world makes you think that SS/Medi benefits will be repealed?

            I am struggling to understand how you can believe that the FT will end SS/medi benefits.

            Apparently we both agree that these 2 programs should be 100% privatized. That’s a good start.

          • thisistheguy

            The reason I use the FairTax as a stepping stone to removing these programs is it brings to light how imbalanced the ratio of paid in to paid out would vary from person to person. Under the current system there is the appearance that you get out what you pay in and you earn it. Which is why it is taking so long to get repealed (even though the program would be far more efficient in a private market). Under the FT there would be no fair way to accomplish the sense of “everyone getting their fair share” and would transition quicker to the private sector.

            I am not arguing and would never argue for the FairTax to be the end game or cure all. I believe it would be a stepping stone. The overspending issues and inefficient programs become visible, and the repeal of them will be at the forefront of economic issues after passage.

          • Yankee

            While we share a common view that Medi (especially) and SS BTH involve wealth redistribution whis is simly WRONG, we apparrently have fery different ways of fixing that problem I do NIT at all see the FT as a way to do that – as I said, the FT advertises that is secures mor stable funding for SS/Medi and seeks to EXPAND benefits to no-workers.
            IMHO, the FT is a Progresive-Socialist move to give away more welfare AND it would be a financial disaster.

            If you want to privatize SS/Medi then do so directly. I would start by pushing for repeal of means-testing Medii premoums, raisng everyone’s premiums and push for full privatization over time.

            IMHO, the FT is way too destructive a step and would NOT provide a stepping stone towards our goals. The FT would accomlish very negative things in the short term, with only their vague promises of distant fantastic benefits.

          • Yankee

            Part 5 “Annual FT Summary”

            First, the FT bill states that YOU the biyer is liable to pay FT (and keep receipts).

            You challenge the necessity of doing so. I considered, as a lifetime tax professional, what I would do if I were appointed the new “IRS” (STAA) Commissioner with the task of collecting FT and limiting evasion.

            From that professional perspective, I would work hard to require an Annual FT Summary because it is absolutey necessary TO HOLD DOWN (NOT ELIMINATE) FT EVASION.

            BTW, you can’t just fire federal employees. They will audit Obamacare, SS Wages reports which will have a lot of fraud, and I say that will be used to audit consumers.

            You did not read in Obamacare that your insurance comany had to raise your premiums and that your doctor would no longer accept Medicare, but those are the real world effects of the bill. I (a retired
            tax professional) am trying to give you the real world effects of the FT.

            This idea was not “fabricated’ by me. I simply thought through what has to happen, using a lifetie of professional judgment.

            It does not matter if I am the only one who is telling you this, it matters ONLY if my judgment is correct (you must evauate the risk that I am right).

            BTW, that same judgent tells me that Congress will repeal the FT’s laughable Sunset Clause and then enact a NEW Income Tax. If you don’t see that coming, you WILL be blindsided.

          • thisistheguy

            your part 5

            “This idea was not “fabricated’ by me. I simply thought through what has to happen, using a lifetie of professional judgment. ”

            Please re-read that and tell me if you came up with the idea from your opinions or if it was a part of the legislature (I’ll save you the time, you made it up)

            And you talk about “mass rebellion” all the time, see if congress imposes both an income tax and consumption tax, then we’ll talk rebellion.

          • Yankee

            First, did you read the FT Sec. 101(d) that makes teh buyer liable for the FT (just like any S/L USE tax) and also require the buyer to get/have a receipt? That is IN the Statute NOT my imagination.

            The next 2 points that you will likley be audited AND you may well have to file an Annual FT Summary are my thoughts after a lifetime of professional tax practice. They have to happen if the FT revenue is to be protected from FT evasion. (Think about a medical insurance rofessional telling you that you would lose your MD or or policy upon his reading of the ACA – after all those 2 things were NOT IN THE STATUTE. A professional is in the best position to advise on the provbale practical outcomes from legislation – (I know you don’t want to hear this)

            I would bet most heavily on winding up with BOTH the FT and a NEW Income Tax. FYI, that is exactly what Congress is trying to right now (add a consumption tax to today’s income tax).-Remeber Herman Cain’s 9-9-9.

          • Yankee

            Part 6 New Homes

            I have previusly noted that AFF-Paid harvard prof. Jorgen said prices come down by 7% MAXIMUM (AFFT’s Chief Ecinomist karen Walby Claims 12.5%, but I say gher figures are bogus).

            So where do you get YOUR big price decreases from?

