Arkansas Blog

I exhort readers to look at the Drum article. In it, two commenters provide a good look at the two sides of the issue. Ian gives a lengthy list of wonders the Fair Tax will accomplish; however, cmdicely counters point by point each of them and shows their flaws or fallacies.

The Faux Tax is a mirage. Don't be fooled by it.

Ending the deductability of home mortgage interest at a time of declining home prices would exacerbate the deflation of this asset class. Talking about really bad timing here. Didn't Huckabee say that timing was the reason he didn't support the elimination of the sales tax on food in Arkansas? Just on general principle, I don't trust any politician who tells me what's fair or what I deserve.

The idea of ending the terror of April 15th is very appealing. I have never been good at saving money toward one special day....be it tax day or Christmas. Of course it would make daily living more expensive, but not dreading April for the rest of time would sure improve the quality of life.

I've paid no attention to this Fair Tax business, so I'm not saying it's great and we need to adopt it....I'm only saying it's a bitch to face April 15th every year knowing it's going to be murder.

We've got to do SOMETHING to fix our tax system. A flat sales tax isn't it, but I applaud anyone who puts new ideas on the table.

I don't agree with the mortgage deduction because the more house you buy - the richer you are - the bigger the deduction and the less the taxes. I never understood why the government was subsidizing the Realtor (TM) business.

When Americans realize that the Fair tax means they must cough up an additional $46,000 for that new
$200K home Huckabuck will sink like lead in water.
I can imagine what realtors and mortgage companies must think about the scheme .

And regarding the myth that his Fair Tax will eliminate the IRS, who's gonna be checking all those
hundreds of thousands of new roadside businesses? Jewelry stores from the back of a van would
blossum.
.

The Fair Tax purports to eliminate the "hidden" taxes and costs of doing business in the USA that would make the USA more competitive in world markets, but several of the largest "hidden" taxes would be untouched--- those on consumer products like tobacco, alcoholic beverages, etc. etc.,and would impose yet another 23% "Fair Tax" on top of these already heavily taxed products.
Doesn't sound very fair to me!

Great articles - I've clipped and saved them. It was interesting that the "Church" of Scientology has been an advocate of the flat sales tax since at least the 1980's in the hopes of getting rid of IRS scrutiny. Of course, the "fair tax" people disavow any official connection with that bunch.

It makes me wonder though. They may not realize that they may not want what they wish for. If there are not going to be any exemptions, what happens to the tax-free status of churches and their "non-profit" businesses? I guess it depends on the wording of the Constitutional amendment that would have to supersede the 16th Amendment. I can see decades of Supreme Court cases revisiting 1st Amendment issues, trying to decide if taxing purchases of a hot tub, stretch limo, or yacht by a church was an impermissible intrusion on religion.

The biggest problem with the FairTax is explaining it. We have been strapped with an income tax for so long we can't possibly imagine its complete removal. Whenever there is a tax change proposal, the knee jerk reaction is "how much more will I pay" and "do we get the rich to pay more. Rarely do we think of the long term advantages.
The income tax equation is income- taxes-compliance dollars = spending
The Fair Tax equation is income = spending + taxes+ compliance dollars,.... so here we are taxed as we spend on new items only and keep the compliance costs.
Rarely do we think of positive change and long term benefits of job growth or lower service cost of capital.
The mortgage deduction argument is silly. What would you deduct from under the FairTax? And 23 cents on top of everything you buy? Again silly. You forgot to account for before tax dollars vs. after tax dollars. Take off the static analysis blinders and look at the dynamic big picture. I shun any candidate that not for the FairTax.
Ashford Schwall

If it is now "illegal" to send (unintended) erroneous facts via e-mail, then imagine how many e-mails you may have sent that states the wrong location, number or has a date here or there mistaken, or states 'Be careful or Be on the Look Out!' like the one I received about a recent purse nabbing ---they are all crimes. And if this is the case then surely Bush, his administration, and most of congress have all created numerous violations and these violations should added to their additional criminal acts (i.e. felonies to address congress and testify false information) thus they should be impeached /jailed.

If we are to "check the facts," and take the time to "fully" certify every fact before any e-mail is sent, then the amount of time needed to perform such tasks and not to mention the personnel you need hire to do this fact checking, and of course the insurance liability one would have to carry, as well as attorneys' fees would make the cost enormous.

In fact, it could be so expensive that e-mail would be restricted to only those who could afford it. Then one could regulate and control the internet. Thus the internet would no longer be the great democratic instrument it is. Now, this could be 'The Plan'?

