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The W - Current Events & Politics - The Fair Tax book review.
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jwrestle
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Since: 4.4.03
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Before I start writing on this issue I want you know my stand point and why it might or might not be important to you. Also, I'm not sure if this should be under Print or Current Events so CRZ I'm leaving this one to you

First: I am in support of this new tax code.

Second: I am going to present the information objectively.

Third: Taxes affects EVERYONE, white, black, Hispanic, Mexican, Canadian-American, Arab-American, and anybody else you can think of unless you're a evading the IRS which might be dead if this bill gets your support.

Four: This is one of the few times I have jumped into politics. I literally hate politics because of the negativity of it all.

The Fair Tax Book


How many hours did you spend on your taxes last year? Well, "if you're an average American you spent about 27 hours doing your taxes." If you didn't do them then you paid some else to do them. Which cost you money right out of your back pocket.

How would you like to NEVER do that again? The Fair Tax


Here are some of the bullet point listed in the book.

# Dramatically reduce the costs of goods and services by 20 to 30 percent.


# Allows you to keep 100 percent of your paycheck, pension, and Social Security payments.


# Gross Domestic Product will increase by almost 10.5 percent in the first year after enactment.


# Compliance costs would decrease by 90 percent.


# Real investment would initially increase by 76 percent relative to the investment that would be made under present law. While this increase would gradually decline, it remains 15 percent higher than under the existing tax structure.


# Exports would increase by 26 percent initially and would remain more than 13 percent above the level under the current tax system.


# Real wages will increase.


# Increases incentives to work by as much as 20 percent in many households, leading to higher economic growth and efficiency.


# Interest rates will fall 25 to 35 percent.


Lets add some realism to this...Did you know that most taxpayers could claim the coveted home mortgage interest deduction decide not to...just because they'd rather save an hour or two by opting for the short form instead.

The most recent reports for unpaid taxes is $355 billion dollars or the "tax gap" from the "underground economy" and other various sources.

The Fair Tax would be give us a chance to grab that money back.

There are over 11 trillion dollars in OFC(Offshore Financial Centers) that would come back if we changed our tax code.

Daimler-Chrysler world headquarters is in Germany. The only reason they left the US was they faced a 67.5% in tax code as opposed to 44% in Germany.



Basically this is some of the information in H.R. 25 and S25. The Fair Tax bill. If you have every lost a night of sleeping dreading April 15th then this is a dream come true for you. If the IRS has ever given you and audit then this is for you. If you think that you really pay to much taxes than this is for you! All I'm saying is pick this book up and read the research. This could be the second American revolution. Pick up "The Fair Tax" book so that you can change the world you live in for the better. Thank you.

One more thing...this is a very quick read. No major big words even a 10 year old could probably figure this one out.

(edited by jwrestle on 5.8.05 2237)



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Can someone tell me where the average of 27 hours per tax return comes from? I file the long form and it never takes me more than an hour or so to do my taxes. I might be the exception to this rule since I am a finance person, but 27 hours seems like a really long time.





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Since: 24.3.02
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#3 Posted on | Instant Rating: 5.12
Yeah, I do the short and EZ forms, and it takes me like 20 minutes. I do support simplyfing and streamlining the tax code though.



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I normally don't like to post twice in a thread but I forgot to and a coouple of important sites.

www.fairtax.org
www.fairtaxnow.org

Those site provide some great online information if you don't end up picking up the book.




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Since: 6.1.02
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#5 Posted on | Instant Rating: 6.14
Interesting read (the websites). I will say I was impressed that it didn't seem to be the usual "simpler taxes" arguement which is almost always a complete red herring for "I want rich people to pay less taxes and need a selling point."

I have four counter-points to the proposal.