            Apparently, you did not understand the point t I was making.

            First, the prices of new homes will UP by 40-70% (even if the 1st come down by 3-4%). Thus new homes will cost 36-66% HIGHER.

            Next, lenders will NOT lend on the FT because of sevarl tax risks that I was able to come up with that the bank will not accept because it woud cause the mortgage to be under water- let me know if you will consider the details).

            Thus, instead of a down payment of 20% of $140 or $28, the down payment required would be $60. AND the buyer has to take the tax risks that the lender reused to take.

            Other than mere verbiage, please shiw us some numbers to prove that there will be overwhelming price reductions – remember AFFT’s economists are saying a MAXIMUM price rediction of 7% or an overstated 12.5%

          • Yankee

            Part 7 Your Closing

            I do not understand what you are asking. You say ” I ask you, if you saw it as I do, a starting point that would lead to the repealing of SS and medicare would you support it?” FT repeal the existing SS/Medi taxes – are you saying repeal SS/Medi PROGRAMS????

            Yes, I operate on the NUMBERS, not on my emotions.

            I would have hoped that by now you would see that my numbers are NOT exaggerated at all, bt are realistic.

            I do not understand how anyone (who is not a Progressive-Socialist) can condone expanding welfare, impose a 40-70% sales tax, have several hidden taxes, destroy the new home market, out the IRS on steroids, and saddle us with BOTH a Ft AND a NEW Income Tax. Perhaps after you read my replies you will begin to understand.

          • Yankee

            The Fair Tax increases welfare

            The Fair Tax’s prebate is a WELFARE check that leaves many dependent upon the government for a large portion of their monthly income – a very bad idea. The poor would even more obviously be dependant on the good graces of the fed govt.This welfare check would likely be used by the govt to increase welfare in the future.

            The prebate is explained as being needed to ensure that the poor pay no FT, merely assuming that we all agree with that goal. Further analysis exposes that the prebate goes much further – it gives the poor a large FT PROFIT.

            The prebate gives every family a monthly check purportedly to cover the FT they would pay on “poverty level purchases” as defined by the US HHS Dept.’s Poverty Guidelines and makes “adjustments” to them. The prebate next “assumes” that EVERY family of each size spend a certain amount of dollars (For 2014; $11,670/adult, $4,060/child) which is then multiplied by 23% (the tax-INCLUSIVE rate) to yield the prebate that will reimburse all the of the FT ($2,684/adult, $934/child) that is THEORETICALLY paid.

            To illustrate, assume there is a family of 5; Husband, Wife, 2 kids, and the Wife’s Sister lives with them. They would be “assumed” to spend a total of $43,130 ($11,670 x 3, plus $4,060 x 2). Their 2014 prebate would be $9,920 ($43,130 x 23%, the “tax-inclusive” FT rate). The $9,920 prebate is calculated to pay back 100% of the FT THEORETICALLY paid by the family, but as shown below it greatly OVERPAYS the amount of FT ACTUALLY paid by the family.

            Point 1. The FT corrects for the “Marriage Penalty.” The problem is that there IS NO “Marriage Penalty” in the underlying HHS Guidelines – they were developed as impervious to the age (or the marital status) of the person. They provide $11,670 in spending for the 1st PERSON in the household and $4,060 for the 2nd PERSON (the 1st PERSON gets more to pay the rent) – it does not matter whether the person is an adult or a child or whether the adults are married or not. What the prebate does is “make believe” that the HHS Guidelines say “Adult” & “Child” and then is more generous to marrieds – the prebate is generous in giving away more money, YOURS.

            RESULT: The prebate assumes this family spends $7,610 MORE and overpays them by $1,750.

            Point 2. The prebate’s more generously defines “family”. FT’s more-limited (than the HHS guidelines’) definition of “Family” allows for more FT “families” in a single physical household than the underlying HHS Guidelines would allow. A FT “family” includes only lineal ancestors/descendants (plus adopted). Thus, the Wife’s Sister would be treated as a separate family under FT, and thus as an adult (this would NOT occur if the HHS Guidelines were followed).

            RESULT: The prebate assumes this family pays $7,610 MORE and overpays them by $1,750.

            Point 3. The prebate “assumes” that ALL spend AT the poverty limit. If the family ACTUALLY spends LESS than the maximum amount a family can spend and still be at the HHS Guidelines’ limit, they will be overpaid. This family is “assumed” to spend $43,130.

