"Fair" Tax Scam
Sep. 11th, 2007 10:51 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
forsythThe following is the text of an email I sent to NPR's Marketplace show today, after they had a hack from the WSJ editorial page spouting nonsense straight out of the "Fairtax" book. Here's the article in question.
And my letter:
This morning, on the Marketplace Morning Report, you had Stephen Moore on, praising the benefits of a national sales tax. His ideas and numbers come entirely from the book "FairTax" by Neal Boortz and John Linder. And unfortunately, most of what he quoted is inaccurate or false. A 23% sales tax would not replace all of the government income, the percentage was picked as near the maximum amount people would tolerate as a sales tax. A national sales tax, despite his claim, would be extremely regressive and complex. Most families who are out of the top 1% spend most of their income each year, which would make their net tax rate at LEAST 23%, plus the increases in cost that would come from this kind of tax. Whereas the richest few don't spend all their money, which would make their net tax rate far below the 23% the rest of us would pay. That hardly qualifies as "fair" by any stretch of the imagination. And his idea of a $20,000 rebate for the sales tax spent? That would be at least as complicated as the current income tax. The rest of the work of tax collection would then be pushed on to the companies who sell products. It would require just as much work, and we would still require the IRS to investigate cheats and other things.
His entire presentation was misleading at best, and outright false at worst. The entire idea of a "fair" national sales tax is snake oil, designed to cover up for a gigantic tax cut for the rich and a tax hike for the rest of us, not any kind of serious policy suggestion.
And my letter:
This morning, on the Marketplace Morning Report, you had Stephen Moore on, praising the benefits of a national sales tax. His ideas and numbers come entirely from the book "FairTax" by Neal Boortz and John Linder. And unfortunately, most of what he quoted is inaccurate or false. A 23% sales tax would not replace all of the government income, the percentage was picked as near the maximum amount people would tolerate as a sales tax. A national sales tax, despite his claim, would be extremely regressive and complex. Most families who are out of the top 1% spend most of their income each year, which would make their net tax rate at LEAST 23%, plus the increases in cost that would come from this kind of tax. Whereas the richest few don't spend all their money, which would make their net tax rate far below the 23% the rest of us would pay. That hardly qualifies as "fair" by any stretch of the imagination. And his idea of a $20,000 rebate for the sales tax spent? That would be at least as complicated as the current income tax. The rest of the work of tax collection would then be pushed on to the companies who sell products. It would require just as much work, and we would still require the IRS to investigate cheats and other things.
His entire presentation was misleading at best, and outright false at worst. The entire idea of a "fair" national sales tax is snake oil, designed to cover up for a gigantic tax cut for the rich and a tax hike for the rest of us, not any kind of serious policy suggestion.
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Re: Actually
Date: 2007-09-11 03:45 pm (UTC)Also, the "23%" rate is a bit of a myth, because the actual increase in prices wouldn't be 23%, it would be more like 30%. Because the tax rate is computed from the total price, not the old price. For instance, a 23% tax on a $1 item would make the item end up costing $1.30. See more on that here.
And that still doesn't address the massive regressive effect of the tax, because as I said, only the top few percent of people make more than they spend, therefore their effective tax rate would be much lower than everyone else's. It's a huge tax cut for the rich, which makes the "fair" tax name a lie. And it doesn't address the reasons we have a progressive tax rate, which has to do with the marginal utility of money. If you have a single dollar, another dollar doubles your money. If you have a hundred dollars, another dollar only gives you one percent more money. Which is one of the reasons our tax code is set up the way it is. See more on the distribution on wikipedia here
"Economist William Gale analyzed a National Sales Tax (though different from the FairTax in several aspects[30]) and reported that the overall tax burden on middle-income Americans would increase while the tax burden on the very rich would drop."
More about the regressiveness of the "FairTax" here: http://www.tpmcafe.com/story/2005/9/15/135951/261
As for the exact rate? Shockingly enough, from this quote in Bruce Bartlett's editorial, "public opinion polls have long shown that support for flat-rate tax reforms is extremely sensitive to the proposed rate, with support dropping off sharply at a rate higher than 23%". And the "FairTax" rate is... 23%! Joy and happiness! What a lucky coincidence!
The "FairTax" platform is nothing but a scam designed to promote a giant tax break for the rich. The 23% rate is really 30%, and wouldn't be revenue neutral anyway. There's no there there.
Re: Actually
Date: 2007-09-11 04:26 pm (UTC)http://www.fairtax.org/site/PageServer?pagename=about_faq
The "prebate" is a flat refund given to every family according to family size and has no connection with actual expenditures other than this is what health and human services said is what the poverty level is. The government will not have to track anything you buy since it is not based on spending or income but rather flat according to family size. So in essence if you lived on farm and was totally self sufficient you could actually have a negative tax rate because you would still be getting the same check as someone who spends millions. All you need is a valid social security card to register. It really isn't that complicated of a process as the social security administration keeps track and sends out checks to millions every month already and are pretty good at it.
The 23% is an inclusive rate as i said much like the income tax so that we compare apples to apples. But you say that prices will increase 30% which is false because of the 22% embedded cost of compliance, corporate taxes, tax evasion, etc which is in all the products made in America. Prices will drop under the fairtax so the price will not rise as much as you say and you will be keeping your entire paycheck to purchase with. Also used goods are not taxed since they have already been taxed so if your that worried about the tax you should buy a used car.
Re: Actually
Date: 2007-09-11 06:20 pm (UTC)First you said "refunded the tax up to the poverty level", now you're talking about a prebate, which is it? And how would the poverty level be calculated? And would either of these include the tax that would be paid on the money they're theoretically being given? Because then you could get into an infinite loop.
Yes, it's an inclusive rate. Which is why prices would go up 30%. Because the 23% includes the tax, so 23% of $1.30 is 30%. So even if I were to generously allow that 22% of all current prices is due to "compliance, corporate taxes, tax evasion, etc", the net effect is still that prices would go up. Which is going to screw over everybody whose actual tax rate on income doesn't make up for the increased prices. Which is a pretty big chunk of everybody, I suspect. And how exactly would the "FairTax" address tax evasion? It would just change it from people evading income tax to people evading a sales tax. Black market goods, and various kinds of tricks like "renting" things, or making temporary loans, or so on, could defeat the sales tax just as easily. Which would mean your claimed 22% would be even less of a "drop".
But the biggest single thing about the "FairTax", that makes it a complete scam, is how completely regressive it is. It shifts much of the tax burden off of the rich, who don't spend all their money, and on to the people who have to spend all they have just to get by. This is one of the key points, and one that you haven't addressed at all, nor has anything on your website with anything other than laughable claims that it's "progressive". Especially since I haven't seen anything addressing purchases such as stock, which would provide yet another way for the richest 1% to avoid paying any taxes.