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Dutchman3 
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Re: “Lincoln's fair attack on 'Fair' Tax

amerigom,

You wrote: "If ALL existing Federal taxes are removed, the price of items,(NEW), would be reduced by approx. 22%! When you buy a NEW item, a 23% national sales tax would be added to your purchase. A difference of only 1%! How good is that?
YOu should read the books on the Fair Tax."

You should read something other than the first two Fairtax books. The long discredited Fairtax "free lunch" myth started in book #1, and Boortz has been scrambling to correct his error ever since. Two thirds of that 22% was employee payroll and income tax withholding according to Dale Jorgenson, the author of the much misunderstood embedded tax study. Unless you believe we all will accept a massive gross pay cut, which would reduce business payroll costs, there is no way that the 22% can be removed. Assuming we get 100% of our gross, business tax related costs of around 9% can be removed, and after adding the 30% (not 23%) sales tax, retail prices will rise by 18% on average. How good is that?

You also don't seem to understand that retailers have to add 30% to their costs in order to get a 23% tax inclusive price. Simple math!

Posted by Dutchman3 on 09/29/2010 at 3:28 AM

Re: “Tim Griffin flipflops on Fair Tax UPDATE

taxedenough,

I'm glad we agree that taxing governments makes no sense.

Your parents argument in favor of the Fairtax is typical when anyone raises a sticky issue for which there is no good rebuttal. "We need to do it for our kids and grand children's sake. " That is quite a leap of faith in my opinion, because I don't agree with many of the rosy projections being claimed by Fairtax advocates. More importantly, HR25 isn't written on clay tablets, and it certainly isn't too late to try to fix some of the issues being criticized. For instance, two of the four criticisms I wrote about could be fixed by the simple expedient of taking payroll taxes out of the plan. Whether you believe it or not, FICA payments, (which stands for Federal Insurance Contribution Act), are just like an insurance plan. Pay your premiums for 45 years or so and collect your benefits. Technically, payroll contributions are a tax, but they are really just insurance premiums. I believe that the SS plan was unconstitutional to begin with, but FDR prevailed by threatening to pack the Supreme Court, and we are where we are. The Fairtax tries to do too much, too quickly, has too many moving parts, and needs to be simplified if it is to be taken seriously. Take the "third rail of politics" out, and focus on just replacing the hated income tax. That sounds like a plan!!

As for the 30 million "free loaders", I went to a lot of effort using IRS data to come up with my estimates. Yes, 47% of American families don't pay any income tax, but all workers pay the 7.65% FICA. By looking at incomes in $5000 increments, I was able to estimate how many families received refundable tax credits in an amount that would totally offset the 7.65% FICA amount. That came to less than 1 million families. If you have any data to support your claim that the number is way too low, please share it with me, but I think I'm pretty close. I believe that everyone should contribute to funding the cost of the federal government, and the idea of 30 million working families getting a free ride absolutely chills me!! How about you?

Posted by Dutchman3 on 09/19/2010 at 9:12 PM

Re: “Tim Griffin flipflops on Fair Tax UPDATE

taxedenough,

O.K., moving on from trying to make economic comparisons, here is why I don't support the Fairtax as described in HR25.

(1) HR25 proposes that the federal government tax State and Local government consumption. That is clearly unconstitutional under our federal form of government. It's easy to forget that our Republic consists of two sovereign powers, Federal and State. Sovereign powers don't tax each other. As Justice Marshall wrote, the power to tax is the power to destroy! For 200 years the Supreme Court has been guided by the doctrine of intergovernmental tax immunity, and this feature of HR25 will be struck down.

(2) The Fairtax throws seniors "under the bus" by double taxing their savings when spent, and forcing them to resume paying for their retirement benefits with their sales tax dollars.

(3) The Family Consumption Allowance, (prebate) creates a group of 30 million working families that would pay no net federal tax annually, yet would still qualify for full pension and health care benefits when eligible. Compare that number to the less than 1 million working families that pay no income tax and also can use refundable tax credits such as the EITC to totally offset their FICA payments. One million versus 30 million. Shouldn't everyone contribute something to the cost of the federal government?

The Fairtax is fair in name only!

Posted by Dutchman3 on 09/19/2010 at 3:42 PM

Re: “Tim Griffin flipflops on Fair Tax UPDATE

taxedenough,

Sorry, but you are dead wrong about having to compare equal incomes. The only legitimate comparison would be to compare what is to what might be. And, to make that comparison, you need to calculate effective tax rates for both tax systems. Why on earth you feel a need to jack up current income in order to make a valid comparison is beyond me. That certainly isn't "what is"!

