Thursday, May 10, 2007

Fair Tax Q & A

The purpose of this entry is to address the very pertinent questions from the last Fair Tax post. I'm going to take the opportunity to use charts to illustrate how the Fair Tax is victory for the people over the liars in Washington, and lets the American people do what they do best: propser!

Item #1: Does a babysitter or the kid that mows my lawn have to collect the Fair Tax? (from Lefty)

No, there is a provision within HR.25 and S.25 that allows for small jobs and "hobby income", up to an annual $2,000. If you sell furniture or other personal belongings via classifieds such as this does not count towards your hobby income. Your car, your investment portfolio, and your Beanie Baby collection are personal items that are not sold in commercial quantities, and therefore are not taxed as retail items, because you are not a retailer. Besides, they are used goods and the tax has already been levied against them.

Item #2: Isn't this a regressive tax? What about the child tax credit? (from Hillary Clinton)

Pictures say a thousand words, and the Fair Tax is the most thoroughly researched tax reform measure in history. Instead of bloviating in miserable economic theory, he's a chart that explains it much better than I can:
How does everybody end up paying less? Several reasons persist:

-Vastly increased compliance (some will still sell illegally, but far fewer than cheat today)
-Improved efficiency in collection (The IRS is the least efficient office possibly ever)
-Broadening of the tax base (internet sales, retail services, etc.)
-Broadening of the base of people who pay taxes (illegal immigrants, tourists, drug dealers)

As for the child tax credit that Hillary was so worried about: based on current estimates, most households with 2 kids will get a $492 check at the beginning of each month. Do we really need to keep paying tax credits every April to people with herds of kids? The Fair Tax reimburses the expenses that additional children create, and that is all that tax policy should ever be responsible for. In fact, the child tax credit of today is basically a brand of social engineering, and is absolutely irresponsible tax policy, so we're not even talking about apples to oranges.

Item #3: Won't the prebate system just create another government monster? (from Lefty)

All legal US Citizens and legal permanent guests will recieve the prebate regardless of income. Hey, we're saying that no US citizen shall pay any taxes on the necessities of life, to be determined by the basic poverty level spending amount. You do not have to prove to the government how much money you make (a MILESTONE in reduction of government paperwork!). This is an important point from our Constitution that the 16th Amendment repealed. The US Treasury Department will do the job that the IRS turned into a beurocratic nightmare, and the FBI will investigate fraud just like they're (supposed to be) doing now. The Treasury Dept. won't turn into another monster because they have a much simpler job that will require an amount of staff that all researchers agree will pale in comparison to the current IRS roster.

Item #4: So basically businesses are doing the job of funding our government. Some of them are corrupt. (from BND)

Yes, businesses will be charged with the task of sending the money off to the Treasury Department. To be sure some will cheat, but with 80-90% fewer entities filing, the concentration of investigation power of the FBI has increased nearly tenfold. Besides, over 80% of all retail goods purchased come from the largest of the big-box retailers, and there is no way they can risk cheating under such a hot spotlight. Also, there is a built-in 1/4% kickback to reimburse for the accounting, so this is not charity work for the government. The math is quite fucking simple with the Fair Tax, so 1/4% is extremely generous.

Item #5: What about doctors and other small business? (from Lefty)

Since the tax base has been broadened to include the retail service sector, your doctor would indeed have to collect the Fair Tax from consumers. These costs are considered into the prebate, so we can't let lobbyists have a foothold here by making exception. This isn't going to exacerbate the health care fiasco for the poor because again, healthcare costs are considered for pre-imbursing these additional costs of basic living. Internet sales are also charged to pay taxes, because that's only fair.

Item #6: What about gas prices? (from Lefty)

The federal government already has a whopping tax built in to gasoline, but it would be up to congress if they wanted to remove the current tax to make room for the new sales tax. Otherwise, it is a retail-level good or service so it is subject to the Fair Tax. I can't stress enough that we're keeping 100% of our paychecks here, plus the cost of these goods will fall from 20-28% once we remove the current income tax burden from the production scheme. I am strongly in favor of user-based taxes, such as the one on gasoline, so we'll have to see if our favorite nincompoops in Washington can do something productive with the revenue.

Item #7: Isn't this a blow to the federal government? (from Lefty)

Not at all, it is revenue-neutral. They will collect the same amount of money from us, the difference is that now they have to do it efficiently, they have to collect from everybody to include illegal immigrants, tax cheaters, and tourists, and we are now perfectly aware of how much they are taking from us. We the people are tired of hidden taxes, lobbyists tactics, and insider tax breaks for buddies. Because we have to tax all retail goods with no exceptions, there are no footholds for shit-eating lobbyists to hook up their buddies. There are no tax credits for oil companies, and there won't need to be any offshore banking to hide money from our government. If you're worried about people not spending money, here's a comparison to how much more stable of a source of income sales taxes are as opposed to income taxes:

AGI = Adjusted Gross Income, PCE = Personal Consumer Expenditures (please note that this graph shows percent change, so a flatter line is a more stable function)

Item #8: Isn't the tax rate really 30%, or even 60%? (from Hillary Clinton)

The people that say the Fair Tax rate is 30% are actually correct. Taxes can be calculated exclusively or inclusively. I wonder why the same people don't want to say that most people pay 52% of their income when calculated exclusively? Since income taxes are always calculated inclusively, it's most appropriate to report the 23% Fair Tax as such. The 30% figure is still better than the 52% figure.

Inclusive Method: Exclusive Method:
Widget: $77 Widget: $77
Fair Tax: $23 30% sales tax: $23
Total: $100 Total: $100
$23 out of $100 = 23%. This is exactly how our income taxes are calculated.