The first one is simple - how can it be revenue-neutral, yet still lower taxes for everyone? Each and every one of their economic analysis' is not anything close to a hard-and-fast fact. All of the numbers in your original post are nothing you can trust. This goes for anyone's tax-reform plan, not just theirs. Despite whatever great new plan someone comes up with, there is no magic economic bullet where somehow less money=more money. Take the plan for what it is - don't take it for what it's proponents say it'll do for the economy. Every other proponent of every other tax-reform plan is going to tell you the exact same thing - that their plan somehow means lower taxes for you, but the same amount of benefits from the government.

Second - you would have to have some mechanism to make sure that the rich don't buy their big-ticket items out of the country. In today's world, if Donald Trump wants to buy a new plane, it would be pretty easy for him to go to the bahamas and buy it there for 30% less. Here in New York, rich Brits and Euros are taking weekend shopping sprees for high-end clothes because it's cheaper. I recently went to South America - my last day I basically bought a wardrobe for the rest of my life in Buenos Aires, because the weakness of their currency made it so cheap. You'd have to make this a global system, or else invest in a huge enforcement mechanism to keep out foreign goods.

Third - this plan discourages spending like no other. Since (for better or for worse) consumer spending is what basically keeps our economy going, I'd like to see how this would affect it.

Fourth - the "hidden tax" arguement (that all taxes paid by corporations are really taxes on you) and that the "free market" will automatically pass those tax savings on to you is highly debateable. Perhaps in a perfect world, but (even allowing for the myth that "free markets" are this magic self-regulating system that is only good for everyone) anyone who thinks that Corporate America operates on anything close to "free markets" is highly naive. If anyone can point to a time when the corporate tax rate has been lowered and consumer prices followed suit, I'd like to see it.



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#6 Posted on | Instant Rating: 1.43
    Originally posted by MoeGates
    Interesting read (the websites). I will say I was impressed that it didn't seem to be the usual "simpler taxes" argument which is almost always a complete red herring for "I want rich people to pay less taxes and need a selling point."

    I have four counter-points to the proposal.

    The first one is simple - how can it be revenue-neutral, yet still lower taxes for everyone? Each and every one of their economic analysis' is not anything close to a hard-and-fast fact. All of the numbers in your original post are nothing you can trust. This goes for anyone's tax-reform plan, not just theirs. Despite whatever great new plan someone comes up with, there is no magic economic bullet where somehow less money=more money. Take the plan for what it is - don't take it for what it's proponents say it'll do for the economy. Every other proponent of every other tax-reform plan is going to tell you the exact same thing - that their plan somehow means lower taxes for you, but the same amount of benefits from the government.

Sir, those numbers have researched of the course of five to ten years. You're dealing with professionals or the people at AFFT who want to be sure that this will work and it can.

    Second - you would have to have some mechanism to make sure that the rich don't buy their big-ticket items out of the country. In today's world, if Donald Trump wants to buy a new plane, it would be pretty easy for him to go to the Bahamas and buy it there for 30% less. Here in New York, rich Brits and Euros are taking weekend shopping sprees for high-end clothes because it's cheaper. I recently went to South America - my last day I basically bought a wardrobe for the rest of my life in Buenos Aires, because the weakness of their currency made it so cheap. You'd have to make this a global system, or else invest in a huge enforcement mechanism to keep out foreign goods.

Once again after the Fair Tax passes we would be able to compete in the global economy like no other. We would be able to lower the prices in the country make people want spend because they have more money to spend. That is some of the basic thinking.

    Third - this plan discourages spending like no other. Since (for better or for worse) consumer spending is what basically keeps our economy going, I'd like to see how this would affect it.

No it encourages saving and spending...get it right sir.


    Fourth - the "hidden tax" argument (that all taxes paid by corporations are really taxes on you) and that the "free market" will automatically pass those tax savings on to you is highly debatable. Perhaps in a perfect world, but (even allowing for the myth that "free markets" are this magic self-regulating system that is only good for everyone) anyone who thinks that Corporate America operates on anything close to "free markets" is highly naive. If anyone can point to a time when the corporate tax rate has been lowered and consumer prices followed suit, I'd like to see it.