Let's face it, the Rivermarket and those who reap its monetary benefits, friends/ partners of Stodola, e.g. Real estate developers, JM- Have been hurt by this e-mail. People have long been dubious of the safety in parking areas around the Rivermarket. Sure you would see police down the street but rarely did anyone see them in the dark blocks one has to park. In fact, I know an enormous number of women, who go out in the river district and will drive until they find a location right on the Clinton avenue itself, just to avoid the darken and eerie under-bridge areas.

In Stodola's press release, he states these crimes occurred this month. What he failed to mention is that these crimes occurred in the past two consecutive weeks. That's a carjacking per week. Or that 1 person was shot and left for dead. One would think that is "Attempted Murder," which is also omitted. The media can only work on what the police releases and the public notifies.

Stodola's press release statement "It's against the law," to forward such an e-mail sounds just like Stodola. A threat- if you speak up and out, let people know at what's going on.... even with 2/3rd accuracy, which is greater than some city officials, you will be punished. It's simply a threat and he is just a bully.

Those of us who have had direct dealings with Stodola in the past can easily see that he is the same guy, a bully. Stodola is quick to deal with things only when they blow up and even more likely to threaten others with a false legality issues.

'Let's address the incidents, install some solutions and punish the person who alerts his/her neighbor.' This way we can avoid the scrutiny of incidents, redirect the focus and continue with the 'mayor's full time job' and fleecing of Little Rock's Money.

And since when has any one seen such rapid response from any bureaucracy? "We're adding lights for determent" has occurred so quickly. It is less likely that lights would have been installed at this break-neck speed if not for the e-mail expressing both concern and civic obligation was sent and hundreds of people forward-ed it. Hurray for conscientious citizens and the 1st amendment.

You were right about one thing, Ashford: you can't explain the Fair Tax. Fortunately, those who have taken a long and hard look at it, can and do explain the fallacies that go with it. One such agency is the Mises Institute. Ever hear of them? There one of the country's leading conservative economic think tanks. They are fiscally ultra-conservative, very anti-big spending, and definitely are against big government. Yet, they find the Fair Tax to be a phony deal.

The Fair Taxers are just a modern version of Popeye's friend Wimpy promising you anything for tomorrow as long as he can borrow something for today.

BTW, that 23% number is an outright lie. The actual tax amount is 30% and they even say so in their book. Any item costing $1 will have $0.30 added to it. Where do they come up with this 23% hokum? Flimflam math actually....it just so happens that $0.30 is 23% of $1.30. Now if they have to trick you on something that simple, just imagine how bamboozled you're gonna get on the rest of their fictions.

It is a Faux Tax and don't be fooled by these snake oil salesmen promoting it!!

See what I mean? They just don't get it, and can't get past it. The blinders ignore that the FT will add over 12 million new taxpayers, illegal aliens and the underground economy. They ignore the $11 trillion of off shore accounts that will have no more reason to be off shore. They ignore the huge number of corporations moving to the US. They just can't get past 23 and 30.
Ok, one more time on the 23% vs. 30%. Pay attention.
A $1.00 item today will be $.77 + $.30 tax = a $1.00 total item under the Fair Tax. ( .77 x 1.30 = 1.00)
So, for those who can't do math, let's just say 23 cents on the dollar goes to the Gov't either way
When income tax rates are quoted, economists call that a tax-inclusive quote: "I paid 23 percent last year." For every $100 earned, $23 went to Uncle Sam. Or, "I had to make $130 to have $100 to spend." That's a 23-percent tax-inclusive rate.
We choose to compare the FairTax to income taxes, quoting the rate the same way, because the FairTax replaces such taxes. That rate is 23 percent.
Sales taxes, on the other hand, are generally quoted tax-exclusive: "I bought a $77 shirt and had to pay that same $23 in sales tax." This is a 30-percent sales tax. Or, "I spent a dollar, 77¢ for the product and 23¢ in tax." This rate, when programmed into a point-of-purchase terminal, is 30 percent.
Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.
Spend that same $100 under a sales tax, you pay that same tax of $30, and the rate is quoted as 30 percent.
Perhaps the biggest difference between the two is under the income tax, controlling the amount of tax you pay is a complex nightmare. Under the FairTax, you may simply choose not to spend, or to spend less. And remember this is for new items only. Used items, school items are not taxed under the FT.
I smell another motive here. Remember, after truly understanding the FairTax,
The only people who hate it are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, and illegal aliens. Those who derive their livelihood from the unproductive income tax hate the FairTax.

Ashford Schwall

To my disappointment, this blogger has accepted the misstatements and misleading arguments of Mr. Bartlett and his ilk about the Fair Tax on face value and without further inquiry. Mr. Bartlett and they are no authority on the Fair Tax, and Bartlett demonstrated his ignorance with his recent piece in the Wall Street Journal.