Too many folks want to compare that 23% Fairtax rate to their current tax bracket, a totally faulty comparison. Even my son, who is no dummy, thought the 23% sales tax sounded pretty good when compared to his 28% tax bracket. I guess ignorance really is bliss.

Posted by Dutchman3 on 09/18/2010 at 8:12 PM

Re: “Tim Griffin flipflops on Fair Tax UPDATE

taxedenough,

My apologies, but as I wrote, I screwed up the higher math(?) and used standard deductions and exemptions rather than itemizing. I think your figures are accurate, and I won't even ask for a finders fee for your $800 windfall. (lol).

I don't agree that you have to compare equal incomes as you suggested. We are comparing tax collection systems, and under the Fairtax, your income will naturally be higher due to the prebate. (I am very glad that you do consider the prebate as income. Many advocates still believe it is just a tax rebate and doesn't add to gross income. They are wrong!)

In your response to Max, you claim that under the Fairtax, retail prices will be reduced. Not true! Too many advocates of the Fairtax don't understand that the 22% embedded costs are NOT all business costs. Dale Jorgenson, the Harvard prof who did the 1997 embedded tax study for AFFT, readily admitted that he assumed that employee withholding for income and payroll taxes would go to the employer for maximum cost reduction. In other words, we would accept a gross pay reduction. That isn't going to happen, imho. We will get 100% of our gross pay and retail prices will go up significantly.

Using 2007 actual revenue data, and against retail sales of $9.5 trillion, businesses paid $290 billion in income taxes, or 3% of sales. Businesses paid $435 billion in payroll taxes or 4.5% of sales. And, according to the Tax Foundation, business compliance costs were $165 billion or 1.5% of sales. Add them up and business tax related costs in 2007 were a little over 9%. Remove 9% and add the 30% sales tax and retail prices will rise by 18% on average. (1.00 x .91 x 1.30 = 1.18) Simple math.

Of course, use a different year's data and the results could change, but 18% retail price increases on average is a pretty good estimate. For many families this retail price increase will be offset by their increase in take home pay plus the prebate. Many retirees will not fare so well in that they would not get any gross pay increase other than the prebate, (no income tax or payroll contributions any more).

As an example, a retired couple living on $30,000 from two SS checks plus $18,000 from investments would pay no federal income tax, and of course, no payroll contributions. Under the Fairtax, their income would rise to $53,000 with the prebate, and they would pay $12,000 in sales taxes if they spent it all on taxable goods and services.

After removing the prebate, their net federal tax would come to $7,000. Try convincing the millions of retirees in similar economic situations that they would be better off under the Fairtax.

Posted by Dutchman3 on 09/18/2010 at 9:44 AM

Re: “Tim Griffin flipflops on Fair Tax UPDATE

taxedenough,

My calculator lied(?), and it turns out the difference is really $661, not $2159. Sorry, but the hour is early, and mistakes abound, it would seem. You still need to be cautious about calling things a lie, however. Too early to come to any such conclusions.

Posted by Dutchman3 on 09/18/2010 at 2:36 AM

Re: “Tim Griffin flipflops on Fair Tax UPDATE

taxedenough,

You wrote: "I am a middle class American with a family of four. My gross earnings for 2009 were $81,243. If the FairTax were in effect, I would have saved $1541 in taxes for the year, and that is assuming I would have spent my entire gross income on new goods and services. To say the FairTax would hurt the middle class is an out and out lie."

I'm no tax expert, but with a gross of $81243, taxable income of $55243, your tax would be $5951 less the $800 "making work pay" of $800 for a total federal income tax of $5151. Your FICA was $6215, so your total federal tax came to $11366. (That is an effective tax rate of 14%)

Your total income under the Fairtax would be $87945 including the Family Consumption Allowance (prebate), so if you want to assume you spent it all on taxable goods and services, the total sales tax would be $20,227 less the prebate of $6702 for a net sales tax of $13,525.

It looks to me like you would be paying $2159 more tax under the Fairtax than under current tax law. However, I'm sure you wouldn't spend all your income on taxable goods and services. I'm equally sure that the Fairtax rate won't be 23%, but considerably higher. At this time, you can't really make a good comparison, but you need to take a hard look if the Fairtax scheme ever becomes law. For sure, calling any claim that the middle class would be hurt "an out and out lie" is a bit premature, imho!

Stay tuned!

Posted by Dutchman3 on 09/18/2010 at 2:24 AM
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