            RESULT: If they ACTUALLY spend $3,000 less than the limit, the prebate will OVERPAY them by $690

            RESULT: For Points 1-3, The prebate assumes $18,220 MORE spending and overpays by $4,190.

            Point 4. The prebate OVERPAYS for USED goods. If the family buys some goods USED (and can prove the seller paid FT) they will not have to pay FT. Yet the prebate “makes believe” that they DID pay FT.

            RESULT: If the family bought $5,000 of USED goods, the prebate would overpay them by $1,150

            Point 5. The prebate OVERPAYS for black market purchases.

            If the family buys some goods on the black market, they will pay no FT. The FT “makes believe” that all of the money is spent legally so that full FT is paid.

            RESULT: If the family spends $5,000 in the black market, the prebate overpays them by $1,150.

            Point 6. The prebate OVERPAYS for In-Kind welfare

            If the family is on welfare, a substantial portion of their support will be paid IN-KIND (e.g., Medicaid, Housing Assistance). The poor will NOT receive cash for these items and pay FT – WE DO. Thus, the FT “makes believe” that the poor actually paid the FT and repays THEM for FT WE paid.

            RESULT: If in-kind welfare is $6,000, the prebate overpays by $1,380.

            RESULT: For Points 4-6, prebate assumes FT paid on $16,000 of purchases and overpays $3,680.

            RESULT: For Points 1-3, prebate assumes $18,220 MORE spending and overpays by $4,190.

            RESULT: Grand Total overpaid prebate; Points 1-6 = $7,870 (i.e. $9,920 minus $2,050, total actual amount of FT paid on actual spending on which FT is paid ($8,910). PLUS, the poor get free SS/Medicare.

          • Yankee

            This is the 3rd part of my reply – please let me know if I have failed to address any of your comments.

            As I noted, you did not discuss ANY of the FINANCIAL or practical problems I see with the FT, including;

            1) the sticker shock 40-70% sales tax that will spark a revolt that would destroy our retail-sales-sensitive economy,

            2) several hidden taxes for Fed + S/L taxes to pay the FT they must pay, AND more fed taxes to pay for SS & all fed pension COLA’s caused by FT AND for fraudulent SS benefits invited by FT’s elimination of the tax “penalty” for reporting higher SS Wages.

            3) Big incrase in new hime prics AND in required down payments (because lenders will require any sales tax to be baid in full buy the buyer).

            4) a more invasive new IRS (STAA) which will likely audit consumers AND request cnsumers to file a “Annual Ft Summary”.

            5) the ineveitable repeal of the FT’s laughable Sunset Clause and the enactment of a NEW Income Tax so that we are saddled with BOTH.

  • Yankee

    The “Fair Tax” is a Fraud – we need a 10% “Tithe” Tax!

    I am a retired lifetime tax consulting professional (JD, LLM in Taxation, CPA, co-author of a 3 volume tax treatise, lecturer), with no financial stake in ANY tax system. This only a brief summary – for supporting details of all comments, call Stephen C. Eldridge tel. 423-532-7337.

    The so-called “Fair Tax” (“FT”) is a fraud – it is MORE WEALTH REDISTRIBUTION, AND a financial SCAM.

    In their own words, FT proudly advertises that it is MORE PROGRESSIVE (yes, it INCREASES WELFARE).

    Of prime importance, the Prebate is NOT a real refund of FT paid as it appears to be. It is a new $600B ENTITLEMENT, which would have ALL Americans receiving a substantial
    monthly check from the federal govt – a very bad idea for those of us who are not Socialists. We simply cannot afford yet another huge entitlement that will only be increased in the future.

    The FT and the Prebate would leave the working poor making no contribution at all to funding the federal budget and paying nothing even for their personal SS/Medi benefits. The FT and the Prebate FT then extend tax welfare to the non-working poor –and also take the next Progressive Cloward-Piven step towards giving SS/Medi to all regardless of work, by removing the tax “penalty” for reporting SS Wages, thereby “inviting” the fraudulent reporting of SS Wages.

    The Prebate is apparently calculated to merely repay the poor for any FT they pay, but actually would pay them far MORE than any FT they might pay (by “assuming” the poor spend MORE than the underlying HHS Poverty Guidelines and also by “assuming” they will pay FT on ALL of their purchases, but they WON’T) – and FT also provides free SS/Medi to the working (and some non-working) poor.