The 60% figure is based on bullshit research done by biased lobbyists who made the fictitious assumption that we would exempt groceries, gasoline, heating bills, electricity, etc. etc. etc. from being taxed, and then still reimburse people for the basic cost of taxes on necessities. That's how they came up with the bogus 60% in order to compensate.

$22,000,000 in top-tier research has been invested in the Fair Tax making it the most heavily researched tax reform measure in history. On May 15th, 10,000 Fair Tax supporters will rally right across the street from the presidential candidate debate scheduled just a few hours later. This is an idea that deserves some mainstream press. By the way, HR.25 and S.25 now have 60 co-sponsors. The idea is gaining steam with every session of Congress. It's starting a powerful trend where people want to know how much tax we pay, and we're tired of being lied to having our money confiscated. I know it's not perfect, but let me close with this question: Why in the hell would you punish people who work legally?


Lefty Metalhead said...

I'll ask these again?

Will the rebate system for the poor be no more than a redistribution of wealth? The rich surely won't be receiving many rebates.

When we pay a tax on consumption, aren't we basically paying for the permission to live? Isn't it implied that people won't be able to sustain life unless they pay the state a tax right off the bat?

By the way, how much will it cost to change the system? I'm with BND on the corporate skepticism. Can we really trust big business to pay up? I mean, the purpose of business is to make money, not collect government taxes, right?

BlackLabelAxe said...

The rich and poor alike will recieve the rebate, because the government doesn't know how much money you earn, nor does it matter. If you are a citizen or legal guest you will get the prebate. No American will be asked to pay any tax on the necessities of life, rich or poor alike, which is why there's a mathematical asymptote along the 23% tax line. Nomatter how much money you spend, because of the prebate you can never actually end up paying 23%. According to most estimates, if you spend $40,000 per year, you'll end up paying around 11% in taxes because the taxes will pre-imburse the first ~$17,000 per year that you spend.

If you earn $50,000 per year, you'll be paid $50,000 per year, not $33,000 in addition to your sales tax, ad velorum tax, capital gains tax, etc. etc. etc..

As for paying for permission to live, isn't an income tax paying for permission to work? For whom are we really working in that case?

I agree that corporate skepticism is a legitimate concern. The answer to that concern is 10 times the federal agents, since they won't be locking up regular income earners or placing leans on people's farms. They'll actually have time to focus on corporate books and law enforcement. Having the brute force of the government to bully the working poor into paying up is specifically what our founding fathers prohibited in our Constitution. Taking on corporations is picking on someone their own size.

To be perfectly honest, I trust private individuals more than government employees, because I know that at least their greed drives my value up according to Smithsonian theory. Government employees have no incentive besides showing up for work.

The cost to convert is admittedly a tricky spot. The IRS will still be around to investigate past tax cheats, but they won't be collecting current taxes. Once all the cases are closed, shut the lights off and go home and become a shameful blot in our bright history.

No more Swiss or Cayman bank accounts- you no longer need to hide your money from the government! We are now the banking capitol of the world. Tax-free money can be spent bringing manufacturing and technology back home where it belongs. We will absolutely dominate the world economy.

Two more things: Social Security and Medicare. The only way in hell these programs are going to work is by broadening the tax base to the people who use them. The Fair Tax is the only way that we can fund them. Our income tax system is busting at the seams, and hasn't been able to fuel our bloodthirsty government since the mid-90's. We need money for government, and it is bullshit that only legal workers are funding it.

What about trust fund hippies? They pay no taxes because they earn no money!

Donald Trump and Robert Kiyosaki both admit that they pay no taxes because all of their income is passive! We're not even taxing the rich, all we're doing is taxing the people that work hard and make our country move. Why are we punishing work?

Lefty Metalhead said...

That last point about Donald Trump and other rich socialites is very good. If the fair tax forces such people to pay taxes, then I may just jump on board. Nevertheless, I still trust the government more than private business. Government officials are moreso in the public eye. Corporations can hide many things without us knowing. I guess the point is, who is more likely to cheat us?

BlackLabelAxe said...

The truth is probably a combination- both government and private enterprise will cheat us. Private enterprise will do it intentionally whereas most government officials will fuck us over just as hard through incompetence.

It's just a matter of setting the incentives in the right direction. If you reward people like Donald Trump and other sleazebags who park their money in Grand Cayman and earn passive income then the middle class and the poor are left to carry the yolk like oxen from our hard-earned paychecks.

I'm very glad that you're looking into this crazy revolution. It accomplishes so many of our overlapping ideals of economic freedom, transparency in government, equality, and it completely untaxes the poor, which is something that current system cannot say. It's not perfect, but it's a debate on the right topic.

Anyways, I'm off to North Carolina for the weekend to do a little surfing and spend some time with my Citadel classmate who's shipping off as a USMC Lt. to Iraq for the next year. I can't wait to read your response to Jenk's rant. If only we could resurrect Epistaxis...

Have a good weekend!

Ann Coulters bastard son said...

Blacklabelaxe, I've got to tell ya, those people at FairTax need to pay you, give you a job or something. You explain the fair tax better than anyone out there--fuck Boortz, you really do a great job.

ken hawk said...

w hats a taxes (ken hawK")

BlackLabelAxe said...

Thank you, sir! I'm only intellectually attatched to it- I wish they did pay me!

The problem I see with the press platoon for the Fair Tax is that they seem to be arrogant (Boortz is the #1 perpetrator of that). Boortz especially has such a vendetta against wealth envy that he's never going to sell the idea to people who don't listen to AM radio.

I suppose it would help the cause if people knew that Neal Boortz wouldn't actually be in charge of anything once the tax is in place.