Yes, I see your point, but corporate America will regulate. As someone once said..."Never underestimate the power of competition" Boortz Circa 2005




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Since: 11.12.01
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#7 Posted on | Instant Rating: 5.50

    Originally posted by jwrestle
    Sir, those numbers have researched of the course of five to ten years. You're dealing with professionals or the people at AFFT who want to be sure that this will work and it can.


The easiest way to make it seem like numbers will work is to skew them in your favor, that's why any tax reform proposal, major or minor, should be taken with a grain of salt. And as far as the length of time researched goes, people have looked into Numerology for centuries, should we necessarily believe them?

    Originally posted by jwrestle
    Once again after the Fair Tax passes we would be able to compete in the global economy like no other. We would be able to lower the prices in the country make people want spend because they have more money to spend. That is some of the basic thinking.


The US ALREADY competes like no other in the global economy. Taxes are only one part of the equation. You have to figure in demand, import/export ratios, tariffs...it just isn't that simplistic.

    Originally posted by jwrestle
    Yes, I see your point, but corporate America will regulate. As someone once said..."Never underestimate the power of competition" Boortz Circa 2005


Yes, just like corporate America has regulated the weaning off of fossil fuels. And, quoting Boortz doesn't exactly help an argument.



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Since: 7.11.02
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#8 Posted on | Instant Rating: 5.90
The first one is simple - how can it be revenue-neutral, yet still lower taxes for everyone?

Of course it can't. 'There is no such thing as a free lunch.'

Just to give an example, let's use their numbers from their faq (look at the answer to question 4 on the following link: http://www.fairtaxvolunteer.org/smart/faq-main.html#13). Here, they provide an example of a childless, non-homeowning married couple making $40,000. Under the Fair Tax, they pay $4917; compared to $6005 under the current tax code. If they have one child, that's a $1,000 income tax rebate, which makes both equivalent. If they pay child care, own a home, or have two children then they are clearly better off under the existing income tax structure. I also crunched the numbers for my family, and we would pay significantly more in taxes as well (although we do make more than $40,000).

Look, this is a 23% sales tax. In the county where I live (in Dallas, TX), state and local sales tax is an additional 8.25%. So, that's a 31.25% tax on purchases. That's a huge drain on consumption. And, when you add that 23% onto the price of a car (for example), someone buying a $50,000 car could save money by buying it someplace else and importing it themself. You don't think that someplace like the Cayman Islands and other countries like that wouldn't become a hotspot for big ticket items? Also, it'd be cheaper for me to fly to Mexico City to buy clothes for everyone in my family rather than purchase it here. And, a number of my colleagues in Mexico already fly to the U.S. to do shopping; tack on that 23% and you can kiss that business goodbye.

I agree that it will stimulate savings/investment. However, it's ludicrous to suggest it would stimulate spending in the short-run. You could certainly make a case that this tax is better for spending in the long-run. However, how many people are going to care about that when they lose their property tax deduction, mortgage interest deduction, dependent tax rebate, dependent care tax deduction, etc. I could go on, but I've droned on long enough. And, the chances of this passing are zero. The chances of a flat(ter) tax passing are slim, but higher than this Fair Tax.



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#9 Posted on | Instant Rating: 10.00
    Originally posted by Corajudo
    I agree that it will stimulate savings/investment. However, it's ludicrous to suggest it would stimulate spending in the short-run. You could certainly make a case that this tax is better for spending in the long-run. However, how many people are going to care about that when they lose their property tax deduction, mortgage interest deduction, dependent tax rebate, dependent care tax deduction, etc. I could go on, but I've droned on long enough. And, the chances of this passing are zero. The chances of a flat(ter) tax passing are slim, but higher than this Fair Tax.


I agree.