    The FT produces a 40-70% in-your-face retail sales tax that would spark a taxpayer rebellion that would destroy our retail-sales-sensitive economy. 40% = 30% (not 23%) FT + e.g., 10% S/L sales tax and 70% is the rate needed at a sample 30% FT evasion rate (the FT incredibly assumes ZERO evasion and ZERO intentional reduction in spending and ZERO migration from new to used goods).

    IN ADDITION to that 40-70% tax, the FT contains several HIDDEN TAXES. 1) FT’s 30% rate is really 42+%; the 12+% is hidden by having fed + S/L govts paying FT – ultimately, they
    must get that money from you. 2) The initial 30% rate is 1-5% short and that plus any other revenue shortfall will have to be made up by raising more FT (or a NEW Income Tax), 3) The fed budget will rise for a) higher SS benefits and higher COLA’s payable to all federal retirees, both induced by FT’s price increase of nearly 30%, and for b) fraudulent new SS benefits invited by FT’s removal of the “tax penalty” for reporting SS Wages, – more FT (or a NEW
    Income Tax) we be required to fund these.

    The NEW IRS (i.e., the STAA) may well be far worse, far more invasive than today’s IRS (the buyer is liable to pay FT and get/show a receipt – The STAA may audit consumers) – also we may well have to file an “Annual FT Summary”.

    We may well wind up with BOTH a NEW Income Tax AND the FT, when Congress repeals the FT’s Sunset Clause and enact a NEW Income Tax .

    Seniors will start to pay for SS/Medi again and some will pay a 2nd-3rd tax on their earnings.
    Many middle class seniors will pay more FT than they would have paid in Income Tax and many will lose purchasing power because of 1) the nearly 30% price increases and 2) the higher S/L & federal taxes required because they must pay FT and can only get the funds from us, and 3) higher federal taxes due to higher SS & pension COLA’s and fraudulent SS benefits.

    The FT promises grand economic benefits which are all UNPREDICTABLE – mere Hype & Change.

    What we need is a Flat Income Tax with No Deductions, No Exemptions, No Credits and a 10% rate, with business income taxed to shareholders on a very simple basis (i.e., no corporate income tax) – See H.R.1040, but with changes as noted here (IRS is neutered, 1 page tax filing,
    everyone pays – more evolutionary). Call your representatives in Congress and
    let them know that this is what you want.

  • Yankee

    Response to Mr. Cotto;

    So, we should love the FarTax “FT” because Gary Johnson likes it – sorry, I amake u my own mind.

    So Dan M. deilvered a load of misleading FT propaganda – not persuasive. They pound on the great diffuculties with today’s system – while we all agree, that does NOT make the FT an automatic good replacement – the FT must stand on its own merits – it cannot.

    What are these people telling us? That after 20 years the FT has only 73 Consponsors in the House (actually 72 – 1 just resigned after drug difficuties). That is pathetic “apparent” support for a 20 year proposal. AND while the author tells us that others have said they would vote for it, some Co-Sponsors have told me they woud NOT vote for it – some signed on just to quiet the “passionate” advocates FT and some did so just to obtain favors.

    Please see my outline below.

    • Ken Smith

      I heard that some Internet tax preparation companies have spent over $1 million in lobbying expenses to keep the Fair Tax “under the table,” and very likely have influenced many members of Congress to not co-sponsor with a “little” political cronyism. Yankee, you wouldn’t be one of those who are on the take, would you? The majority of Fair Tax supporters who I know are loyal patriots, who completely volunteer their time, energy, and treasure, not “comrades” or “social progressives” as you suggest with your demeaning and inflammatory language. I believe that if it were a “socially progressive” tax reform measure there would be many more Democrats as co-sponsors in both the House and the Senate.

      • Yankee

        Ken,

        Do you simply not know how to rread or are you in a FT Kool-Aid trance?
        My very Flat Income Tax gets rid of tax preparers – everone can file their own 1 page simle tax return.

        The FT PROUDLY advertises how “progressive” it is and how it punishes the rich and takes care of the poor (deceptively) – d oesn’t that sound like Socialist class warfare to you?. The Bolsheviks were all volunteers, too.

  • markdouglas

    Fairtax is more of a psychological test for suckers, than a tax plan.

    First, there is no tax plan in Fairtax — there is no research. Despite claims of 22 millions dollars of “research” — they have not ever shown one page of it. I have offered 50,000 dollars for years now — just show one page of that 22 million dollars of research into a simple personal retail sales tax to replace all other fed taxes.

    There is no such research — not a page, not a post it note, nothing. What they do have are several hundred pages of double talk nonsense, that have massive other taxes, over 2 trillion dollars of other taxes, as “assumptions”. Like the massive taxes on city county and states for their wage pension and capital investment expenditures.