The assertion that the Fair Tax would add 30% to the cost of goods and services today is a cannard. Missing from the analysis is the fact that we already pay that much, and more, in income taxes, payroll taxes, and the tax costs of goods and services that are embedded in their price. The Fair Tax removes these costs.

The Fair Tax does not exempt any items because it handles the regressivity problem through a prebate instead. The Fair Tax neither favors nor disfavors any group, good or service. It removes from the hands of politicians the ability to play favorites.

Steve Moore of the Wall Street Journal has likened the Fair Tax to putting the economy on steroids. He is right.

Those such as Bruce Bartlett, who think the current tax code merely needs tweaking, are beginning to write screed, like that we just saw in the Wall Street Journal, out of insecurity. They are finding it harder to defend the indefensible tax code. They are seeing that the Fair Tax is garnering attention from national media. Perhaps the silver lining is that the sensational bunk from the pens of such writers will call the public's attention to the Fair Tax. The hope is that some will take the trouble to look beyond the fiction and get the facts.

~Jim Bennett

Did you know?
That a middle class worker in the 25% income tax bracket [& paying 7.5% to social security] wishing to work overtime to cover a $100 retail purchase has to earn $148 to clear that $100 that he needs? [do the math 100/67.5%]

That's the equivalent of a 48% sales tax!!!!

Makes a 30% Fair Tax [with no Inc Tax or Soc Sec Tax withheld] look pretty good doesn't it?

Remember:
$148 Under current system
$130 Under the Fair Tax

This article is so inaccurate and full of baseless attacks it defies reason. Why would someone with Mr. Bartlett's credentials stoop to such a level?

Anyway, the WSJ just published rebuttal letters at http://online.wsj.com/article/SB118835673922011955.html?mod=googlenews_wsj . They are reproduced below.

Be Fair to FairTax - Throw the Red Herrings Back in the Water
August 29, 2007; Page A13
It is apparently getting so difficult to defend the current income tax system that its guardians must use smear tactics to slow down its best replacement. Bruce Bartlett ("FairTax, Flawed Tax," editorial page, Aug. 25) is the latest status quo defender to use fiction to slander the FairTax plan.

The FairTax was developed many years ago, totally independently of any other proposal, group or movement. It is a product of more than $20 million of advanced economic research, as well as detailed conversations with citizens as to their preferences defining the best possible national tax system. Many groups and individuals have agitated to replace the deeply flawed income tax system, including, apparently, the Church of Scientology. As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in the founding, research or crafting of the legislation giving expression to the FairTax.

Mr. Bartlett is equally wrong about many other aspects of the FairTax. We are disappointed but hardly surprised by such distortions about it coming from the very economist who once opined that the income tax system just needed a little "tweaking."

Leo Linbeck
Chairman and CEO
Americans for Fair Taxation
Houston

My guess is that few readers made it with an open mind past Mr. Bartlett attributing the FairTax's origins to the Church of Scientology. That organization may have a similar proposal or a proposal with a similar name, but I know for certain that the mainstream FairTax proposal found at www.fairtax.org has no connection to it.

I know this because the two principal founders of the FairTax movement, Leo Linbeck and Bob McNair of Houston, are friends of mine who served on my board at the Dallas Fed. I was there as they began to develop their proposal in the mid-1990s. I watched them pitch their fledgling idea to their friends and business associates, and I watched them urge prominent economists to do independent research on their proposal. I even accompanied them to San Francisco to pitch it to Milton and Rose Friedman. (I still remember Rose's homemade cookies.)

We should give the FairTax a fair chance. In fact, I posted a blog with that title a few weeks ago. See www.bob-mcteer-blog.com. A fair chance means a thorough evaluation and discussion of its merits without the distraction of a red herring.

Bob McTeer
Distinguished Fellow
National Center for Policy Analysis
Former President of the Dallas Fed
Frisco, Texas

The FairTax would replace the federal corporate and individual income tax, payroll taxes and the estate and gift tax with a 23% national retail sales tax on all goods and services. Each household would be provided with a monthly prebate equal to the sales tax rate times the federal poverty level plus a small extra amount in the case of a married couple to prevent a marriage penalty.

The FairTax bill (H.R. 25) was developed by economists, business people and tax lawyers who understood that the current tax system is dysfunctional. Specifying the criteria by which successful reform should be evaluated, they engineered the tax around the notion that reform should minimize the adverse growth effects of the tax system, be neutral between debt and equity, consumption and savings, and among industries, should reduce compliance burdens that waste more than a quarter trillion dollars today, respect civil liberties instead of requiring Americans to reveal virtually every aspect of their lives to government, eliminate favoritism shown imports and remove the penalty on exports, enhance the competitiveness of the U.S. as a investment destination and a location for headquartering businesses, eliminate the bias against upward mobility, and increase transparency and comprehension of the tax system.