Think about it, Congress writes all of the tax laws, why are they going to scrap the whole thing now? If it would have been beneficial to them, they would have done something like this years ago. You think *enter politician's name here* is going to want a 28% (here in MA we have a 5% state sales tax) tax on his new Canali suit or his new BMW SUV? Of course not.

This will completely damage spending in our country and would probably have people making "cash sales" and "off-the-truck sales", thus you still need some form of enforcement. Furthermore, like everyone has said, they will make all purchases out of the country and then just import it. I would be curious to find out how we would tax on stuff like that.

Unless they allowed for exemptions on clothes, food and other necessities then there is no way in hell people could live. On the other hand, if we set up those exemptions, how do we fund a gov't which is already running on a morbidly high deficit (which is only going to grow with Iraq)?

I think W has too much going on to push the tax issue right now. He has to straighten out Iraq, figure out this energy crisis, see if he can do something with Social Security and he needs to mend fences in foreign policy before he can worry about the tax code. I think he will end up getting a few small changes through but nothing special.

(edited by wordlife on 9.8.05 1119)



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#10 Posted on | Instant Rating: 5.50

    Originally posted by Corajudo
    someone buying a $50,000 car could save money by buying it someplace else and importing it themself. You don't think that someplace like the Cayman Islands and other countries like that wouldn't become a hotspot for big ticket items? Also, it'd be cheaper for me to fly to Mexico City to buy clothes for everyone in my family rather than purchase it here. And, a number of my colleagues in Mexico already fly to the U.S. to do shopping; tack on that 23% and you can kiss that business goodbye.


Wouldn't it also have a detrimental effect on tourism? Intra-US as opposed to foreign travel?



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#11 Posted on | Instant Rating: 0.00
It's a cute idea that pops up semi-regularly, but it's no more workable now than it has ever been.

The core is simple: Stop taxing businesses and manufacturers and capital gains directly. They will then take their additional income and pump it back into the economy, lowering prices on goods for everyone, increasing sales and stimulating the economy to make up for the lost non-direct-sales tax revenue.

It's supply-side economics with a different wrapper on it, and willfully disregards the notion that manufacturers and corporations and investors might simply pocket their tax savings, while consumers stare at unchanged prices (or higher prices on goods that are currently untaxed). Shareholders would eagerly accept slashed prices and lower profit margins, right?

Whenever anyone says "I have a great new tax plan that'll help everyone," check your wallet, then notice how much bigger the speaker's wallet is.






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#12 Posted on | Instant Rating: 8.13
    Originally posted by vsp
    It's supply-side economics with a different wrapper on it, and willfully disregards the notion that manufacturers and corporations and investors might simply pocket their tax savings, while consumers stare at unchanged prices (or higher prices on goods that are currently untaxed). Shareholders would eagerly accept slashed prices and lower profit margins, right?

    Whenever anyone says "I have a great new tax plan that'll help everyone," check your wallet, then notice how much bigger the speaker's wallet is.





Agreed. An axample, though a little out there, is revenue sharing in MLB. It was supposed to give smaller market teams the ability to compete by providing more money for player aquisition/retention. However, some team's owners, KC for example, just pocketed it.

Also, when it comes to changing taxes, etc., in Kansas, the state cut our taxes greatly in the late 1990's and everyone was happy. Five years later, people are realizing they are paying higher taxes overall than ever. It's just being taxed from a different governing body.



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#13 Posted on | Instant Rating: 0.00
The act of replacing income and wealth-based taxes with levees upon the purchase of goods and services, which is a notion currently very popular in "conservative" circles in certain extremely wealthy countries, would be the most severe shift of financial burden from the rich to the poor since the compilation of the infamous "Domesday Book" in Norman-ruled England, which counted every single chicken and outhouse owned by peasants in medieval Britannia and then taxed them accordingly - while the fat-cat aristocracy grew even richer off of the proceeds of this merciless form of robbery. (and yes i know i have a nasty proclivity for run-on sentences...) For a scathing yet level-headed critique of this reverse Robin-Hood notion, i refer the Gentle Reader to this article:
http://social-democrat.dailykos.com/storyonly/2005/8/8/1944/55056 .