    When will Fairtax suckers read the fine print? And how on earth are massive taxes on wage pension and capital investments the same thing as “simple retail sales tax”

    Try to grasp this, Fairtax suckers, the fine print matters.

    Don’t give me this nonsense about “Well the income tax is screwed up too” Yes, it is, we need a new tax code. We do NOT need total bs from hustlers who try to pass of utter nonsense as a tax plan. We will never get a new tax code as long as poeple are so stupid, so guillible, to these hustlers. Whoever put up the money to make this hustler, and sell this hustle, clearly wants our present tax code to continue. This “Fairtax” is not going anywhere, because it’s goofy. They may as well tell you to tax all baby farts 10 million each, in the fine print, and then claim its a simple person retail sales tax.

    Once more — yes, they DO have a retail sales tax, for a small part of it. But the biggest part of Fairtax are these massive taxes, far far larger than the retail sales tax, on city county an states, that they do not tell suckers about. All city county and state taxes would have to skyrocket — do you get that, or not?

    Read the fine print, quit being fooled by BS

    • Ken Smith

      Mark, it’s clear to me that you are on the same page as Yankee. Do you belong to the same club? Please read my response to Yankee’s comments above since they basically apply to your comments as well. And, no, I’m not a “sucker.” And how about using more adult, professional language as you attempt to make your points in this debate.

  • jimd

    Ahh – the “I’ve offered $50,000” guy shows up. You owe a lot of people $50,000 and have never paid a dime. Take what “markdouglas” says with a whole bottle of salt.

    • Yankee

      Jimd

      Is all you have to offer “don’t listen to this guy”.

      I also ask the same questuon that he does – where is this $22MM in “research” ? I have never seen any such “research” paper issued. (BTW, the AFFT used to say “$22MM in research AND MARKETING” and later simply dropped “AND MARKETING”.

      Who cares how much money they spent in economic “research” – it can predict NOTHING.

  • Amerigo M. Cimino

    Is the fair tax a realistic replacement for the income tax?
    You can bet on it!

    • Yankee

      Gambling is a sin.

  • Amerigo M. Cimino

    Is the fair tax a realistic replacement for the income tax?

    P. S. Just THINK; who will be left out!

    • Yankee

      The American economy.

  • Amerigo M. Cimino

    Is the fair tax a realistic replacement for the income tax?

    THE FAIR TAX IS A PANACEA!

    • Yankee

      But, will it grow hair?

  • jimd

    Yes Amerigo – it is a VERY realistic replacement. The bill has 73 co-sponsors in the House and 8 in the Senate.

    • Yankee

      Jimd,

      Only 72 – 1 resigned after a drug problem. After 15-20 year they have only 72 (a Flat IT, HR 1040 has 10 Co-sponsors – including 6 FT Co-Sponsors – after only a few months).

      Many of those 72 would never really vote for it – they have signed on merely to quiet the FT screamers – one said he signed on just to earn a favor.

  • lolitsalex

    Of course it’s realistic, income tax = theft.

    • Yankee

      Why isn’t a 30% sales tax (+ several other big HIDDEN TAXES) just the same THEFT?

      • lolitsalex

        its 23% sales tax no hidden jokes….

        • Yankee

          I don’t know how YOU calculate sales taxes, but most of us say that a $30 tax on top of $100 pre-tax price (Toal $130) is a 30% SALES TAX – it may be comparable to 23% INCOME TAX, but iit is still a 30% SALES TAX.

          I made no jokes. There is an extra 12+% Hidden Tax in that the fed + S/L gvts must pay FT and can only get the funds to pay it from us in higher taxes of one sort or another.

          Also, the fed budget goes up for SS & all fed pension COLA’s caused by FT’s increase in retail prices AND for fraudulent SSbenefits “invited” by FT’s remova; of the tax “penalty” for over-reporting SS Wages. I don’t consider these to be jokes.

  • Charlie

    The Fair Tax would create a de facto federal tax penalty for having children. The prebate is indexed to the poverty level. Therefore, should I wish to provide my child with a middle-class standard of living I must increase consumption thereby increasing the total tax my family pays to the federal government. Everything I do to provide for a child would increase my tax liability. Having more children would increase my tax bill dramatically. There’s little hope that I could win a large enough raise to offset the proposed consumption tax rate that would apply to the costs of raising children .This would mean that having more children equals bad financial planning. The Fair Tax penalizes child rearing.