Mr. Bartlett questions economic claims that under the FairTax proposal the gross domestic product will rise 10.5%. In fact, Arduin, Laffer & Moore Econometrics estimates GDP gains up to 24.4% greater than under the current system by the 10th year. Michael Boskin, former chairman of the Council of Economic Advisers, estimates long-term gain to GDP from a consumption-based tax reform would be about 10%. Laurence Kotlikoff estimated a 7% to 14% increase in GDP. Many others find high single digit to low double digit gains. Lowering marginal rates and eliminating double and triple taxation of savings will increase the well-being of the American people by a trillion dollars per year and perhaps much more.

The FairTax would untax existing homes that represent three-quarters of all homes bought and sold. And by allowing mortgage interest payments to be paid with both pre-income and pre-payroll tax dollars, the tax is the equivalent of allowing mortgage interest to be deductible against payroll taxes today. Interest rates will drop by 25% for the same reason municipal bond rates are lower than taxable bond rates. Interest would not be taxable to the recipient. And of course there is the benefit of having the only developed economy in the world with a zero rate of tax on income.

Dan R. Mastromarco
David R. Burton
Alexandria, Va.

(Messrs. Mastromarco and Burton are principals in the Argus Group, a law and government relations firm.)

What the Faux Taxers ignore time and time again is the spending side of the problem regarding government. They also ignore the amount of paperwork, red tape, cheating, and other problems that come from what should be moer appropriately titled a "National Sales Tax."

One of their favorite arguments is that people who oppose them must be for the status quo and think the income tax system is the best. This is false. The argument is not that the income tax system is bad and that the Fair Tax system is better; no, the argument is that the income tax is bad but the Fair Tax system is a boondoggle that exacerbates the problems.

Click on my name and read a point by point analysis of the flaws of Faux Tax.

In addition, here is a brief note posted on another site by an opponent (and retiree) of the Faux Tax. He offers his thoughts. See what you think.

FIRST: The misleading label FAIR TAX couldn't be further from the truth, this is a National Sales Tax, and it is most certainly NOT FAIR.

SECOND: If there is a small business making 65% profit, let alone keeping 65% profit, please let me know I'd like to own a chunk of it.

THIRD: There should not be a problem for a company with an astute owner/manager to show it's employees how a reduction in gross pay of 5% (arbitrary value) would result in an increase in spendable income if the employees marginal tax rate was reduced by greater than the 5%. Most employees are not dumb, they know that their gross pay is not "theirs".

FOURTH: As I said above, although a company COULD show that an employees take home pay would increase, since a company wouldn't gain or loose by a shift in the WORKERS taxation method, there would be NO justification for a company to cut the gross pay unless the company exemption on goods for resale were eliminated.

FIFTH: The unfair part of the National Sales Tax (please call it what it is) proposal would apply to retired individuals, regardless of their income level. Until an individual retires, that individual helps support the Government(s) by the present income tax system. The person has saved all of his or her life and now starts to draw on their savings. By shifting to a National Sales Tax that individual must now pay all over again. Of course that is still partially the case under the present Income Tax system, but that IS only partly true. And, yes there are some reductions under the proposed National Sales Tax, but not sufficient to protect a retiree's life's savings.

SIXTH: I believe most business understand very well that the pay taxes on their REPORTED profit, which is why they do whatever they can to reduce their REPORTED profits.

"The only people who hate it are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, and illegal aliens. Those who derive their livelihood from the unproductive income tax hate the FairTax." -- Ashford

Who is Ashford trying to fool? Himself?! Us everyday joes don't compute taxes in his flimflam way no matter how much he tries to manipulate the data. Nope, it aint the way our everyday business of defining taxes goes. So, they just go and invent a new meaning to dress their magic up in some respectability. Abracadabra!! You shall be showered with money!! It's Fair.
Well, renaming Adolf Hitler "Jesus" doesn't change what the sucker did.

His "only people" quote is pure BS. It's just cheap name-calling and he knows it. People are standing up against this National Sales Tax because it is fraudulent, not because of any imagined connection Ashford has about them. They have provided many point by point criticisms of the plan, have asked serious questions that continue to be ignored by the Fair Tax adherents, and offer genuine concerns and outcries about the excessive spending and big government currently in vogue with the Bush administration.

Basically, the Fair Tax plan is the "Me" generation of Republicans showing their true colors. The problem is not their government or their spending; the problem is the tax system. They want you to ignore the billions and trillions of dollars they waste by waving a few extra dollars under your nose, hoping this will blind you to the real problems.