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jwrestle
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#14 Posted on | Instant Rating: 1.43
    Originally posted by Corajudo
    Look, this is a 23% sales tax. In the county where I live (in Dallas, TX), state and local sales tax is an additional 8.25%. So, that's a 31.25% tax on purchases.


Wrong...inclusive tax, sir. In fact the origin of this bill was a group Houston, TX businessmen. A 50,000 dollar car will cost the same after the fair tax. Why? Because it is an inclusive tax like the current, broken, income system we have or when paying for gas. Instead of paying hidden mark up you would be paying the federal government. That is after you get your full pay check and don't have anymore April 15th to mess with anymore.

    Originally posted by Eddie Famous
    Wouldn't it also have a detrimental effect on tourism? Intra-US as opposed to foreign travel?


Actually, this would help us. Tourists would actually pay the federal government of the USA every time the visit. They would pay for our items and be paying the tax already included in the price. They don't pay income tax for living in but we do. This would be part of increased revenue if we had such a tax.

    Originally posted by vsp
    Whenever anyone says "I have a great new tax plan that'll help everyone," check your wallet, then notice how much bigger the speaker's wallet is.


Funny you should mention that because that's exactly what somebody said to the fellow that came up with the idea for the "Fair Tax". He was in meeting with other business men and they were auguring over the insane taxes. Finally some one said why don't you do something about it. That is what sparked the idea for everyone one to be tax equally.


(edited by jwrestle on 11.8.05 2259)


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Since: 7.11.02
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#15 Posted on | Instant Rating: 5.90
Wrong...inclusive tax, sir.

I did not realize until after the fact that the fair tax was an inclusive tax (in contrast to exclusive taxes, which is how the sales tax is currently assessed). For an example, a 23% inclusive tax means that a good with a price of $100 has the 23% tax, meaning the actual revenue received by the seller would be $77, with the remaining $23 going to the government.

In other words, if it were an exclusive tax (like I assumed in my post), then it would be 30% (after adjusting for rounding). This only reinforces my point. This would create a huge collections problem because it would create an enormous incentive for retail businesses to underreport sales or for consumers to buy goods elsewhere or under the table (or 'used').

Moreover, if they expect states to collect the revenue and then hand it over, then it creates a huge incentive for states to underreport their collections; just think of the competitive advantage a state would possess if they were not aggressive in collecting revenue. Moreover, what would the penalty be?

In spite of all this, the book assumes ZERO tax avoidance and that the government can collect all the revenue businesses/households will owe. Frankly, that's silly. States already deal with avoidance on sales tax rates at much lower rates.

Additionally, this would not abolish the IRS; it would only rename it because there would still be some entity responsible for tax collection.

I could go on and on pointing out weaknesses in this plan. I agree that a ten year old could understand the book and the argument. The problem is that when someone changes something so fundamental to the economy as tax policy (especially such a radical change), then the economic forces set in motion are such that it takes more than a ten year old to fully understand what will happen as a result of the new tax regime. You are changing the cost of capital, the fundamental nature and efficacy of monetary policy, changing workers' nominal wages, relative cost/benefit of debt vs. equity, and a whole host of other things.

Lastly, to finally wrap things up, just look at their stated benefits. Economic growth of 10.5%? Even China's 'official' growth rate isn't that high. The U.S. hasn't seen anywhere close to real, annual growth of >8% since WW2 (kind of mitigating circumstances). Price declines of 20 to 30 percent is very, very bad. I could go on.

If you've gotten this far in the post, here's a more technical analysis of the national sales tax which specifically addresses HR25/the Fair Tax: http://www.taxpolicycenter.org/UploadedPDF/1000785_Tax_Break_5-16-05.pdf WARNING: A ten year old would probably not understand it, and it is a little on the technical side.



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